The Fuse
What are futures doing?
Stocks are trying to rebound from an awful week that ended badly on Friday. Heavy selling across the board on that day but perhaps a rebound with some bargain hunting goes on today. Tech stocks took the biggest hit and are moving up the most, but not quite 1% yet.
News
In a spillover from Friday stocks across the globe were down sharply following big losses in the US. The STOXX in Europe fell .9% led down by France and Germany. FTSE lost .3%, the dollar index fell .1%, gold is now breaking down and testing lower levels as is silver, below $70. Crude oil is bouncing back, up 3%. Yields are still rising in the US, up 5bps on 10 yr US treasuries, German bund yields rise 1bp. Japan saw large losses, down 3.8% but also down were Hong Kong and Shanghai, off 1.5% and 1.7% respectively.
Volatility
The Vix was the big story Friday, rising up a massive 40% and pushing those futures even higher. The swelling losses demanded traders/investors to buy protection and it was bid up substantially Friday, but looks to be calming down a bit. VIX futures back below 20%.
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Interest Rates
Yields ripped higher on Friday, a catalyst for the stock market selling off. We continue to have bonds down this morning but slightly, some inflation reports later in the week will have some influence. 2/10 spread continues to flatten and move lower, the long end of the curve is moving higher in yield. Junk bonds has problems Friday, they are aligned with equities, while Fed funds futures have taken rate cuts off the table and are pricing in hikes later in the year.
Earnings
A quiet earnings week with names like Casey’s, Vail REsorts, Chewy, Oracle, Adobe, Lennar, RH and Land’s End. Expect few names to report over the coming weeks but some important trend names.
Events
A huge whack to the markets on Friday has everyone on edge. These big moves tend to be the start of something rather than the finish, and while most traders/investors will contemplate over whether there is more down to go, the market is signaling trouble ahead. One day does not make a trend but it can start one.
Breadth
Poor breadth but it could have been much worse. We did see the small caps get drilled on Friday, down more than 3% and the Nasdaq off a whopping 4%. Those are big number, but only about 2 1/2 to 1 bearish on the breadth. We saw new lows expanding as well, oscillators are now back to negative but far oversold, so perhaps more to go.
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Volume
We are starting to see the distribution days cluster together, and that means more selling is on the way. The huge volume print on QQQ and IWM Friday was significant, and leading to areas where there might be some buying. However, during a seasonally weak period for stocks there is not much help there if high turnover continues to lead the markets lower.
Support Levels
We had talked repeatedly about the lack of support level tests lately and that eventually it would be paid back. Well, Friday happened and all the sudden the support on the short term charts were destroyed. Some gap support from the early May gaps higher may hold but eventually the 50 ma is now going to be the target for investors to really get back in, if the brakes are slammed in those areas.
The Internals
What’s it mean?
Just atrocious internals, the VOLD straight down all day long. ADD and ADSPD were weak but not as bad as expected, the TICKS were something else, with red candles nearly all day long. That means sell programs were hitting hard, PUT/CALL rose up strong while the VIX went up a scary 40% in a day, not common. Bears looking for followthrough.
The Dynamite
Economic Data:
- Monday:N/A
- Tuesday:Small Biz optimism, wholesale trade, existing home sales
- Wednesday:CPI, treasury balance
- Thursday:jobless claims, PPI, PCE
- Friday:Michigan sentiment
Earnings this week:
- Monday:FCEL, GHM, DLTH, MPAA, CPB
- Tuesday:ASO, LE, SJM, TITN, CASY, BARK, LAKE, OMO, SKIL
- Wednesday:CHWY, JILL, CHM, ORCL, SFIX, AEMD
- Thursday:LOVE,HOFT, ACB, MH, VRA, ADBLE, RH, LEN
- Friday:
Fed Watch:
No question the committee is looking at this strong labor report and getting skittish over current monetary policy. Perhaps it is a bit too loose? Futures are pricing in rate hikes later in the year, and maybe into 2027. Inflation readings this week will be important markers.
Stocks to Watch
Semiconductor Stocks – This group was hammered on Thursday/Friday with a 1-2 punch to the gut. It’s going to be an uphill climb after the heavy distribution on Friday.
Apple – The big iPhone and pc company has their annual developers conference this week, what might they announce to surprise their customers?
SpaceX – Friday is the day when Elon’s big company finally trades on the open market. It’s been a long time coming and many investors will be able to participate in the offering, but no doubt overbought to start.
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