The Fuse
What are futures doing?
Equity futures are mixed this morning as Nasdaq remains the leader, but it certainly feels a bit frothy and a whack could come at anytime. SPX futures down slightly from all-time highs.
News
Not much help from Europe as the STOXX was down .1% led lower by stronger losses in France and Germany. The dollar index rose .1%, oil is climbing, up 2.7% but gold is down and broke 4,500. Silver is pulling back, too. Yields are also climbing, bunds up 4 bps with 10 yr US treasury up 4bps. Japan ripped higher again, up 2.5% but China was lower. Shanghai down .2% and Hong Kong off 1.6%.
Volatility
VIX remains low and that eventually will be a problem. When volatility is cheap it means options are also cheap, puts and calls. It is not expensive to protect portfolios here.
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Interest Rates
Yields are on the rise again as they were on Monday, which felt like it would be a risk off day. The 10 yr is pushing higher, the 2/10 spread slightly lower while the belly of the curve (5, 7) start to rise in yield. High yield is starting to wobble though, and that means spreads widen. Fed funds futures are steady but may move following this week’s job data.
Earnings
Strong earnings and guidance from Palo Alto but the stock has pulled back from the overnight highs. We may see buyers step in here later on this name. Ulta was strong with good guidance, Gitlab beat but missed in estimates. Tonight we have Broadcom, Crowdstrike, Five Below, Macy’s and Veeva Systems along with retailer PVH.
Events
Sure looked as if the bears were going to take advantage of the bulls after a nice recent run but the dip buyers were not having it. Solid price action on the side of the bulls has this new month off to a flying start. Can this continue? Certainly to the end of the week, we’ll see if dip buyers get yet another opportunity.
Breadth
Positive breadth, that’s the only good thing I can say about it. Eventually the heaviness of the breadth is going to weigh and that will mean some down days for sure. Right now, the bulls are shrugging it off. Oscillators back to positive (both), new highs still ahead of new lows.
Volume
Volume was again weaker than the prior day and that may concern some, but it’s not a surprise. Actually, lower volume at a top is quite normal and characterizes the market as a wall of worry. Those who are not ‘in’ are waiting on their opportunity, like a pullback but cannot seem to get what they want. Eventually they get dragged in.
Support Levels
Looking for a pullback to support but as the markets move sideways we may not get there. A move to the 20 day ma or simply waiting for a catchup is most likely. As extended as the indices are right now, there is time and price to correct for and that might be sooner rather than later.
The Internals
Another day of blah internals, the VOLD up but off the highs of the day, ADD and ADSPD just pathetic, but then breadth was weak all day. TICKS were heavy red on the Nasdaq but split on the NYSE, put/call remains low and the VIX fell again to close under 16%. Looking for something to shake the internals this week.
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The Dynamite
Economic Data:
- Wednesday: ADP, PMI, factory orders, ISM, fed beige book, fedspeak
- Thursday: Jobless claims, productivity, Barkin speaks
- Friday: Labor report for May, wages, consumer credit
Earnings this week:
- Wednesday: MMED, MDT, CGNT, M, OLLI, THO, AVGO, CRWD, VEEV, AI, FIVE, DSGX, PVH, WOOF
- Thursday: CIEN, CAL, CMCO, BF.B, TTC, RBRK, PL, LULU, DOCU, IOT, GWRE, TTAN, QX
- Friday: ABM, GIII
Fed Watch:
It was a loud week for fedspeak as several speakers came out with opinions of the current economic environment. There is no way the committee can be happy with the current inflation situation and outlook, but we have yet to hear from Chair Warsh and his views.
Stocks to Watch
Big Cap Tech – A renaissance of sorts, the big names like IBM, Oracle and Microsoft along with Dell had a phenomenal month, not to mention Intel as well. Can the surge continue? It’s possible but look for some sort of retreat soon.
Energy – Oil prices finally dropped sharply this week after it appeared the Iran War may be winding down. A few more details to get the Strait of Hormuz open and then crude may decline more.
Interest Rates – Long rates are slowly moving downward and that would be a positive for stocks, especially small caps. Can yields fall enough if inflation numbers are rising?
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