The Fuse
What are futures doing?
Index futures are mixed this morning with the industrials higher but the Nasdaq lower. Seems many traders have thrown in the towel for this week and we’ll see much less action after noon today. Tomorrow markets are closed.
News
Flat is the new word in Europe. STOXX was unchanged yesterday as was Germany, France gained a bit of ground. FTSE was lower by .1%, the US dollar index off .2%, gold and silver slightly down. Crude oil back below $68. Yields are rising again, German bunds up 2bps and US 10 YR treasury up 1bp. Stocks Japan fell 2.5%, Hong Kong was up .4% but Shanghai hit, down 2% on heavy trade.
Volatility
The VIX is slightly higher this morning but may get sold off after the jobs report is released at 830am EST. No telling how volatile the markets might get but suffice to say the SPX 500 seems content to stay in a range.
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Interest Rates
Fixed income traders are bracing for the June labor report to see if there is growth continuing or some inflation in wages. Rates are slightly up but that will change by the open. 2/10 spread remains tight, fed futures unchanged for now and not see much in the way of movement until later in the year. High yield continues to perform well.
Earnings
Lindsay the only name to report this morning.
Events
Good start with positive energy but markets ended with a thud, nearly on their lows of the session. Something seems amiss here, or perhaps the bulls got a bit tired after running all week long. July is off to a slow start for the Nasdaq which fell more than 1% on heavy turnover yesterday. Perhaps a sign of things to come, but traders ran stops all session long.
Breadth
It sure looked as if breadth were going to be positive yesterday but some weakness in the last two hours bent the horns of the bulls. It was a still a positive day but less than earlier in the session. We had some good breadth in the NYSE names but Nasdaq sellers were pouring it on all session, though the Mag 7 names did have quite a day, memory and chip stocks led this index lower.
Volume
The only positive we can say here is the turnover was very weak and no distribution day was counted. If there is no bid today we could have quite a bout of selling hit today before the 3 day holiday gets underway, ushering in a weak start to the new month. That happens occasionally though, but now in July this usually has some good bullish action with strong turnover when earnings season gets underway.
Support Levels
Just a pathetic close of the indices and we could see it continue as temperatures rise in the Northeast. No catalysts here to move the markets higher so the sellers come in to take profits and traders search for stops up and down. That is frustrating but part of a larger consolidation phase. 7.500 is good resistance now on the SPX 500 having been rejected a few times this week. Support down to 7.400.
The Internals
What’s it mean?
It appeared the internals were going to make a positive move yesterday but they fell flat on their face and brought the market down with it. That is what we normally see with these indicators. The VOLD up nicely then right down, that is not a normal bull market behavior, ADD the same but did finish in the green. Check out the heavy dose of sell programs in the TICKS, strong red all session and intensified late in the day. VIX down but not much, and put/calls are trying to roll over for a buy signal, not yet.
The Dynamite
Economic Data:
- Thursday:June labor report, wages, factory orders
- Friday:Holiday
Earnings this week:
- Thursday:LNN
- Friday:Holiday
Fed Watch:
Fed futures are probably more hawkish than the FOMC. On the surface, perhaps the committee is waiting for more data to get a firm opinion of monetary policy, but futures markets see a couple of hikes coming this year. Perhaps Kevin Warsh will have something different to say on Wednesday.
Stocks to Watch
Volatility – The VIX has been stagnant of late, just hanging around the 19% level but lacking any sell catalyst the fear index could drop sharply this week, with only four days to trade and an 3 day weekend coming.
Micron – We watched it last week, this memory supplier kicked butt last quarter and guided significantly higher for the next year or so. It was impressive, the stock really ripped hard on Thursday but faded some Friday. We’ll see if buyers continue to step up.
Bonds – We have to always keep an eye on rates, the bond market is something of an enigma. It will respond this week to a speech by Kevin Warsh and the labor report, looking for about 120K expansion of jobs with rate and wages steady.
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