The Fuse
What are futures doing?
Futures are ripping higher this morning after a two-day retreat. Stocks are poised to open up strong following monster earnings from Micron, which also guided much higher. Tech stocks appear to have taken the lead for the most part, semiconductor stocks catching the action.
News
Modest gains in Europe with the STOXX up .3% led by a gain in Germany. The FTSE was flat, as was the US dollar index. Gold and silver, which have been punished lately are now testing major support. Crude oil is trading below $70. Yields rallied a bit overnight, German bund yields up 1bp while 10 yr US treasury yields rallied 3bps. Japan’s market rose sharply, up 4.6%, Shanghai up .2% but Hong Kong shed 1.6%.
Volatility
VIX is back on the decline, only a couple of sessions of downside in markets was enough to get the volatility sellers engaged. Still, the index is still elevated but might retreat more after some economic data is released. Next week is the last few trading days of June and the second quarter.
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Interest Rates
Rates pushed down yesterday in an effort to show the economy is strong and the consumer is going to benefit. We saw good action in the long end of the curve which flattened out, the 5, 10 and 20 bonds were sharply higher. Lower crude oil prices helping the 10 yr, high yield is also well-bid again, while fed funds futures now seeing a better chance of two hikes in 2026, that might be a bit optimistic for the bond vigilantes.
Earnings
Monster earnings from Micron along with huge guidance for the future, it has lit a fire under the feet of tech stocks today.
Events
Just more volatility into a thinly traded market. Stocks were on a yo-yo all session long, with little direction and very poor read on trend. Turns out, traders were simply waiting on Micron to deliver earnings for the excitement to begin, and that might be what is in store for later today. This divided market is hard to play as the money moves from growth to value and back to growth. Eventually things will get settled.
Breadth
Another strange day with breadth, what is going on? Sure, the small caps were higher and rates sunk significantly, but the rotation out of growth is getting very painful. But, the breadth was positive again even as the indices were down, but oscillators are still in negative territory, barely. You get the feeling the bulls are trying to bait the bears here and there could be a major league rally coming soon.
Volume
Volume was okay yesterday but nothing to write home about, the industrials were higher and actually posted an accumulation day, the Russell 2K just missed it. SPY and QQQ were lower volume and it’s a good thing, those indices were off the mark. We could see a big rise in volume here today and Friday.
Support Levels
Seems there was interest down below around the 7320 level on the SPX 500 and perhaps a bit lower, but those markers may be left in the dust. There is little reason to believe the market will head down now after the robust earnings from Micron last evening. Nothing stopping the bulls here from taking out the old highs, perhaps by July 4th.
The Internals
What’s it mean?
Internals continue to say the markets are strong, but are they? We’ll have to see but they are certainly looking better than the price action. VOLD seems dead, and the ADD just cannot make higher highs. TICKS were again heavy red all day long, put/call rising again — this indicator on a sell signal. VIX was down most of the day then up, again a rather curious session.
The Dynamite
Economic Data:
- Thursday:jobless claims, PCE, durable goods, GDP revision, fedspeak
- Friday:Trade numbers, inventories, sentiment final
Earnings this week:
- 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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