The Fuse
What are futures doing?
Equity futures are modestly higher this morning on this last trading day in May. The month has gone incredibly well, aided by a potential end of the Iran War, which could happen at anytime. Markets like this news and prefer to move on fundamentals rather than the macro.
News
A nice bounce back in Europe as the STOXX gained .3% on volume, aided by gains in France and Germany. The FTSE also added a fraction, the US dollar index was flat, oil is heading lower this morning while gold and silver are rallying. Japan was sharply higher by 2.5% on the Nikkei, Hong Kong up .8% but Shanghai down .7%>. Yields rose a small fraction on the German side and US 10 yr treasury side, both up 1bp.
Volatility
VIX made a sharp decline and pushed below 16% yesterday, which has been a level of support this past month. The fear index is pressing lower and could make a run to those December lows soon below 14% if the news continues to improve.
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Interest Rates
Modest steepening along the term structure of rates as yields pushing higher again, but not too threatening. The 2/10 spread again is steady, high yield is moving in lockstep with the equity market, and fed funds see no chance of a cut as far as the eye can see.
Earnings
Michael Dell knows how to dazzle them, and his company really did it and raised. guidance significantly. The stock is up about 34% this morning, but also up strong are NTAP and Okta, both reporting solid gains. Costco had a beat but fell off a bit, MongoDB had an odd report, it first went down sharply and then rose, it seems the guidance is strong. The Gap is weaker as is Autodesk.
Events
It is hard to contain such enthusiasm when the bull rush is on. Stocks ripped higher and right through all-time highs again, this time with emphasis. Strong moves across many sectors but it sure seems like things are getting a bit frothy, but that is just an observation. Bull runs can go much further than anyone can imagine or wish for, our job is just to stay on board and get off the train before it ends.
Breadth
Good breadth again, not great but frankly that has been the trait of this market rally. Nothing wrong with positive breadth on a strong day, just not overwhelming. We could certainly have a strong breadth day but that might get in the way of the rally. Oscillators positive but not overbought, New highs advancing again vs new highs.
Volume
Turnover was decent, not overwhelming but the price action is really where it is at. This has been a good run and every time the market dips the buyers step in with volume. Truly remarkable, yet the narrowness is concerning. We would like to see a more broadening out of this rally to be sustainable, but we’ll take what we can get..
Support Levels
It does not appear we will get that test of support coming this week, perhaps during the first week of June. The bulls are running wild looking to buy anything they can get their hands on that is moving higher. It’s not just memory stock names, it’s anything tech related — See DELL today for a clue. The incredible moves lately are not going to last too much longer, time to take some serious $$$ off the table..
The Internals
Not a horrible day for the internals but still in alignment with the market trend. VOLD not crazy high but then breadth was not dominant. VIX fell hard and again and is now below 16%, smacking of complacency. Put/calls lower again, the TICKS were big time green, lots of buy programs working. Fridays have been mostly positive this year, we’ll see how it goes.
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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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