The Fuse
What are futures doing?
Back from a long weekend, traders are waking up to modest losses in futures. Friday markets were closed for trading but equity futures were open and traded lower, today we are above those levels. July is front month for options starting today.
News
The STOXX in Europe was flat overnight, but Germany was slightly higher and France modestly lower. FTSE was also flat, gold is slightly lower while silver is modestly higher, crude oil down 1%. US dollar index up .2%. US 10 yr treasury yields up 3bps, German 10 yr bunds down 1bp, and in Japan Nikkei up strong again, higher by 1.5%, Shanghai up 1.8% but Hong Kong down .5%
Volatility
The VIX may ‘pay it back’ for dropping hard last Thursday, but we won’t see too much upside today. This is a day following expiration and that usually drives the action following a triple expiration day.
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Interest Rates
Seeing bonds selling off slightly on the long end of the curve today and even rising a bit on the short end. 2/10 spread is reversing up slightly while we see high yield continuing to press higher. Strong data this week could push yields back up, fed funds futures now modestly pricing in hikes later in the year, perhaps as early as September.
Earnings
Things are picking up slightly with earnings this week, some big names like Micron, FedEx, KB Home and Carnival, Cerebras, and Jefferies among others.
Events
Stocks on Thursday were looking better early on, trying to rally back following a poor showing post Fed meeting. The indices were strong but some of the underlying strength was stapped late in the day, probably just a little profit taking before the long weekend. Volatility dropped as we have come to expect in front of a holiday, and given the reality that the Iran War may be over the bulls have something to celebrate.
Breadth
Advancers bested decliners on this day without much fanfare, nearly a 2-1 advantage but I would have liked to see a much wider spread, especially on a day when the indices were up 1% or more. But, we can’t have everything we want, as breadth is still on a buy signal. Oscillators back in positive ground, new highs still well ahead of new lows.
Volume
We told you last week volume trends were going to be strong, the biggest option expiration ever on 6/18. That was a whopper, and plenty of volume was seen trading into the end of they day. We’ll see today what it means, if shorters got stock put or called away. Look for weaker turnover today, historical stats show the markets often do poorly over the next few days and weeks.
Support Levels
/Settling back a bit on Thursday was unexpected, Wednesday’s fiery test of support could be labeled a success. Yet, we have not really seen a good drop lower on volume to scare anyone yet, and with few catalysts to drive markets lower (that we know of) the bulls retain control of the tape.
The Internals
What’s it mean?
Another mediocre day for the internals. No energy in the VOLD at all Thursday, it was an expiration day but perhaps some traders left early for the 3 day holiday weekend. Ticks were heavy green early but faded late in the session, Put/calls headed lower as did the VIX, which is now back under 17%. Good sign for the bulls.
The Dynamite
Economic Data:
- Monday:N/A
- Tuesday:PMI’s
- Wednesday:New home sales, leading economic indicators
- Thursday:jobless claims, PCE, durable goods, GDP revision, fedspeak
- Friday:Trade numbers, inventories, sentiment final
Earnings this week:
- Monday:FRVO, OWW
- Tuesday:CCL, KFY, SUNB, FDX, BKH, WOR, CBRS
- Wednesday:PAYX, NG, DART, LVO, PODC, MNY, MU, TCOM, FUL, WS, MEI, JEF, MLKN
- Thursday:LOT, NNOX, BB, CMC, AYI, MKC, SNX, DRI, VTIX, WGO, AOUT, WSE
- Friday:APOG
Fed Watch:
Kevin Warsh spoke last week after the Fed decision and it really was not surprising what we heard. The new Chair of the Fed is going to do things differently, and not just with rates. He is creating several task forces to deal with changes and new initiatives, expect less transparency though, which will create some uncertainty in the markets.
Stocks to Watch
SpaceX – This was one to watch last week, and no doubt the first trading week was turbulent. But this week coming up may help define a trend for the Musk company, as some sellers decide to cut bait — if the stock falls more that may not happen.
VIX – Market volatility often declines into the end of the week, that happened and now we’ll see if there is some payback. It may open the door for the dip buyers if the market swoons.
Micron – The big DRAM producer reports earnings this week and many are wondering how much higher it can go. The stock has been on fire and caused some other names like Sandisk to rip higher as well. Expect strong earnings and a solid report.
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