The Fuse
What are futures doing?
Futures are mixed this morning as the markets are mostly quiet, settling in after the SpaceX excitement. Today’s conclusion of the midyear Fed meeting is likely going to bring a response.
News
More upside for Europe, very slight as the STOXX inched higher by .1%, but Germany was down. The FTSE was flat, US dollar index was as well, gold slightly lower as is silver, crude oil very little changed. US 10 yr treasuries dropped 1bp, Japan resumed its climb up .7%, Hong Kong down .7% but Shanghai up .4%.
Volatility
The VIX remains bullish below 17% and with some positive reaction from the Fed statement it could move below 16%. The term structure remains bullish as well, Today starts July as the front month.
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Interest Rates
Very little change on the yield curve, 10 yr yields a bit lower, the 2/10 spread is coming down and that will be good for small caps. Also seeing bond investors rallying to the high yield market, these bonds hit new highs recently. Fed futures pricing in no change today and only a chance for a hike the rest of 2026.
Earnings
Strong earnings from Lazboy last night as the stock beat and boosted guidance. This morning strong revenue from Carmax, the stock is up 5%. Later on we hear from Jabil, tomorrow am Accenture and Kroger.
Events
After that huge Monday rally the buyers disappeared from view. It was clearly a risk off day, that’s not a problem as we often see a ‘back n fill’ following a strong day. Today’s Fed decision will be important for the markets from the standpoint of what to expect going forward. Chair Warsh may present things differently and may emphasize the funds rate LESS than before.
Breadth
Sure looked as if breadth would be strong yesterday even as the market was teetering on a rollover, but that did not come to pass. Still, minor positive breadth on the day still had the oscillators moving higher, new highs still beating new lows in stylish fashion. We are not overbought here so there good be a strong move behind yesterday as the market digests gains.
Volume
As we mentioned yesterday the chances of a followthrough day on higher volume was extremely small. Volume move Tuesday was less than Monday, so it seems buyers and sellers are getting ready for some volatility to heat up following the fed policy decision. No trading Friday as markets are closed, but look for more volume to come Thursday on that big expiration day.
Support Levels
It’s hard to say yesterday was ‘the’ pullback to support, maybe the 5 day ma, but that is very short term. We tend to like a pullback to the 10 or 20 ma to really scare everyone who got in late, that may still happen if the market does not like the data (retail sales) or the Fed’s statement. There is plenty of good support at 7500 but more resistance at the old highs near 7.600..
The Internals
What’s it mean?
And the internals go thud. Nothing good happening here following Monday’s rout, but remember we said the Monday internals were also weak. VOLD and ADD sold off hard all day long, PUT/CALLS were on the rise and steady sell programs all day with the red arrows on TICKS. VIX was slightly higher but was down most of the day, just nothing good happening here. Bulls ran out of energy, perhaps the dip buyers come back today.
The Dynamite
Economic Data:
- Wednesday:Retail sales, pending home sales, Biz inventories, FOMC rate policy decision
- Thursday:jobless claims, Philly Fed, leading index
- Friday:Holiday
Earnings this week:
- 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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