The Fuse
What are futures doing?
Seeing some bullish action early this morning in futures as the SPX 500 tries to extend the rally from Monday. Of course, that rally flopped as many investors remain cautious following Friday’s spectacular decline.
News
We saw the STOXX in Europe up only .1% on lower turnover, France was up but the FTSE lost .4%. The dollar index fell 1bp, crude oil is down two and trading under 90, gold is stabilizing while silver is up slightly. Yields are on the lows with bunds and 10 yr US treasuries down 1bp, Japan’s Nikkei up 2.2% in volatile trade, Shanghai up 1.3% while Hong Kong edge out a gain.
Volatility
Following a big shocking move up in the VIX Friday there was a bit of calmness yesterday, though markets were moderately volatile. Some selling ensued late in the day but volatility is still coming down. The 20 ma at 17.24 is the important marker, two closes below would put the bulls back in charge. Currently at 18.2.
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Interest Rates
Seeing a bit of a rally in bonds this morning, yields are falling across the curve. 5’s and 10’s are getting some interest from bond buyers. The 2/10 spread continues to slide, high yield is starting to gain some traction again. Fed funds futures not changed much but could move following some important inflation readings this week.
Earnings
Rough earnings and guidance from Vail Resorts last night. We’ll hear from Land’s End and ASO this am, tonight Casey’s, Cracker Barrel and Skillsoft, tomorrow Chewy, J.Jill..
Events
The one thing bulls did not want to see was a trap, and it seems like that happened Monday. Futures were soaring at the start of the day and climbed higher on lower volume, which tells you not much conviction. For now, the markets are in a no mans land, nowhere to go but up/down the range from last Friday, which is huge. Where it goes from the high or low tells us all we need to know.
Breadth
Breadth started out positively but deteriorated badly late in the session as the bears won out. There is no sense of winning here even as the indices propped up nicely, only a fraction of Friday’s losses were recovered. Still, the bulls won this round but with some economic data due later in the week that may not be too flattering, look for more selling to resume. Oscillators still firmly negative, .
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Volume
It is hard to classify Monday’s action as anything other than lethargic. Buyers stepped in early, probably some short covering from Friday’s smackdown but that buying faded quickly. Most of the day was a slow bleed lower, volume picked up late as the SPX 500 printed more selling on the day, but officially an accumulation day. Lower highs, lower lows on the Industrials, which is notable.
Support Levels
Friday’s lows held firm, and that is useful for the bull case but the action was not all that positive. It seems sellers are still lurking and may look to push the markets down towards the 50 ma, which is still rising at a fairly fast rate. The indices closed again below the 20 ma, which will start flattening out this week and become resistance if the markets don’t move higher, a long ways to go.
The Internals
What’s it mean?
Nothing positive from the internals on the day, just lethargic action. Looking at the VOLD and ADD, just finishing below the zero line is not inspiring. There is little interesting from traders here, the ticks were evenly distributed but a slight lean to bearish, VIX was lower but still reflects some anxiety. Put/calls on the move here.
The Dynamite
Economic Data:
- Tuesday:Small Biz optimism, wholesale trade, existing home sales
- Wednesday:CPI, treasury balance
- Thursday:jobless claims, PPI, PCE
- Friday:Michigan sentiment
Earnings this week:
- 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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