The Fuse
Equity Futures are mixed early as they have been doing all week long. Today is a big expiration, the June monthly series expire today and there will be a slew of volume. We are also getting close to re-balancing efforts for the Russell 2K and other indices, where constituents are moved in and out based on market capitalization.
Rates are steady this am after a good drop down in yield Thursday. Bond prices were well bid all day long as the inverted yield curve just widened out further.
Investor sentiment news shows the bulls are out in force. The AAII reading for this week has not been this high since 2021. The economy seems to be pleasing investors and traders at the moment. Yesterday the ECB raised rates again and pledged to continue fighting high inflation. Markets are closed Monday in celebration of the Juneteenth holiday.
Very strong earnings and guidance overnight from Adobe, as that may stoke a continued rally in tech stocks.
The Fed sided with the markets this week and left rates unchanged. The funds rate remains at 5%, but in the projections the committee members see more rate hikes ahead. Markets were volatile on that revelation.
Pretty strong breadth today as the bulls took charge. Better than 3-1 with gobs of breadth, the market is very overbought but until the money stops flowing in the bulls are in charge.
The melt up continues and with pretty strong turnover. That is a classic condition of a bull market rally: strong turnover with prices heading higher. We’ll see how things go tomorrow as we head into a three-day weekend.
The SPX 500 just keeps ticking off resistance levels as the markets remain overbought. At some point the buying will stop and people will rush to the exits, but trying to guess when is not our job. We take profits and move money around. Next up for the SPX 500 would be a test of 4455 and the 4500. The nasdaq continues to lead though and is only 10% away from an all time closing high.
What’s it mean?
Yesterday we noted a big drop in volatility, well the opposite happened Thursday. Not to fret though, markets rallied sharply after a strong retail sales release in the am. Note the strong VOLD all day long and the finish along with the ADSPD nearing a trend up day. But notable were the ticks, very strong all day long. Green was the dominant color. TRIN fell sharply as did the put/call. An overbought market but not ready to turn it off just yet.
The Dynamite
Economic Data:
- Friday: Consumer Sentiment
Earnings this week:
- Friday: BHAT, BUFF, NATH, ONVO
Fed Watch this week:
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.