The Fuse
What are futures doing?
Solid gains this morning for ES futures following a strong start to the week. The temperature is coming down from the Iran War and the market likes it, but even during a bearish seasonal period the bulls should be on guard for any sign of trouble. One hand on the exit door at all times.
News
Europe regained some ground overnight, the STOXX up .3% led higher by France and Germany. The FTSE though was flat, as was the US dollar index. Crude oil is falling again amid some volatility, gold and silver also down sharply. Yields are falling in Germany and the US, off 2bps a piece as the world seems a bit safer than it was last week. Japan was flat but declines across the board in China — Hong Kong and Shanghai both off by 1% or more.
Volatility
VIX remains muted here as the macro headlines are running in favor of the bullish trend. The term structure of the VIX is upward sloping which is bullish for markets, and now the 20 ma is well below the 200 ma, so that sets up a nice buy signal..
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Interest Rates
Rates are moving down, a good move for the bulls. The yield curve is bending lower which is good for the overall market. 2/10 spread is lowered as well, 30 yr is pushing lower and trying to penetrate the 5% level. High yield is tight, the JNK and HYG right near all-time highs, fed funds futures still holding steady.
Earnings
Modest gains for Box on last evening’s report, ZScaler slipped hard and is down sharply on weak guidance. This am strong numbers from Dycom and raised guidance, PDD down sharply on weak earnings, Dick’s beat on sales but missed on earnings, re-affirmed guidance. Capri Holdings with a miss on earnings and revenue but mixed guidance going forward. Tonight we hear from Salesforce, Marvell, SnowFlake, AMSC, Everpure, Synopsis and Nutanix.
Events
Excellent day for the bulls, a followthrough that sets up the markets for more new highs down the road. Higher highs, higher lows is the hallmark for an uptrend, and that is definitely the case. New highs in Nasdaq, SPX 500 and Russell 2k show the great depth and breadth of this rally. With strong earnings, we suspect strategists are slowly taking up their price targets for the remainder of 2026.
Breadth
Pretty strong breadth day but it was much better early on. Oscillators are back in the positive, only if they can stay there for a few days we could have some more strong upside sessions. New highs now crushing new highs, this indicator will be on a buy signal (intermediate) if there can be one more day of 100+ new highs.
Volume
Can’t say the buyers are stepping up providing big volume but that is normal at new highs. As mentioned before, if you see big retail money come flying into the market it is probably a signal the market is ready for a substantial pullback. So far that wall of worry is up high.
Support Levels
No pullbacks yet to speak of, and that could be worrisome if there is a rejection of new highs. As it stands, look for more upside especially if the tech sector continues to lead. The 20 day ma is quite a distance from the current price, but we are in the last few days of the month so anything can happen. If the macro news remains positive expect new highs through the end of the week.
The Internals
Internals had a nice day, VOLD finished on its highs, TICKS were super strong while the VIX actually moved lower. Put/calls are still on the decline and now on a buy signal, ADD was solid. Nothing wrong here, in fact the internals here yesterday confirming the price action, second day in a row.
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The Dynamite
Economic Data:
- 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:
- 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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