The Fuse
What are futures doing?
Futures are seeing a nice bounce this morning after an extremely volatile week. No doubt much of that volatility was caused by the upcoming quarterly expiration and end of June, which tends to be about rebalancing indices and portfolios. Perhaps that is over by tomorrow.
News
Mixed trading overseas last night, the STOXX flat but the FTSE lost .2%. Gold is falling about 1% while silver is down sharply, crude oil rallying back up to $70. The dollar index fell .1%. US treasury 10 yr yields rose up 1bp, Japan climbed .2%, robust gains in China and Hong Kong, the Shanghai index up 1.2% and Hang Seng up 1.8%.
Volatility
While the intraday volatility has been apparent, on the closes we have not seen too much movement. That is fascinating, and given the fact VIX remains elevated with some premium they could knock down the fear index pretty hard this week.
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Interest Rates
Modest movements on the yield curve overnight with the long end catching a slight bid. Fed futures are unchanged, the 2/10 spread is flattening out finally, while high yield bonds might be attractive today.
Earnings
Not too much on the earnings front this week but we hear from Dow stock Nike along with Constellation Brands, General Mills and Factset.
Events
Equities continue to consolidate but the broad market is showing some advancing potential. Market rotation is happening, quite normal and healthy to see money flowing into different groups and sectors. No more hiding out in the Mag 7 names and other big tech, they have been taking the brunt of the punishment lately.
Breadth
Really good breadth again on Friday, we saw modestly good a/d line all week long even during the down sessions. That speaks volumes for sentiment even if the price action is not reflecting the same. Oscillators are back in the green, new highs again beating new lows by a large margin.
Volume
Coming off a high volume day last week before the holiday we saw some good turnover as well into the end of the week. This was rebalancing of the indices and repositioning for big institutions, which should be over by Tuesday. There are some large-sized option expirations on the 30th and this is a short trading week, look for less big moves as we head towards Friday.
Support Levels
/Sellers have been active lately but only to rotate into other groups. The Nasdaq has been pretty weak of late and now sits on the 50 day moving average, which has been good support in the past. Industrials and small caps are working their way higher, 20 day moving average rising very quickly.
The Internals
What’s it mean?
Let’s call it a mixed picture for the internals. VOLD spiked end of day but that might be given back later today, the ADD line as well. We can attribute this spike to rebalancing efforts, the VIX came in a bit but the ticks were super red on the day, some buy programs but mostly sells. Put/calls continue to rise, big money is hedging their risk.
The Dynamite
Economic Data:
- Monday:N/A
- Tuesday:Home price index, Chicago PMI, consumer confidence, JOLTS
- Wednesday:adp, Kevin Warsh speaks, ISM, Final, construction spending, auto sales
- Thursday:June labor report, wages, factory orders
- Friday:Holiday
Earnings this week:
- Monday:AVAV, CNCX
- Tuesday:NKE, PRGS, STZ
- Wednesday:GIS, FDS, UNF, MSM, FC, BSET, BGX
- Thursday:LNN
- Friday:Holiday
Fed Watch:
Fed futures are probably more hawkish than the FOMC. On the surface, perhaps the committee is waiting for more data to get a firm opinion of monetary policy, but futures markets see a couple of hikes coming this year. Perhaps Kevin Warsh will have something different to say on Wednesday.
Stocks to Watch
Volatility – The VIX has been stagnant of late, just hanging around the 19% level but lacking any sell catalyst the fear index could drop sharply this week, with only four days to trade and an 3 day weekend coming.
Micron – We watched it last week, this memory supplier kicked butt last quarter and guided significantly higher for the next year or so. It was impressive, the stock really ripped hard on Thursday but faded some Friday. We’ll see if buyers continue to step up.
Bonds – We have to always keep an eye on rates, the bond market is something of an enigma. It will respond this week to a speech by Kevin Warsh and the labor report, looking for about 120K expansion of jobs with rate and wages steady.
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