The Fuse
What are futures doing?
ES futures say HAPPY MONDAY, as stocks are poised to open sharply higher after a TACO weekend. President Trump backed off the bombings for a bit so that gives some energy to the bulls. Of course, the rug pull is out there and has happened so many times before, perhaps some much-needed bullish action before the end of the month.
News
Solid gains in Europe are pacing the action here with the STOXX up .8% led by nice gains in Germany and France. The dollar fell .2%, gold and silver are up modestly and crude oil is getting hammered. The FTSE added .5%. Yields are falling too, with German bunds off 4bps and US 10 yr treasury down 5bps. Setting up for a trend up day. Japan rose up .5%, Hong Kong up 1.1% and Shanghai gained 1.2%.
Volatility
We see the VIX coming in a little this morning as the war premium gets reduced a bit. Mind you, this indicator tends to find more worries than ever and could rise up very quickly, even after a trend up day.
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Interest Rates
Nice to see a drop in rates across the curve, perhaps the easing in rhetoric is going to make a difference this time? Hard to say, but that 4.7% on treasury yields is significant and continues to be resistance. Lower yields on the term structure is bullish for markets. High yield might get a nice bid here, fed futures still seeing only a modest chance of a rate hike.
Earnings
Huge week of earnings with 4 Mag 7 names reporting, several industrials and about 1/3 of the SPX 500. Important names like ARM, Qualcomm, Boeing, UPS, Visa, Vertiv, Mastercard, Altria and Exxon.
Events
A mixed market with the Industrials flying high on Friday but the rest of the market just lethargic. The Nasdaq made another leg down Friday and is looking to make a run down to the 100 day moving average. Small cap stocks were down and weak as rates continue to shoot higher, and with a fed meeting this week that trend could continue.
Breadth
Breadth was better on Friday but was much stronger earlier in the session. We have seen this problem persist for some time now, and given the fact oscillators are moderately oversold is a good reason for better breadth. New highs reversed that nasty Thursday session and rallied back to a positive reading, just barely. This indicator remains bullish but may turn neutral at some point.
Volume
Decent volume across the board but with weakness in IWM and QQQ that is not a bullish situation. We may see some relief today but what matters is follow-on buying. The recent volume trends have been bearish and are likely to continue for awhile, this week however could see big turnover with heavy dose of earnings and a Fed meeting.
Support Levels
The indices are approaching some good support levels. The QQQ has a bead on the 100 ma, the Industrials looking for the 50 ma while the small cap IWM is already there, looking for a bounce. The best the bulls can hope for is to stop going down, move sideways and consolidate and wait for the next signal to buy.
The Internals
What’s it mean?
Internals were rather poor most of the day after an initial rally attempt, but stocks in the Nasdaq and small caps put in a dismal performance. the VOLD basically stood still all session long, the ADD and ADSPD fell most of the day. VIX popped up late in the session and remains moderately elevated, put/calls remain heated and the TICKS were about evenly distributed. Typical summer Friday.
The Dynamite
Economic Data:
- Monday:N/A
- Tuesday:Economic indicators, inventories, consumer confidence, fed meeting begins
- Wednesday:Interest rate policy decision
- Thursday:Jobless claims, GDP first look, PCE prices
- Friday:employment cost index, chicago biz barometer, michigan final survey
Earnings this week:
- Monday:apld, nvts, cls, nue, rmbs, amkr, whr, ffiv, ko, azn
- Tuesday:PYPL, BA, KO, UPS, DINO, GLW, JBLUE, RCL, BE, STX, ENPH, KLAC, V, TER, TLRY FO, CAR, CAKE
- Wednesday:SOFI, VRT, BSX, APH, FLEX, CTSH, ADP, PG, HUM, MSFT, META, HOOD, ARM, ORLY, LRCX, CMG, FTNT, AEM, QCOM
- Thursday:BM Y, CI, MA, VLO, MO, STLA, PWR, OWL, RACE, AAPL, AMZN, RBLX, RDDT, DRH, RIVN, HUN
- Friday:XOM, CCJ,, MRNA, AN, CVX, D, ABBV, MGA, CHR, CL
Fed Watch:
The second meeting of the Kevin Warsh Chair era begins this week and there will be some wrangling. Already at the last two meetings the sides were drawn against and for hawkish policy, though most were right down the middle. The committee will slowly come around to Kevin Warsh’s way of thinking about inflation.
Stocks to Watch
Mag 7 – Save for Apple, this group has been crumbling, and yes that even includes NVIDIA. Four of these names report this week and three of them have very ugly charts (MSFT, META, AMZN). Can they overcome?
Rates – Again we must pay attention to rates as the 2 and 10 yr yields moved up prominently this week. 4.7% on the 10 year is brutal for markets.
Options – Being the last week of the month we could see quite a bit of positioning if gamma is negative, meaning stocks could go down considerably if there is no bid around.
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