The Fuse
What are futures doing?
After getting drilled on Monday/Tuesday the bulls are trying to wrest control back from a 2 day bear holiday. Equity futures are up a bit this morning, fair value is very negative so the futures are shing stronger gains (thanks to late selling after hours on Tuesday).
News
Not seeing much in the way of market help from Europe, the STOXX was flat, Germany down but France higher. FTSE was also flat, gold is shedding some recent gains, silver is ready to break $60 per ounce, while oil is down once again. US dollar index climbed .1%, Asia stocks were mixed. Japan Fell .9%, Hong Kong up .4% but China’s Shanghai up .1%. German bund yields fell 1bp, 10 YR US treasury yields fell 2bps, a bid in the bond market.
Volatility
When the VIX shoots up to 20% or so it seems to give the volatility sellers an opportunity. They seem to ‘know’ the market won’t fall apart on them and it is ‘safe’ to tread in these waters. It doesn’t always work out that way, but Tuesday was a reminder that even a 14% move higher in volatility will not be long-lasting.
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Interest Rates
A continued drop in yields across the curve as we have some inflation data due a bit later in the week. The markets were down hard yesterday and may not be finished falling, but the bond market is not deterred. 2/10 spread continues to narrow, now only at 29bps (was much higher earlier in the year). That may spell trouble for the markets eventually, high yield remains robust, fed futures mostly unchanged but they could move on the inflation data later in the week.
Earnings
A good quarter from FedEx but weak guidance has this stock down this morning, while Cerebras reported their first earnings as a public company and disappointed on all fronts. Stock is much lower today. Later tonight all eyes on Micron.
Events
Tuesday was a continuation of the selling that hit hard later in the day Monday, with a spectacular open down more than 1%, the markets failed to rally though the internals were not as bad as one might have expected. No question the tech stocks got hit very hard with the Nasdaq falling sharply, down nearly 3% at one point. We’ll see if it can get back on track today.
Breadth
You would think breadth would have been a mess yesterday but that really wasn’t the case. The A/D line was about flat which says money was rotating out of some groups and into others. The bulls would argue as long as the money stays in the price action will eventually improve. Oscillators still flirting around the zero line, new highs negative for the first time in awhile.
Volume
A heavy dose of selling hit yesterday with the opening bell being a sharp down moment. Given the fact traders dumped stocks hard and all session long but the internals were not damaged badly tells you something about the market rotation. We are in summer and volume is often weaker, but Tuesday was clearly a day of distribution, the bears won the day.
Support Levels
/With the huge gap lower you would have thought that was enough of a test for the markets to reset and start a move higher. We’ll see if that happens later in the week but this particular week has historically been the worst of the year. Technically speaking a few spots lower might be enough to trigger some buying, but those moments have not lasted for very long.
The Internals
What’s it mean?
Another odd session for the market with the huge down day in price but the internals holding it together. I’m not sure what it means, whether the tail is wagging the dog or not, but suffice to say on a day that looked miserable the internals were far from it. VOLD was basically absent all day, ADD and ADSPD but finished positive, that is astonishing. Put/calls are still on sell signals, breadth is hanging onto a buy but ticks were heavy red all day, lots of sell programs.
The Dynamite
Economic Data:
- 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:
- 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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