The Fuse
What are futures doing?
Equity futures are down sharply much as they were on Tuesday before rallying back, but this has the feeling of a bull squeeze. Basically, with stocks overbought and the likelihood of a corrective phase there is little reason to get involved. Rates are higher, crude oil up, gold down and volatility expanding. Risk off day ahead.
News
Modest rise for the STOXX in Europe overnight, the index rose .3% on moderate volume. France and Germany rose up nicely, the FTSE was flat, so was the US dollar index. Crude oil is quiet, so is gold but silver is down a bit more. German bund yields fell, in Japan the Nikkei fell 1%, Shanghai off 1.5% but Hong Kong with a slim gain.
Volatility
Seeing a strong bid this morning in the VIX as worries over the Iran War persist. The meeting between Trump and Xi is over and while there were some deals closed the President seems a bit bothered by the lack of trust with Iran to seal a deal. If there is more to this conflict look for more volatility and the VIX to rise into the 20’s.
If you are an existing Market Blast or Trader’s Pass member, log in here:
Interest Rates
Yields are up across the curve, the 10 yr pushing 4.5% while the 30 yr is already getting comfortable above 5%. That is problematic for markets, higher rates make it more expensive to do busine or buy a home. High yield is starting to fall, spreads are widening and with the recent high inflation data fed futures are starting to price in rate hikes.
Earnings
Solid earnings from Applied Materials, the stock rallied hard after the release but pulled back off those lofty levels. Figma was a strong mover with very nice gains top/bottom line. Alaska Air out this morning.
Events
Stocks moved up higher on okay turnover yesterday. It was a milestone day for the SPX 500, trading above 7,500 for the first time ever and closing above that mark. An impressive feat, just 5 weeks ago the index at at 7K. The bulls are in control, clearly and are looking for more bear blood. No doubt earnings have been strong and have really been driving investors to get in the game.
Breadth
Another up session but at least breadth was not negative. However, it was not impressive either, with barely a 15-10 advantage for the bulls. Given the current environment of new highs and hesitant market players there is little need to worry much, the wall of worry is high. When the volume picks up at new highs then we could be faced with a selling situation.
Volume
Volume again was weak, save for the industrials. It may not mean much just yet but it certainly tells us the majority of investors/traders are not willing to participate in a market making new highs daily. Dip buyers are not interested at these levels but are waiting for their opportunity to snag some shares.
Support Levels
Another day gone by without a test of support, but if the markets suddenly move sideways then we can surmise a pullback to support may not be necessary. The trend remains up and good support is not far below, but that distance is getting stretched day. 7,340 probably on the SPX 500.
The Internals
What’s it mean?
Interesting day as the internals really gave something for everyone. VOLD was decent but the ADD and ADSPD were weak, ticks were about even across the board while the put/call and vix were lows. Seems as if the market wanted to go up even in face of sellers at the top. Friday’s have been pretty strong of late, we’ll see how it goes today.
The Dynamite
Economic Data:
- Friday:Empire state, industrial production, cap utilization
Earnings this week:
- Friday:SPRY, PAVM, RMIX, SACH, SLE, AZ, ALK, RBC
Fed Watch:
The Fed will have plenty to chew on this week as the data is going to likely point to higher inflation overall. That is reflective of higher energy prices, which will hit the consumer hard in the wallet. It is possible the committee will look through the data but if it lasts quite a bit longer there will be necessary adjustments, like a rate hike. Last full week for Jay Powell as Chairman.
Stocks to Watch
Semiconductor Stocks – This group has been on fire lately and could really ignite the markets higher. Even a modest setback could trigger dip buyers to engage.
Oil/Energy – We continue to watch the developments in this Iran War. It seemed last week there was progress towards a resolution but oil prices continued to rise following. More good news could send oil down to the 80’s.
Cisco Systems – The big networking company reports earnings this week and it could be a blockbuster.
[/MM_Access_Decision]
