The Fuse
What are futures doing?
Equity futures are falling sharply this morning as the Iran War is back on. Rhetoric is no longer just the catalyst but now some bombs are going to drop and forces will be deployed. Apparently the Iranians are not finished, and that uncertainty creates more doubt with markets.
News
The STOXX in Europe fell hard, down .7% led down by declines in France and Germany. The FTSE lost the same, .7%. Crude oil is rallying about 5% while gold and silver are getting hit hard. Yields are rising, German bunds up 3bps but US 10 yr treasury yields down 1bp. In Japan the Nikkei was off 2.1%, Shanghai down .5% but the Hang Seng gained 2.6%.
Volatility
We saw a bit of action in the VIX recently but that faded a bit Tuesday, it is now moving higher above 18% with the re-start of the Iran War. We’ll see how long this lasts but no question the uncertainty of length is going to create more demand for protection. As long as that is the case the volatility index will rise.
If you are an existing Market Blast or Trader’s Pass member, log in here:
Interest Rates
Once again bonds are weakening, especially on the long end of the curve but the short end is on the rise. 2/10 spread is spurting up again, 30 yr yields are up as well. Junk bonds, hitting new highs on Monday have backed away but spreads are still rather tight. Fed futures seeing only one hike in our future.
Earnings
We’ll hear from Levi tonight along with AZZ, Helen of Troy this morning, Pepsi on Thursday am.
Events
With every modest jump higher the bulls tend to wake up the bears from hibernation, and then chaos ensues. Tuesday was one of those days when it appeared the bulls might get some followthrough but it was not to be. The market seems to move like a yo-yo on a string and just cannot get any directional rhythm going.
Breadth
Breadth was poor but this indicator remains on a buy signal, just barely. Oscillators are near the center line but now diverging, Nasdaq slipped back into negative territory. That is not tragic, but more down sessions would be concerning for the bulls. New highs continue to push the new lows.
Volume
Distribution days on the Nasdaq and the Industrials with the latter posting a new intraday high. Profit-taking is not uncommon at those levels but we cannot dismiss the heavy turnover in the Nasdaq, which helped bring all the indices lower. Not much news or catalysts to push volume this week but maybe traders are waiting until earnings season starts.
Support Levels
This could be the chance to get the dip buyers into the game. There have been few opportunities to get in, which is characteristic of a strong bull market. The dips have been short and shallow and often only one day, perhaps we will see the lows hold as support. SPX 500 has support at 7500 and then 7400.
The Internals
What’s it mean?
Weak internals make it very difficult for a followthrough day to occur. As it is, the VOLD and ADD were in bad shape coming into the day and it just got worse, failing to hold closing at the lows of the day. Not good for the bull case. TICKS were heavy red all day, put/calls started up and the VIX rose but backed away after a midday surge. Just nothing good here for either side.
The Dynamite
Economic Data:
- Wednesday:wholesale trade, fed meeting minutes, consumer credit, some fedspeak
- Thursday:Jobless claims, existing home sales
- Friday:N/A
Earnings this week:
- Wednesday:HELE, LEVI AZZ
- Thursday:PEP, BYRN, SMPL, NTIC, WDFC, SLP
- Friday:DAL
Fed Watch:
We heard from the new Chairman last week of the FOMC and he did not reveal much, as expected. With some inflation data coming out soon before the next meeting this month markets will be watching closely. Friday’s job report with fewer than expected created a bit of a buzz for fed futures, which now see less of a hike chance in 2026.
Stocks to Watch
Memory Stocks – A massive torching this week of Micron, Sandisk and others helped to squash some recent gains in semiconductors. This is all mechanical selling here, but then the buying was the same. Look for a rebound this week.
Apple – Strong week for the big iPhone maker and a solid finish, not far off the old highs. A followthrough week would be huge for this name before earnings hit end of July.
VIX – Coming into a holiday week volatility is often sold off hard and then rebounds once the market opens again. That would be more selling as futures sell off with rising volatility, but it doesn’t always happen — just usually.
[/MM_Access_Decision]
