The Fuse
Equity futures are flat to slightly higher today following a very strong Monday to start the week on the positive side. All indices were up yesterday but it did not feel like a rout of the bears unless you were in technology. Nasdaq is within earshot of 20K.
Interest Rates are slightly higher this morning as the yield curve continues to make very small adjustments. It appears rates are exactly where investors want them to be, considering little news to drive money into bonds that makes sense. Five Fed speakers later today may have some influential comments on the markets and rates.
Bumping up price targets on the SPX 500 is the new thing. Citi did that today, yesterday it was Goldman. Basically their strategists don’t want to be left behind. Crude oil is flat after a pretty strong Monday, gold is also flat-lining. A record percentage of central bankers expect gold holdings to increase. Retail sales will be out today.
Earnings last night from Lennar were strong but they gave a downbeat deliveries outlook. We’ll hear more from KBH tonight and some housing data later in the week.
Solid price action Monday as leadership continues from the tech sector. Semiconductors and hardware are pacing the action, and even when small caps (IWM) seem to be ready to drown the market throws them a life preserver. Certainly over the span of a few weeks the stock market is moderately overbought, but that does not seem to deter the dip buyers. They continue to add stocks on the opportunistic dips, eventually that won’t happen and markets will fall. For now, we follow the pattern.
Breadth showed a positive trend Monday but frankly it was not impressive. The oscillators suddenly turned up, just in time. The division between up/down issues was narrow leading us to believe there needs followthrough. But when the market’s back is agains the wall there is always some sort of rally to change the tone.
Pretty good turnover on the SPY and QQQ yet not so hot on the DIA and IWM, which should be playing catch up to the rest of the market. Certainly the small caps have lagged badly for the entire year, that could eventually be a problem if the market sells off. Remember, the IWM often leads on the way down or up, if volume trends remain bearish there may be no other way to go than down.
We continue to wait for support levels to show themselves, but with the stock market making higher highs, higher lows (SPX 500, Nasdaq) the large caps are creating a lot of fury. Small caps (IWM) have some support at 198 while the Industrials have strong support at 38,100. Short week of trading could see an extended pullback if buyers do not participate.
The Internals
What’s it mean?
Good volume today on the up issues pushed the VOLD up nicely Monday, ADD also finished at the highs of the day. But the breadth was not impressive, ticks were mixed while it appears the VIX may have found a bottom and is starting to bounce. TRIL was rather low and the put/call (bottom right) is sneaking up, meaning big money is starting to buy protection.
The Dynamite
Economic Data:
- Tuesday:Retail Sales, Industrial Production, Business Inventories
- Wednesday:N/A
- Thursday:Housing starts, jobless claims, Philly fed index
- Friday:PMI flash composite, existing home sales
Earnings this week:
- Tuesday:CGNT, KBH
- Wednesday:SCS
- Thursday:ACN, KR, DRI, JBL, WGO
- Friday:KMX
Fed Watch:
Last weeks Fed meeting was a bit of a head scratcher. The committee and Chair Powell acknowledged inflation was on the decline but they took up their forecast for higher inflation, and they also removed two estimates for rate cuts. Their forecast has one cut planned, but that could always be changed. One speaker this Monday followed by five on Tuesday, we may learn more about policy moves to come. Next meeting is end of July. It’s been a year since the last rate move.
Stocks to Watch
Options – Friday is a big options expiration day and this is a short trading week. Hence, trading will be condensed into four days and with volatility so low plenty of movement can be had. Look for some bigger price action after the Wednesday holiday./span>
Housing – Quite a bit of data released in the group this week. Rates have been coming down, perhaps that may trigger more activity.
Earnings this week from Lennar and KB Home may provide more clues.
Apple – The big phone and computer company had a stellar week and regained its crown of most valuable company in the world. The buying did not stop for Apple this week, there could be nice followthrough as the stock is mildly overbought.
