The Fuse
Equity futures are up strong following the holiday session, but diverging again with the small caps and Industrials a bit lower. We’ll see how this goes today but be ready for anything.
Interest Rates are up a bit as bond traders sell some of their holding following the release of some economic data. Jobless claims rose up while we had no change from the Bank of England on their monetary policy.
Bank of England held steady on monetary policy today but they seem to want to cut rates soon. The Swiss bank cut rates overnight by 1/4 point, the Philly Fed index barely grew. Gold is up modestly, crude oil higher by just under 1%. We saw gains overnight in Europe and Japan but down in Hong Kong and Shanghai.
Earnings were strong for ACN but guidance was weak this am, Kroger delivered a nice beat and is higher on strong guidance, Jabil beat but offered in line guidance. We’ll hear from Carmax tomorrow am along with Factset.
It was a very tight range for the indices on Tuesday, traders were dragging their feet through a pre-holiday session. Yesterday markets were closed in observance of Juneteenth. The action was lethargic but some areas did exhibit strength, like the semiconductor group. Companies like ARM Holdings, Qualcomm, NVIDIA led the way and helped to lift up the other indices. The SPX 500 finished on its highs of the day, just under 5,500.
Positive breadth but that is about the only good thing to say about it. Yes, it means the sell signal is avoided for now but we have not seen too many impressive volume/breadth sessions. In fact, going back to May there are only a handful. Will it matter? Eventually yes, when the weight of stocks gets to be too much and profit-taking commences.
Volume was poor on Tuesday as many traders probably hit the exits early to start their holidays. That makes sense, but rising up on low turnover is not inspiring to the bulls. In fact, it sets up another dangerous situation. Fortunately, there is not much on the news front (planned) that is likely to shake up markets significantly. We are rolling towards quarter end, it’s been positive and many traders want to get paid this time around.
More new highs for the SPX 500 and Nasdaq. We could see good support down near 5,440 towards 5,400 on the SPX 500, the Nasdaq with strong support at 19,200 but also down at 19,000. The Russell 2K seems happy to be trading around 2K level (200 on the IWM), while the Industrials remain challenged under 40K.
The Internals
What’s it mean?
Not much energy in the stock market Tuesday and it shows from the internals. The VOLD was higher but not showing the sort of move we come to expect when markets are up. ADD hit highs midday and declined, telling us stocks were starting to fall even as the indices were rising. That is a negative divergence. TICKS were mostly red on the day, ADSPD reached higher but it was not a trend day. Typical summer trading before a holiday. We have another one coming up soon.
The Dynamite
Economic Data:
- Thursday:Housing starts, jobless claims, Philly fed index
- Friday:PMI flash composite, existing home sales
Earnings this week:
- 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.
