The Fuse
What are futures doing?
Stocks are trying to push through resistance to mark one more win in June. This being the last day of the month and quarter there are some option expirations hitting today, look for a bit more action as we get near the close.
News
Stocks rose across the pond overnight, the STOXX index higher by .5% led by modest gains in France and stronger gains in Germany. The FTSE rose .1%, the dollar index rose the same amount,, oil is slightly higher as is gold and silver. Yields are falling, in Germany the bunds down 2bps while in the US 10 yr treasury down 1bp. Japan climbed .9%, Shanghai also gained (.5%) but Hong Kong was lower.
Volatility
The VIX has calmed down a bit, no surprise as we head into a holiday weekend. We often see volatility sellers get in front of the holiday and do their work, the VIX now well below 18% and under the 200 and 20 day moving averages. Bullish for markets.
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Interest Rates
Seeing little movement across the curve today but the long end seems to be coming down. The oscillation of the yield curve seems pretty static here, but the jobs numbers later in the week are likely to change that. 2/10 spread remains tight and might get even more tighter soon, fed futures now less hawkish, seeing only a 39% chance of a hike in 2026.
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
Following the weekend and some less than negative headlines the bulls were in a buying mood, taking the indices up more than 1% on very good turnover. However, small cap stocks (IWM) were loathe to participate and actually closed lower. Regardless, an impressive rally coming after some weak consolidation days. We’ll see if there is followthrough on the last trading day of June.
Breadth
After some good breadth figures last week the a/d line was positive but not overwhelming. One would think a wipeout of the bears with a better than 1% rally in the Nasdaq and SPX 500 but it wasn’t to be. Oscillators still positive and new highs expanding again. Are the bulls tired already, or just waiting for the new month to start?.
Volume
Pretty good turnover for a Monday, save for the IWM which was lower and had lesser volume. That’s a positive, the small caps did not print a distribution day. Expect to see more big volume today an later in the week as we move into the holiday, but it might taper off Thursday.
Support Levels
Markets are churning here, we could point the cause to the end of the month/quarter, that might explain some of it. Good rotation and a broadening out of the rally is certainly benefitting the bulls, even with poor to average breadth stocks are on the rise, and are not letting up.
The Internals
What’s it mean?
Once again it is really not clear how the internals are running so poorly with the indices so strong. At some point something is going to break and it won’t feel good at all. Yet, ticks were super green and bullish all day long, put/calls headed lower as did the VIX, with fell under 18% and might fall lower by week’s end. Breadth numbers were poor, the VOLD and ADD just barely finishing in the green. This needs to improve.
The Dynamite
Economic Data:
- 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:
- 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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