The Fuse
Equity futures are ripping higher across the board this morning after word of a preliminary agreement between the US and China. The two countries lowered tariffs across the board after reaching common ground and it is expected progress will continue. However, the moratorium is only 90 days so by August if there is nothing to show for it the tariffs come right back up.
Interest Rates are up after the apparent agreement in Geneva between the US and China. Spreads are still tight though with junk yields reflecting more growth rather than stagnant action. Fed futures are down and now reflect less of a chance for the Fed to cut rates, we’ll see this move however this week with the release of CPI and PPI for April.
Stocks look to open up sharply higher and push the SPX 500 back above 5,800 since breaking in early March. Europe led the charge and was higher by 1.2% in heavy trade, France and Germany were higher as was the FTSE. Gold is getting pounded, down nearly 4% but crude oil is climbing, up 4%. The dollar extended recent gains, up .8%. German 10 yr bund yields rose 5pbs, as did US treasury 10 yr yields. Stocks in Japan were up .4%, huge gains in Hong Kong up 3.1% with Shanghai up .8%.
Earnings will be interesting this week with several names in retail reporting like Walmart. A slew of tech including Cisco and Applied Materials will be reporting as well along with Alibaba and JD.com. Friday is expiration for May options.
As we approach this week there is a big option expiration to come on Friday, a double witching. That will lead to some good volatility as the markets move and shake. We continue to be challenged by the 200 day moving average as strong resistance but if the bulls can find some momentum this might finally be the week. It seems markets are hanging on every news item that drives interest in or out.
Breadth was positive and that keeps this indicator on a buy signal. Certainly there has been quite a bit of good breadth days, the oscillator remains moderately overbought. We also have an expansion of new highs yet this indicator is not yet on a buy signal, it is just neutral.
Volume prints continue to to be unimpressive. Until there is some better turnover the market moves can be reversed quickly and easily.
Bigger volume moves show conviction from the big money. There doesn’t always need to be huge volume but certainly if we expect to see prices supported then that would be necessary.
Support levels are still locked in but the issue here is resistance. That 200 day moving average is a stickler right now and that could be a problem if the market turns sought. The recent test and failure by the Nasdaq shows the vulnerability after not following through. It seems like a catalyst is missing here, maybe it is lower rates so we’ll be watching bonds carefully.
The Internals
What’s it mean?
Really not much to write home about for the internals. Stocks really went nowhere on a net basis but VIX fell hard and that meant little movement overall. The VOLD was up but barely budged, the ADD and ADSPD flirted with the zero line, ticks were even across the board while put/call sank even lower, that is a danger signal..
The Dynamite
Economic Data:
- Monday:Federal Budget, Fed Governor Kugler
- Tuesday:CPI, NFIB optimism index
- Wednesday: Fedspeak
- Thursday:PPI, retail sales, jobless claims, empire state, philly fed, Chair Powell, industrial production, biz inventories, Fed Governmor Barr
- Friday:Import prices, consumer sentiment, howsing starts
Earnings this week:
- Monday:FOX, MNDY, HTZ, PLUG, RGTI, ACHR, PBR
- Tuesday:JD, SE, HMC, UA, ONON, NU, OKLO, GRAL, GEVO, EXEL, CAPR
- Wednesday:SONY, DT, STRR, TECNY, INVZ, CSCO, CRWV, LAZR, NXT, JACK
- Thursday:BABA, WMT, GAMB, DE, REE, CSIQ, AMAT, COCS, CAVA, TTWO, DAP, XPON
- Friday:CDRO, FLO, BRC
Fed Watch:
After last week’s Fed meeting when the committee held firm on rates we have to now turn our attention to the data. That is going to be the main driver of trader/investor sentiment over the coming weeks, given the fact much of big earnings season is behind us. Yet, we have several speakers out this week including Chair Powell who will deliver a speech midweek. Nothing likely to change their view of slow and steady.
Stocks to Watch
Interest Rates – We are again watching rates and how they move to the news of trade and the Fed.
Retail – Walmart delivers earnings this week and we’ll also get retail sales numbers for April. Recall the last couple of months were rather mixed but if they show the consumer slowing down that will be troublesome.
Trade News – Apparently some movement lately with tariff stimulating talks between the US and other nations. We’ll have to see of they can move the ball across the goal line. All positive news is good or investor sentiment.
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