The Fuse
Futures are modestly higher this morning as markets try to extend the up session from Monday. That was a powerful day with very solid price action but the internals were not that supportive. In this stock picker’s market, traders are being very choosy.
Interest Rates are pretty stable in front of the first big report of the week, CPI.
Not much on the news front, but politics-related. Former President Trump will be arraigned in a Miami courthouse today on federal charges.
Protesters are promising to be out but there is a worry demonstrations may turn violent.
Very strong earnings from Oracle last night as that stock and other cloud/software names climbing again.
The Fed meeting: Need we say any more? This could be a game changer for the markets and the economy if the committee starts to ‘loosen their ties’ a bit.
Poor breadth continued into Monday as many players are still wary of a sharply higher inflation reading. That coupled with the Federal Reserve policy statement tomorrow has many on edge, no wonder the vix rose sharply.
Volume weakened again but we believe turnover is going to start getting heavy later in the week, especially with a big options expiration coming on Friday.
Massive move higher again as the SPX 500 vaults 4300 and pushes much higher. This rally could run to 4,550 or so before losing steam.
The Internals
What’s it mean?
We can see the VIX did an about face yesterday, rising up with some uncertainty left on the calendar. Today starts the June fed meeting but we will also have the CPI out early this morning to start some fireworks. We saw improvement all day in the internals but it was not a rout. Breadth was poor to average and that is also seen in the VOLD and ADD, barely budged. Put/calls dived and remain on buy signals.
The Dynamite
Economic Data:
- Tuesday: CPI, NFIB Small Business
- Wednesday: PPI, Weekly mortgage applications, Fed Statement
- Thursday: Jobless claims, Retail Sales, Empire State manufacturing, Business Inventories
- Friday: Consumer Sentiment
Earnings this week:
- Tuesday: MIND
- Wednesday: ACB, LEN
- Thursday: JBO, KR, COGT, ADBE
- Friday: BHAT, BUFF, NATH, ONVO
Fed Watch:
It’s the most important Fed meeting this week since….the last one? Of course that is hyperbolic, but we should note as we move forward in time the discussion around the table during the Fed meetings will become more divided. Recent comments from Fed speakers tell us some are talking pause, while others see the need for more aggressive rate hike moves. We’ll learn more Wednesday and in the press conference with Chair Powell. In addition, the ECB will have a rate decision later in the week.
Stocks to Watch
VIX – Volatility has reached levels not seen since before the pandemic. Some say it is ‘too low’. However, it is simply an indicator that is reflecting the mood or temperature of the room.
Federal Reserve – A big meeting as mentioned above, with the strength recently in the stock market could a ‘sell the news’ follow the latest policy decision?
Inflation – Two reads on inflation this week and Retail sales. We’ll get a good view on how inflation is being worked through the system and if the Fed’s efforts of higher rates is actually paying off.