The Fuse
What are futures doing?
Another mixed moment on futures today with the industrials up sharply but the Nasdaq and SPX 500 pulling down mildly. We can blame the weakness in semiconductors once again, just no lift at all in this group right now, which is under severe distribution.
News
More selling in Europe as the STOXX fell .2%, weakness in Germany and France. Crude oil is flat, gold and silver down slightly. US dollar is flat, the FTSE lost .5%. Yields are still on the rise, German bunds up 1bp and US 10 yr treasury up 2bps, Japan fell sharply, off 2.8% along with Shanghai down 1.8%, but Hong Kong rallied 1.3%.
Volatility
The VIX is solidly in the 16% range here, even news of more bombings in Iran are having a muted effect. One wonders if/when the bombing stop for good how low the VIX will go, or will it remain elevated for the next crisis that occurs.
If you are an existing Market Blast or Trader’s Pass member, log in here:
Interest Rates
We are seeing rates continuing to slowly rise, the 2/10 spread flattening. 10 yr yields are pressing towards 4.7%, that is not a good sign for the bulls. High yield spreads are right new highs, they are very tight. Fed funds futures are not moving much, still seeing very little chance of a hike in July.
Earnings
Solid earnings and guidance from UNH this morning and GE, Taiwan Semi also with strong numbers and guidance but that group is under severe distribution, so it doesn’t matter what they say. United had good earnings too last night but warned about higher jet fuel prices hitting their bottom line. Earnings tonight from Netflix, Alcoa, Intuitive Surgical and others.
Events
Stocks rallied yesterday but it really felt somewhat shallow. Sure, the SPX 500 was higher and mostly wiped away Monday’s losses, but without the semiconductors participating it seems strange, since this group had been driving the action for weeks. We did have good strength is some of the Mag 7 names, recently called out for their poor performance. Not yesterday!
Breadth
Breadth was barely positive again but like the price action it really has not been impressive. I suppose a win is a win for the bulls but until we see some sort of emphatic move up for the bulls every pop will be vulnerable to sellers. This market has the feel of a rug pull waiting to happen, I’m not sure what the catalyst would be. Oscillators are in positive/negative territory – barely.
Volume
Looks like an accumulation day for the bulls on the SPX 500 barely, but the other indices did not notch that win. Hopefully we’ll see a bit of smoke clearing the remainder of the week, some good earnings out this morning with GE, UNH, TSM Abbott and US Bancorp among others. As long as we have no distribution everything will be fine.
Support Levels
We could say ‘sideways action’ over the past three sessions as the markets have virtually gone nowhere. However, there has been some selling in recent groups that have been bullish, and those have pulled down to some good support areas. Perhaps that test will be enough to attract the dip buyers to step up. Markets continues to hover, SPX 500 support at 7500 and then 7400 is pretty firm.
The Internals
What’s it mean?
So far the internals are not telling us a consistent story, perhaps some day they will. After the release of market-friendly inflation data there was just not enough energy to juice the markets higher. VOLD was very odd today, just sideways movements much like the ADD and ADSPD. TRIN moved higher, put/calls lower and the VIX down as well. Ticks were evenly distributed, buy and sell programs all day long.
The Dynamite
Economic Data:
- Thursday:Retail sales, philly fed, housing market index, pending home sales, jobless claims, more fed speak
- Friday:Housing starts, import prices, industrial production, cap utilization, michigan sentiment.
Earnings this week:
- Thursday:UNH, TSM, USB, GE, ABT, STT, CFG, NFLX, ISRG, AA, CNS, WISE
- Friday:RF, TFC, FITB, TRV, SFFI, SKIFY
Fed Watch:
Pay attention this week to Chair Warsh as he talks to Congress about monetary policy. Listen carefully for clues about where policy may be heading, though he has been evasive for weeks. He will face some tough questions this time around.
Stocks to Watch
Chip stocks – with SK Hynix now trading in the US markets there is another competitor for dollars out there, and that might take from Micron, Sandisk and others. This group is key for the markets to retain upward mobility.
Banks – The big banks will report earnings early in the week and optimism is high, with most names at/near all time highs. I suspect strong numbers but any whiff of caution will knock these stocks down sharply.
Volatility – We will again watch volatility closely as the VIX is down to a very low level, near 15%. That is a bit too cozy for market players so expect some giveback, though with earnings up this week not too much.
[/MM_Access_Decision]
