The Fuse
What are futures doing?
Equity futures are nicely higher following the long Memorial Day weekend. Stocks are poised to open at all-time highs across the board, something we have not had just yet. Last trading week of May, bulls want to finish out with a statement.
News
Strong gains in the US did not trickle over to Europe, the STOXX up .1% overnight with drops in France and Germany. The FTSE had a strong session, up .8%>. Crude oil is backing away, down 5% but gold and silver up modestly. The dollar climbed .1%. Yields in Germany and the US are on a different path, the Bund yield up 3bps but 10 YR US treasury yields down 5bps. Stocks were mixed in Asia, Hong Kong up .1%, Shanghai down .2%, same for Japan.
Volatility
We thought VIX might pay it back today as the fear indicator moved down sharply on Friday, but with news over the weekend that the Iran War was making headlines (positive) that is stoking a rally in equity futures. The war premium is being removed slowly.
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Interest Rates
A good move this morning in yields as they are dropping across the term structure. 2/10 spreads are tightening, that is a positive. 10 yr yields are falling again, while 30 yr are trying to get back below 5%. High yields spreads are tighter and remain well bid, fed funds futures are steady and see a better chance of a hike than a cut as the next move (in 2027).
Earnings
A good slate of earnings this week with big tech names Salesforce, Dell, Marvell, HPQ and ZScaler leading the way. Box and Nutanix along with a slew of retail like Costco, ANF and Dick’.s. Interesting names, most have strong chart patterns for more upside.
Events
Decent day for the bulls again as the Industrials closed at an all-time high. The SPX 500 and Nasdaq are right behind it, and they could reach new highs today barring any adverse macro news. This being the last trading week in May brings about the usual ‘window dressing’, which can start any day this week. May has been a strong month for the bulls and no doubt they want to finish on a high note.
Breadth
Once again, good not great breadth on Friday but enough of a pass to start thinking the bearish signal may be repealed soon. Oscillators are split but moving upward again, we’ll see if this is a false move. New highs are starting to expand again but this indictor is not yet on a buy signal.
Volume
Volume was weak on the way up Friday and that has us concerned, not because of the new highs but the lack of interest to buyers. That is quite normal however, who wants to buy the highs? So, in essence a wall of worry is up and that might lead the markets to move even higher.
Support Levels
Reversal candles on Friday does not look pretty, seems the bulls were laying off buying the highs and took some chips off the table. We’ll see if that continues or if these sellers get right back on board. The recent test of support (last week) seems to have held firm, so if a new high can be tagged this week more upside may be generated.
The Internals
Another good day for the internals which remain bullish. ADD and ADSPD were positive but came off their highs, the VOLD expanded again but tired late, the TICKS were spread out, many buy and sell programs hitting. VIX moved lower as we often see in front of a three-day weekend. Bulls still in charge.
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The Dynamite
Economic Data:
- Monday:N/A
- Tuesday:Home prices, consumer confidence
- Wednesday:N/A
- Thursday:Jobless claims, durable goods new home sales
- Friday:GDP (2nd), income/spending, PCE, retail/wholesale inventories, Chicago biz barometer (PMI)
Earnings this week:
- Monday:JOYY
- Tuesday:AZO, CRGO, SKY, VNET, ZS, SQM, BOX, API, MOD, SVM, APPS, BBAR
- Wednesday:DKS, BBWI, CPRI, PDD, BNS, DY, ANF, BMO, SPMC, AMSC, NTNX, MRVL, CRM, SNOW, SNPS, HPQ, P ,NCNO, BRZE
- Thursday:BBY, PLAB, HRL, BURL, WB, XPEV, ARBE, CM, KSS, FUTU, DELL, PATH, MDB, COST, ADSK, S, OKTA, ESTC, NTAP, GAP
- Friday:ELMT, KNOP, FUFU
Fed Watch:
A week into Chair Warsh’s tenure and all is quiet. We have not heard from him yet on any speeches but that might be coming soon. His first meeting as Chair comes up in three weeks, projections will be carefully examined. Not much fedspeak this week.
Stocks to Watch
Interest Rates – We had seen a good rise in rates lately due to potentially damaging inflation, but they seem to be settling down a bit. If the PCE this week signal higher inflation then rates could again rise more.
Tesla, SpaceX – It might be a big week for Elon Musk’s companies as SpaceX may file paperwork for their IPO and start a road show. This is estimated to be the largest IPO on record.
Chip stocks – Though NVIDIA did not fire following stellar earnings other names had some good pin action. We’ll see if that continues during this last week of May.
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