The Fuse
What are futures doing?
Unlike earlier this week the equity futures are pointing lower with some weakness coming from all sectors. It is not a surprise to see a bit of selling after hitting all-time highs like yesterday, given the fact markets have had an extraordinary month of May.
News
Poor performance in Europe with STOXX down .5% but with smaller drops in Germany and France. FTSE in England fell a bit more, off.9%, the dollar index up .1%, crude oil is rallying a couple of percent, gold and silver down as they continue to vacillate. Yields are climbing again with German bunds and 10 yr US treasuries up 2bps, Japan was off .5%, Hong Kong down 1.3% but Shanghai up a small fraction.
Volatility
We saw the VIX land under 17% yesterday and that was probably just too much complacency for the markets to handle. After all, the Iran War is still on and we continue to find out different things that could extend it further. Hence, a reason to buy some cheap protection with the VIX having traveled so low, even if for a couple of days.
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Interest Rates
In a reversal rates are moving up across the curve this morning, the 20 yr and 10 yr yields up firmly, 2/10 spread is falling a bit however. Seeing good bids still in high yield, this group is correlating well with the stock market, fed funds futures remain steady and continue to point towards rate hikes down the road.
Earnings
Amazing move up in Snowflake after a strong beat and raise, MongoDB and Dell are getting some pin action (those two report tonight). Salesforce beat but did not offer better guidance, AMSC and Everpure with a miss with Synopsis and HPQ beat but did not fire as much, could see a delayed reaction.
Events
We’ll consider yesterday a followthrough session but it was far from impressive. Stocks started off strong and mostly sold down the entire day though they did finish in the green. That put the SPX 500 through to a new high but it closed just slightly above there, the Industrials the strongest of the big four. Expect some window dressing for the end of May the last two days of this week.
Breadth
Another day of good but not great breadth, and. that is just fine after a strong Tuesday session. As long as the breadth figures remain positive there is a likelihood this rally will continue. Oscillators are mildly positive, and new highs nearly pushed to a buy signal, just narrowly missed a second day in a row of 100 new highs. We’ll try again today and Friday.
Volume
Volume continues to dry up, and that could again be a problem for the bulls if a large rally does not ensue. A pullback however on moderate volume to scare the crowd would be ideal actually. Lower turnover at the highs tells us buyers are just not that interested here save for a few select names.
Support Levels
It is quite possible the markets pullback into the weekend as bulls may decide to take some chips off the table. It has been a fabulous run in May and with only two days remaining in the month and the Nasdaq leading the way with a 9% gain the performance has been nothing short of spectacular. Still, a pullback to support could reset the markets for an even higher move.
The Internals
Nothing to get excited over in the internals, the VOLD was poor while the ADD and ADSPD fell flat on its face to end the day about par. Ticks were mostly red, and that is concerning for the short term, but the VIX did a swan dive again as did the put/call, so there is still strong bullish sentiment.
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The Dynamite
Economic Data:
- Thursday:Jobless claims, durable goods new home sales
- Friday:GDP (2nd), income/spending, PCE, retail/wholesale inventories, Chicago biz barometer (PMI)
Earnings this week:
- 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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