The Fuse
What are futures doing?
Equity futures are modestly higher as traders await word on a Fed policy statement. Today is the conclusion of a 2-day meeting, following will be a press conference by Chair Warsh talking about their decision and what they plan to do going forward. We could see a nice bounce if the decision is what many expect to hear.
News
More solid gains in Europe as the STOXX index rose up .3%, led by similar gains in Germany and France. The FTSE picked up nice gains, higher by .6% while the dollar fell .1%. Gold is slightly down while silver is slightly up, oil prices are rising sharply with crude back above $83. Yields are up too, German bunds higher by 1bp and US 10 YR treasuries up 1bp, Japan fell 1.5% but China’s markets were on the rise, Hong Kong up 1.8% while Shanghai gained .4%.
Volatility
Volatility is somewhat elevated and that may change once the news is released about the current rate policy. We also have some big earnings news the next few days and that will have an impact as well, Friday is the last trading day of the month.
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Interest Rates
Today is the day, we’ll see where Fed policy leads us, either into a nice path or into the abyss. As it is, the markets are not expecting a rate policy change at all today, but there is a slight chance of a rate hike today, about 31%. More than likely things will remain the same but the language will be scrutinized. Seeing some selling in fixed income this am, rates are modestly on the rise today, high yield is struggling.
Earnings
While tonight and tomorrow are the big earnings days we still have some important releases to discuss. Strong earnings and guidance from Visa, Bloom Energy beat as well and raised guidance, KLA missed badly while Teradyne had a nice quarter. Ford and Cheesecake Factory had nice beats, too. This morning a miss from Vertiv, lowered guidance from PG along with a miss from Humana and ADP. Tonight Microsoft and Meta along with Arm, Lam Research, Qualcomm, Robinhood and Fortinet.
Events
Another slow motion day but this time the bulls overcame some early selling. Seems that the bears are exhausted from trying to push the markets lower but without any traction. Breadth was solid yesterday as the RSP has moved into the lead for returns on the year. With broad leadership that will only help push the stock market higher when the dip buyers finally re-engage.
Breadth
A good day for the bulls after some very weak breadth sessions. Not much to write home about but a nearly 2-1 advantage is a good place to start. The bulls have been needing a strong show of breadth badly and with another day like this they are bound to get the buy signal they need. Once again, separation on the oscillators, but new highs beating up on new lows again, not quite on a buy signal yet.
Volume
Higher turnover for the Nasdaq but much of that was early and to the downside, the QQQ printed a doji. So, you need to see a white/green candle and a followthrough day for the bulls to gain some short term control, volume prints big or (better to be bigger). Industrials had a good day on better volume as well, this index is seeing nice money flows.
Support Levels
It may be the lows are in for now, if the storage/memory and MAG 7 group can somehow find a bid. There is a good chance for that to happen today after the fed policy decision, plus we have end of the month coming up on Friday. No doubt with the weakness in the Nasdaq some bargain hunters are going to dip a toe in the water.
The Internals
What’s it mean?
Well that was a nice finish for the VOLD and volatility, but that was it. Ticks were evenly distributed with buy programs on both sides, while put/calls did step down a bit. Buyers are just not enthusiastic right here, naturally with poor liquidity, erratic price action and worries over a new fed policy it makes sense to have that worry hit the markets here. VIX is going to be the tell today and the remainder of the week.
The Dynamite
Economic Data:
- 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:
- 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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