The Fuse
Equity futures are quietly moving higher this morning as an important read on inflation is coming out. The April PPI is going to move markets, in addition Chair Powell will have comments at 10am EST which may sway traders.
Interest Rates are down slightly as the bond market awaits word on April’s PPI figure. This number in line last month but stocks still sold off. Tomorrow’s CPI and retail sales are likely to move markets, Chair Powell speaks later today.
The big news is the resurgence of those meme stocks like GME and AMC, which are soaring again as those who were short are just getting slaughtered. Stocks are stuck here and are in a very tight range, as volatility starts to expand slowly that won’t be the case. Gold is up modestly, crude oil down slightly.
Stoxx Europe was little changed. Bank of England will have a rate announcement this week as will China on Wednesday. Several Fed speakers out later in the week.
Earnings out this morning from Home Depot, they beat on the bottom line but missed on sales, they reiterated guidance for the remainder of 2024.
Alibaba at the same story, missing on sales while Sony beat and raised guidance. Tomorrow bring smaller names but we could see some heavy volatility.
The action on Monday was downright pathetic, with so little volatility in the market we’ll have more days like this one where the range was less than half of one percent. Of course, bulls and bears alike did not want to flinch knowing the big news was coming over the next few sessions. What would be encouraging to the bulls is the lack of heavy selling right near all-time highs. Today was the first down session in eight for the Dow Industrials, time to start a new streak.
A positive breadth day but frankly that is the only good thing to say about the session. Notice how the highs in breadth were right at the open and deteriorated from that point on (see the ADD below in the chart). New highs continue to remain strong however, and that may help eventually lead to the markets moving higher.
Turnover was pretty poor as you might have suspected, more volume is likely in the coming days as news is released. One thing we have noted lately is higher volume on the most positive of sessions, which tends to be a hallmark of bullish trends. Perhaps after a good start in May the buyers are stepping back here to let the market consolidate, all normal behavior.
With yet another close above the 5,200 level on the SPX 500 there is good support and it continues to build. No question this is bullish as the short term moving averages appear to be turning up as well. Nasdaq has support at 18K while the Russell 2K, which was positive yesterday has some decent support at 204 and resistance at 208 and again at 212.
The Internals
What’s it mean?
The VIX shot higher in anticipation of a potentially explosive number today and tomorrow. We are talking of course about the inflation readings for April, which can move markets sharply. VIX was up 8% on the day but is still very low below 14%, the ADD showed bearish behavior all session long, making its highs at the start of trading and moving downward all session. Put/calls went down however and that may eventually be a good sign for the bulls. Ticks were extremely negative, especially on the Nasdaq (TICKS/Q). Will we have a turnaround Tuesday here or more of the same?
The Dynamite
Economic Data:
- 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:
- 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.
