The Fuse
What are futures doing?
ES futures are soft as more war rhetoric permeates. We have higher oil prices again, crude jumping up as the bombings in Iran continue, as they are far off from negotiating. Yesterday’s rally was impressive from a price perspective but some indicators were questionable.
News
Not much help from overseas with the STOXX in Europe down .3% but France and Germany were steady. The dollar index fell .1%, the greenback has been very strong. Oil is higher by 3%, gold and silver are up. Yields are rising again, German bunds and US 10 yr treasuries up 1bp, Japan was slightly down as was Shanghai, but Hong Kong lost 1.1%.
Volatility
Market volatility signals are turning up slightly with the VIX sitting around 17%. Today is the first day of trade for the August vol future, the term structure still in bullish formation (contango). Until that changes to flat or inverted the bulls have a tailwind.
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Interest Rates
Slight bump up in yield across the curve in modest profit taking, and worries over inflation. The 10 yr yield is at a 5 week high and threatening to break 4.7%, which will not be good for stocks in general (especially small caps). High yield spreads remain well-bid, fed funds futures are still seeing slight chance of a hike at next week’s meeting.
Earnings
Big day for earnings with Tesla and Alphabet delivering after the close along with IBM, ServiceNow, CSX and Texas Instruments. GE Vernova had a nice beat/raise. Also a solid quarter from Pulte and raised guidance but cautious tone.
Events
It was a turnaround Tuesday as the bulls took advantage and the dip buyers came in hot to push stocks higher. The action was spread across many sectors, it was not only tech but no question the semiconductors had some influence. Those stocks finally had a winning day, we’ll see if they can make it two straight to get them on the right track.
Breadth
Breadth was okay, not great once again. Oscillators still in negative territory but the new highs barely beat out new lows. We have a good chance to take the markets much higher if breadth can just cooperate a bit, but this has been a problem for some time. The market needs some consistency and rhythm for it to move forward, else it is just in a range.
Volume
Actually had an accumulation day on Industrials and the Nasdaq, which is very impressive. These indices really need to pick up the pace after faltering of late, and if there is some good volume days to the upside the trend can shift to bullish again. New highs are still within reach.
Support Levels
The biggest and best trends barely give you a chance to get on board, and that seems to be the case once again. That pullback on Monday from the highs seemed rather steep and bearish but the bulls managed to scrape out a win yesterday. The lows from Friday seem to be in tact, maybe just a breather before the big earnings news takes over.
The Internals
What’s it mean?
We’ll call it mixed on the internals, with the VOLD actually spinning higher, the VIX solidly lower and the TICKS in green, especially on the Nasdaq. NYSE ticks were evenly distributed, put/calls are still rising so that indicator is on a sell. Bulls will take it, but far from a rout.
The Dynamite
Economic Data:
- Wednesday:N/A
- Thursday:Jobless claims, KC fed survey
- Friday:new home sales, flash PMI
Earnings this week:
- Wednesday:GEV, T, PM, TNL, WAB, TEL, PHM, IRDM, MCO, FBP, TSLA, GOOGL, NOW, IBM, TXN, KMI, TCBI, SLG, CCI, CSX
- Thursday:NOK, CLF, AAL, HBAN, FCX, STM, BX, CX, LMT, TSCO, INTC, MXL, DECK, NEM, COLB, BYD, SLM, SAM, RNG, JAKK
- Friday:VZ, CHTR, AXP, NEE, CNI, BAH, LW, SLB, HCA, CPF
Fed Watch:
Kevin Warsh had some tough talk for the markets and Congress this week, vowing to fight inflation with all the tools available at his disposal. In the end, it is more likely a rate hike or two, the fed funds futures are pricing that in. We’ll learn more in a couple of weeks, and then Jackson Hole next month.
Stocks to Watch
Google – The stock took a hefty fall this past week and will report their quarter after the close Wednesday. I’m not sure the beating last week was a warranted, but we’ll see how much color they provide in the call.
Rates – They have been climbing steadily, trying to force the fed’s hand to raise rates at the next meeting. No question the Fed committee is going to be aggressive against inflation, and that means rate hikes. Bond yields may rise before they fall.
Breadth – We have had mediocre breadth on the up days for weeks, finally it is starting to matter that this is not bullish. Perhaps a bit more downside to go into the end of July.
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