The Fuse
What are futures doing?
Equity futures are quiet this morning but are stepping up after Monday’s torrid advance. We could see a bit of consolidation here and leading into tomorrow’s Fed meeting policy decision. The meeting starts today.
News
Nice followthrough in Europe with the STOXX gaining a modest .3% led by gains in France and Germany. The FTSE added .2%, the dollar index flat, gold and silver up slightly. Crude oil is down about 3% and trading below $80. Stocks in Japan cooled off a bit, slightly higher but Hong Kong down 1.7% and Shanghai down slightly. Yields in the US 10 yr treasury bond were down 2bps in a continuation move.
Volatility
Volatility continues to decline ever so gently as the market awaits word on Fed policy and the SEP (projections). Kevin Warsh will hold a press conference tomorrow and that might be a reason for some to hold protection and do some selling.
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Interest Rates
Seeing a slight move down in the yield curve as maturities across the board are lower, overseas yields are little changed. 2/10 spread remains steady, fed funds futures seeing a 98% chance of no move tomorrow in rates, the next move being priced in might be December but hikes and cuts are about even money..
Earnings
Tough earnings for Dave and Buster’s last night, weak this morning. We’ll hear from LaZBoy tonight, Jabil and Carmax tomorrow am.
Events
Stellar move from the markets stoked by news over the weekend of a ‘deal’ with Iran. Markets were waiting for something like this to happen and the confluence of events put the bulls in charge. Strong moves up by gold/silver, bonds and crypto were the hallmarks of the day, but also a stellar 3% move by the Nasdaq was totally spectacular. Follow through is key here.
Breadth
Interestingly enough, breadth was NOT very good, for a market that jumped so high that is a bit of a surprise and disappointment. Below you’ll see the VOLD, which was weak all day long. Breadth was barely positive, only 14-12 on the NYSE but much better on the Nasdaq, just not overwhelming. Oscillators remain positive, New highs crushed new lows again, this indicator remains on an intermediate buy signal.
Volume
You probably would have expected a huge volume day with Monday’s massive rally but that was not the case. On a summer Friday the trading seems to dwindle, and since this was not an accumulation day the bulls should be nervous. No question the biggest volume of the session came early on with heavy short covering and straggler buy orders. Dip buyers will probably be active on the next move lower with a bounce try.
Support Levels
Perhaps those brief moves lower last week were the signal markets needed to get the bulls engaged. No doubt the pullback midweek attracted some dip buyers, who were paid nice on this Monday rip higher. The bulls will be looking for a move back up, but the lack of buying end of day could be considered exhaustive if the buyers don’t step up again. Perhaps some caution before the Fed meeting which starts today.
The Internals
What’s it mean?
Volatility was the big story with the markets ripping higher, VIX fell sharply after the ‘war premium’ was removed with the weekend news. Put/calls went down, but the problem here was the VOLD and ADD, which started to decline after midday. TICKS were super green at the start but then turned to red later, heavy sellers and profit taking before a potentially explosive week. Internals were not the best, not like last Thursday.
The Dynamite
Economic Data:
- Tuesday:Import prices, housing starts, building permits
- Wednesday:Retail sales, pending home sales, Biz inventories, FOMC rate policy decision
- Thursday:jobless claims, Philly Fed, leading index
- Friday:Holiday
Earnings this week:
- Tuesday:VNCE, WLY, LZB
- Wednesday:PGR, JBL, KMX
- Thursday:KR, ACN
- Friday:N/A
Fed Watch:
The week we have all been waiting for! This is the first meeting chaired by Kevin Warsh, a seasoned veteran of the Federal Reserve Board who is providing some new leadership following the end of Jay Powell’s term. I expect to see/hear much of the same from the new Chairman, the committee will have a new set of economic projections, no move is likely in rates in this week’s policy decision.
Stocks to Watch
SpaceX – By all accounts a successful IPO last week, but now the hard part begins. Options start trading on Tuesday, volatility is going to start being priced in as sellers are lurking. It’s going to be an interesting week for this new issue.
Interest Rates – The facts are clear and understood, inflation is starting to rise and may soon cause more price increases to occur. With the Fed meeting this week I suspect they will show some concern, else we could see bonds selling off in a big way.
Iran War – Will there finally be an agreement? It has been bountied around for weeks now but nothing in writing. Thursday seemed as if the two sides were close, markets rallied sharply. This is a short week and maybe an agreement is coming by the July 4th holiday. Wouldn’t that be ironic.
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