The Fuse
Equity futures are flattish this morning as the markets digest a big week of new highs tagged. We often see more money pouring into the stock market following new highs, there are two weeks remaining in the month and with a strong performance so far we’ll see if that continues.
Interest Rates are slightly higher this morning as bond traders are taking some chips off the table. It’s been a nice run for bonds since the start of the month, fed funds futures are trying price in more rate hikes but it will be a difficult climb.
Overseas most stocks were lower following the late selling in US markets on Thursday. Bitcoin, gold and silver are marginally higher this morning. Chinese markets gained while the US dollar was slightly down. Today is a fairly large options expiration day.
Earnings from Applied Materials last night were strong but guidance was a bit light vs estimates. Take Two Interactive disappointed on the top/bottom line but announced new Grand Theft Auto for 2025. Doximity delivered some strong results, too. Meme stocks are getting trashed this morning, GME and AMC down sharply.
A bit of a pause in the current rally as markets were pretty well overbought on several metrics, so a little retreat is not a bad thing. In fact, markets have been showing good strength this month, probably a bit too much so with two weeks left in the month we would not be surprised at a modest pullback of 1-2%.
Breadth was weaker on Thursday, buyers were being stingy as the huge Wednesday rally left some people behind. Dip buyers are still lurking though, and that will likely be the activity unless/until some price failure at moving averages. The low risk entry trade is to buy the breaks/dips right now with an uptrend in place. Oscillators pulled back some but are still in bullish territory. New highs continue to swamp new lows.
Turnover was moderate yesterday but far less than midweek, meaning less conviction on the seller’s part. That’s a good sign for when buyers return, in fact we could see some breakouts to the upside with an expansion of volume within days.
Tagging new highs and trading above 40K for the first time ever, The industrials have shown some terrific relative strength of late. The SPX 500 and Nasdaq could not close higher but did manage new highs intraday, buyers were just not showing up at those higher levels. The SPX 500 finished below 5,300 but above 5,310 the buyers are going to come out to push the markets upward. Strong support for Nasdaq at 18,500.
The Internals
What’s it mean?
The action was downright dull and boring, much like the beginning of the week. A far cry from the excitement generated by Wednesday’s sharp rally and new highs. VOLD was nascent as was the ADD, there was simply no buying done and no volume to accompany it. The VIX perked up end of day, and those ticks were pretty red most of the session, if that continues we’ll have a whack day coming soon. ADSPD was pretty flat most of the day, internals really told the story – flat market action.
The Dynamite
Economic Data:
- Friday:Leading indicators
Earnings this week:
- 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.
