The Fuse
Equity futures are bouncing back trying to recover some of the losses from earlier in the week. Today is Fed day and the market is not expecting any movement in fed futures. However, the market is still moderately overbought and could sell down a bit more if the news and press conference are more hawkish.
Interest Rates are slightly lower as some fixed income investors position themselves before the Fed’s next rate policy decision. Fed futures remain steady and do not really see a fed cut until July at earliest. The 2 year is in alignment with this idea too, yet the long end of the curve sees stagnant growth and likely staying right here. High yield remains strong as yields are tight, positive for equities.
Stocks are up this morning on the hope that US/China trade negotiations are getting underway. In Europe though declines across the board with the STOXX down .4% led down by France as Germany was steady. The dollar climbed .2%, gold is down as it continues in a volatile trade. Tuesday was a strong 3% move up for the yellow metal, crude oil is trying to get back to $60. German 10 yr bund yields held steady, US 10 year treasury yields rose 1bp, in Japan stocks barely fell while in China these markets were modestly higher (.8% and .5%)
Earnings last night from AMD were good and they guided modestly higher, the stock is up a bit. Disney reported this morning a strong beat and guided this quarter higher, SuperMicro was a disappointment. Uber beat and guided higher, Wynn missed and guided in line but Oscar posted strong numbers. Tonight we’ll hear from Arm Holding, Axon, Carvana and Applovin along with Dutch Bros and Oxy.
There is a Fed meeting this week and while many folks believe there will not be a cut this time around, some still think the FOMC needs to be aggressive in cutting the overnight lending rate. The top of the list for this request would be President Trump, who seems to believe low rates are the elixir for the economy.
I’m afraid that is not true nor how it works. It is very likely the committee will not only stand pat this week but in June forecast even FEWER hikes (currently 2) for 2025.
Another day of poor breadth but this indicator is still on a buy signal. However, more bad breadth is going to flip this to bearish and it could happen in days. This indicator has been a huge supporter of the markets’ recent rise and has helped move the markets towards resistance, but that 50 ma is still strong resistance and is going to be difficult to surpass this time around.
Volume trends are turning bearish but are not quite there yet. We have seen a trickle of turnover the last few days. When markets are down and volume is light that is better than heavier turnover as there is a lack of conviction in the selling. No question the price action matters here and we cannot dismiss nor ignore it, there are targets below but if volume is not confirming then the selling is not likely to last too much longer.
Stocks are pulling back in a moderate way here after printing a bearish spinning top Monday the markets fell sharply and actually produced a gravestone doji yesterday. That is not welcomed by the bulls of course (on SPX 500) but we’ll need to see more action to get a better sense of things. Certainly the action of late has a bearish feel to it, and if there is more selling to be had this month could really go off the rails fast.
The Internals
What’s it mean?
Not much positive on the day as the internals were weak the entire session. Even a rally back towards the breakeven point was interrupted by some deep sell programs. The VOLD did not have much momentum but finished lower, the ADD did the same. Ticks were very red all day again, large sell programs hit big early and often.
The VIX climbed up but finished off its highs of the session, this indicator needs attention.
The Dynamite
Economic Data:
- Wednesday:FOMC meeting, Chair Powell press conference, consumer credit
- Thursday:Jobless claims, productivity, inventories
- Friday:Lots of Fedspeak
Earnings this week:
- Wednesday:UBER, DIS, TEVA, NOVO, VST, GOLD, FLEX, OSCR, BG, CVNA, APP, ARM, CLF, DASH, BROS, OXY, BBB
- Thursday:PTON, SHOP, COP, HUT, CROX, LNG, TTD, COIN, MARA, MELI, NET, SOUN, DKNG, AFRM, WOLF
- Friday:WULF, ENG, ANI, TLS, PAR, AGN, ESNT, GOGO
Fed Watch:
We have the third Federal Reserve meeting of the year and the futures market is not expecting rates to budge at all. The data still tells the committee the economy is running strong and there is a hint of price instability with coming tariffs. If that goes away the narrative may shift to a more accommodative Fed, but maybe later in the year. Lots of Fed speak on Friday and the Powell press conference on Wednesday.
Stocks to Watch
VIX — With some news behind us and some potential resolution to trade issues the VIX has come down sharply, nearly 22% and is looking to break 20 this week. If so, that lines up more upside.
SPX 500 – With a strong start to May the index finds itself on a nice day winning streak, something that is quite rare. The indices are overbought and due for a corrective phase, when it happens is anyone’s guess but you should be ready for it.
China Trade – Will there be a deal between the US and China? The stalemate continues but word has it both sides want to make an agreement before economic disaster happens. We may know more in the weeks ahead but the news cycle is accelerating quickly.
