The Fuse
Equity futures are mixed following a day when the SPX 500 and Nasdaq closed at all time highs. However, we still have the Russell 2K well below its all time highs and the Dow Industrials also shy. We have a holiday tomorrow, markets are closed in observance of the Independence Day holiday, trading will resume Friday with the jobs number released before the open on that day.
Interest Rates are modestly lower, bonds are rallying but fed funds futures remain steady. German bonds are rallying a bit as are the 10 year in treasury. Yields jumped Monday and continue to remain elevated as a potential Trump administration could be disastrous for fixed income investments.
Gold is on the move, up nearly 1% on good volume, silver up as well. Crude oil remains elevated but off the high levels from yesterday. The ADP report will be out today forecasting payrolls for June, the dollar remains under pressure follwoing comments from Chair Powell on inflation.
In Europe the Stoxx was up .4%, stocks in Asia were mixed while the 10 year bund fell slightly.
Earnings out this morning with a beat by Constellation Brands even though sales were down 7% over last year. The company backed its previous guidance for FY25 free cash flow.
A pretty solid day that I would characterize as a slow-motion ripper for the bulls. Indicators were strong all session long as the beginning of the month money flows made their way into equities. We also saw bonds rally smartly, yields fell a bit. Chair Powell spoke and did little harm to rates or the stock market, it was up and out after he was finished.
Very good breadth that took the oscillators up and above the zero line. That means the markets are now on a buy signal, and the more time spent above zero the longer the market can rally. Even though the SPX 500 and Nasdaq are moderately overbought, we don’t consider that a sell signal until breadth deteriorates and starts to weigh down the indices. New highs are starting to improve.
Much better turnover on the Nasdaq and SPX 500 as these indices continue to lead. It is no coincidence that money is flowing to these big names day in and day out. Eventually the small caps should respond loudly, but for now they will have to be happy with smaller gains, if that. We might see volume recede as we head into the holiday-shortened trading week.
Again another new high for the SPX 500 and Nasdaq. We’ll remain consistent about lower support but the higher we get the more painful feeling if a larger correction develops. With 5,400 as solid support on the SPX 500, we may see a bit more upside before a more sizable correction begins.
The Internals
What’s it mean?
We won’t complain too much, but a nice rally for the markets on Tuesday with decent internals. The VOLD finished very strong while ticks were also mostly green, meaning solid buy programs all session long. ADD managed to show green today, the VIX started higher and ended down on the day. Keep an eye on this put/call, which rallied on Tuesday.
The Dynamite
Economic Data:
- Wednesday:ADP, services PMI, factory orders, ISM services, fed meeting minutes
- Thursday:N/A
- Friday:employment report for June,
Earnings this week:
- Wednesday:STZ, BB
- Thursday:N/A
- Friday:N/A
Fed Watch:
This past week we heard from several Fed speakers who seem to like the trend inflation is taking. That would be lower of course, the PCE from May showed a flat month/month and lower annual number, not to the 2% target but getting there. It is increasingly like the Fed is going to cut rates at some point in 2024, more likely in September if more data shows the trend continuing. All eyes/ears on Chair Powell on Tuesday as he speaks in Portugal, later in the week NY Fed president Williams is out twice. We’ll also have the Fed meeting minutes released Wednesday during the day from the June meeting.
Stocks to Watch
Volatility – The VIX remains extremely low here and could even bust lower with a holiday coming up. We often see volatility recent and sell off before a holiday session. The VIX is telling us buyers and sellers seem satisfied at this level.
Technology – After a stellar first half of the year can the momentum continue? Nasdaq had a strong 17% gain following an amazing 2023.
The uptrend remains in tact as sellers are not interested in letting go just yet, certainly not while the Fed looks ready to pivot towards an easier policy.
