The Fuse
Equity futures are mixed this morning as the markets prepare for the weekend. Some believe a 20% rally leads to a new bear market, but we are skeptical of that analysis. Since the lows in October 2022 the stock market has rallied now 20% (SPX 500), the Nasdaq as moved more than that. We don’t particularly like to label markets as bull or bear, rather what are the conditions that assist in our daily trading. The SPX 500 is still trying to get a close above 4,300, and a weekly close there today would do wonders for the chart.
Interest Rates are rising up today after some heavy short covering on Thursday drove bond prices up, along with some sold bond auction activity.
Elon Musk and Tesla have done it again! Early in the week a partnership with Ford for their customers to use Tesla’s supercharger, now a deal with GM for the same. The euro zone technically has entered a recession, but the economic picture there is starting to clear up.
Strong earnings from Docusign (DOCU) last night and Duckhorn (NAPA) is moving those stocks higher.
A solid rally on Thursday with good volume and again broad leadership. This time, all markets rallied in sync but the SPX 500 remains under resistance.
Breadth was negative on the NYSE but positive for the Nasdaq. Curiously, when markets were mostly lower on Wednesday market breadth was strong. It seems players are waiting for a catalyst, that might come next week.
Volume did not pick up as the markets rallied after mid-morning. That could be a sign of trouble but we also understand this is the summer time and a seasonally weak period for stocks. With rates plunging during the day there was a chance to take a risk on stance.
We continue to see 4,300 as the ultimate resistance. The bulls would like to make that move after a modest selloff, not when the entire market is overbought as it is now. Nasdaq made a nice comeback but needs a followthrough day tomorrow.
What’s it mean?
Internals really did not tell the story of the price action today. In fact, if you read these internals they would probably tell you the markets went sideways to slightly down. That was the signal from the VOLD, ADD, ADSPD. But the TICKS show some strong green, and the put/call remains headed lower as does the VIX, with a close under 13.70! Simply amazing for those fighting the trend.
The Dynamite
Economic Data:
- Friday: Baker Hughes Rig Count
Earnings this week:
- Friday: NIO
Fed Watch: Fed Officials are ‘officially’ on a quiet period. The next meeting starts in a week. Fed Futures are seeing a 1 in 4 chance of a rate hike at the June meeting.
Issues/Stocks to Watch this Week
Apple – WWDC is happening this week, and all eyes will be on some new products that are in development.
Crude Oil – An OPEC+ meeting was to be held this past weekend, if some production cuts are announced we could see big moves in crude.
VIX – Volatility is down sharply and as such protection is rather cheap to come by. I don’t expect to see volatility this low for much longer.