The Fuse
US equity futures are rallying modestly this morning after a pretty strong week for the markets. Stocks are trying to deliver a followthrough week one more time as their is strong potential for a new uptrend to commence.
Interest Rates are slightly down across the curve as the bond market awaits a fresh read on inflation. Tomorrow’s PPI and Wednesday’s CPI will move markets and influence bond traders. Currently Fed futures are barely pricing in one rate cut in 2024, and likely on the back end. If inflation starts coming down however that might change the pace and frequency.
Oil prices are creeping higher this morning with crude futures up about .6%, gold future are down sharply, off 1.22% so far. Data this week may determine the short term path for gold, silver and other commodities. Across the globe Japan closed slightly down, Europe was flat while the Hang Seng edged higher. Tesla is launching a new financing rate for Tesla Model Y buyers, while Apple faces some pressure from its workers to unionize. The US dollar is showing some fatigue and is lower and could come down sharply if economic reports this later on are weaker than expected.
Earnings are starting to slow down a bit this week but we will have reports from big names Home Depot, Walmart and Cisco, among others. Earnings have been fairly decent so far but have simply stepped over a lowered bar (lower expectations). We are not hear much excitement from companies for the second half of 2024, but that could change.
Markets continue to confound the experts. With an overbought reading the prior week it was expected the stock market would give up some gains, but that did not happen. Good price action and participation from several groups paced the rally. The weekly chart now shows a bullish condition which could last several more weeks.
Good breadth overall this week but Friday’s session was a setback. It was positive though but much more so in the first 30 minutes of trading. Oscillators are fairly overbought here and may be due for some corrective action, new highs continue to expand over new lows. With breadth now on a buy signal we’ll see if it can last more than few days in a row.
Pretty strong volume Friday so we notched another accumulation day. Stocks did manage to push through resistance on good turnover, that is a positive sign going forward. But as we move into the summer months volume is going to dissipate and the mean wild, volatile moves but the markets seemingly going nowhere.
Tough market to trade in those conditions but if the trend continues higher we could see more turnover coming up.
We’ll still call 5,200 as good support on the SPX 500, with 18K now built as a strong level for the Nasdaq. We have been harping on the fact the Russell 2K needs to be the lead for markets to continue higher, that is due to the breadth leadership the index provides. Note, most indices were up Friday except for the IWM as breadth pulled back, too. A rise above 212 in the R2K/IWM would be very bullish.
The Internals
What’s it mean?
Not much to see here actually, ticks were pretty red late in the day as buyer exhaustion set in. VIX went lower and remains in the tank, that simply means expectations for market volatility is quite low. ADD was down but finished off the lows, the VOLD down all day signaling volume trends were bearish. All in all it was a choppy, sloppy mess of a day after sentiment told us the consumer was worried about inflation.
The Dynamite
Economic Data:
- Monday:Consumer inflation expectations – April
- Tuesday:April PPI
- Wednesday:April CPI, retail sales, business inventories, housing market index
- Thursday:jobless claims, industrial production, import/export, housing starts/permits
- Friday:Leading indicators
Earnings this week:
- Monday:PSFE, AHR
- Tuesday:JACK, HD, SONY, PBH
- Wednesday:MNDY, CSCO, DT, DOLE, MMYT
- Thursday:WMT, WMS, GOOS, UAA, JD, BIDU, AMAT, FLS, ROST, TTWO
- Friday:
Fed Watch:
Stocks managed to forge ahead this past week after some dueling fed speakers were out Friday. Goolsbee (Chicago) and Kashkari (Minneapolis) were trying to explain their views and were certainly at odds. This coming week has Chair Powell speaking on Tuesday with a slew of other speakers on the schedule. Some more hawkish than others. With some data sprinkled in between, will we see simultaneous responses?
Stocks to Watch
Gold – The yellow metal had a stellar week after a mild corrective period in April. We still see gold making a run to $2,500 eventually, especilly if there is continued worry about sticky inflation.
SPX 500 – New highs are not far away, the last time the index made a run there it fizzled out. This time around, breadth and new highs are strong, so this may be the time to push upward. If 5,265 is exceeded, we see a move to 5,350 pretty quick.
VIX – Once again, the volatility index is quite low and that means the market is complacent about risk. That can last awhile, and in fact a few more days of this will actually cement a market buy signal, if the 20 day moving average of the VIX crosses under the 200 day moving average and confirms. That could happen by Thursday of this week.
