The Fuse
What are futures doing?
A different story this morning with ES futures up modestly, trying to shake off the blues from a dismal trading day. On 7/8 the markets were pounded from the start in a rough risk off session, perhaps dip buyers are stepping in to fill the void.
News
A nice rebound for the STOXX in Europe, posting a gain of .5% with strong moves in France and Germany. The FTSE lost .2%, US dollar index fell the same amount, crude is settling in above $70 while gold is pushing above 4,100 an ounce. Silver trying to join the gainer’s club. Yields fell modestly, German bunds down 2bps with 10 yr US treasury yields down 1bp. Japan showed nice gains, up 1.4%, Shanghai up again, 1.7% but Hong Kong down .6% in volatile trading.
Volatility
The VIX is backing away here but we still need to watch it carefully. That big rise yesterday is a reminder there is still some uncertainty out there and complacent traders/investors are going to feel some pain at times. Good to have some put protection just in case.
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Interest Rates
Seeing a pop in rates across the curve this morning, if anything just profit taking from bond investors. Nothing too serious as the curve has been flattening of late, that is bearish for equity markets. High yield still looks very strong, not seeing any signs of a recession here, fed funds futures are steady, seeing potentially one hike in 2026, but inflation numbers next week might change that outlook.
Earnings
Solid numbers from AZZ yesterday, Levi hit some good levels too but provided fair guidance. This morning Pepsi with higher sales and maintaining their guidance, the turnaround continues. Tonight WD40 and then Delta in the am.
Events
Stocks were headed south yesterday from the start as it appears the Iran War is back on, but perhaps the temperature will cool down soon enough. Oil prices ripped higher though as a risk off day was apparent, but the Nasdaq finished in the green and the SPY had only a minor loss. Call it a win for the bulls as it could have been much worse.
Breadth
Terrible breadth that barely improved all day long, nearly a 3-1 rout of the bulls by the closing bell. Oscillators are negative again and sitting on sell signals, but new highs continue to expand. This intermediate term indicator continues to defy the odds.
Volume
A heavy volume day to the downside for the small caps means a distribution day was notched, but not for the Industrials. That’s important, but if there is more selling today then the index might be headed for a corrective move. Higher turnover but not a distribution for the SPX 500, thankfully for the bulls. A bit of clearing out this week but nothing serious just yet.
Support Levels
A good-sized dip at the start of the day got the bulls rather anxious, along with a pop higher in volatility. The uncertainty over this Iran War is a dark cloud of the markets and that could be troublesome for the bullish bias. With earnings season nearly upon us the bulls would not like to see the trend shift downward, July is often a strong month especially towards the end of it.
The Internals
What’s it mean?
More weak internals but perhaps they reached a ‘flush out’ point. The VOLD was awful all day long, making a puke at the end of the day but the markets were not at their lows, so a positive divergence. ADD was weak too, the ADSPD nearly a trend down session. Ticks were heavy red all day, a slew of sell programs while the VIX spiked but then pushed down. Just another poor trading session with bad internals.
The Dynamite
Economic Data:
- Thursday:Jobless claims, existing home sales
- Friday:N/A
Earnings this week:
- 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.
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