Market Blast - A Mixed Picture

The Fuse

What are futures doing?

It is a mixed picture this morning with Nasdaq down roughly .4% after steaming forward over the past five sessions. ES futures are up as is the Dow Industrials, both posted new highs on Wednesday.

News

More upside last evening in Europe, pace by gains in France and Germany the STOXX rose by .4%, FTSE also higher by .3%. The US dollar index up 1bp, gold continuing its rally above 4,300 while silver stabilizes. Crude oil is rallying 1%. Yields are up slightly today, bunds up 1bp while US 10 yr treasury also up 1bp, Japan declined by .9%, Hong Kong also dropped 1.6% but Shanghai with a positive session, up .6%.

Volatility

While it seems everyone has an eye on the VIX because it was higher on Tuesday as the markets rose, they lose out on the fact the trend in VIX is down and the fear index lies well below the 200 day moving average. These are what matter most, bull rally can continue with these characteristics.

Interest Rates

A quiet morning for fixed income as rates are bumping up slightly, perhaps a bit of profit taking before the release of July’s payroll report. The long end is rising but the short end of the curve is flatter. High yield spreads are tight as the HYG hit an all-time high this week, no recession coming based on this instrument. Fed futures seeing a rate hike probability in September but it is now down to 54%, from 65% a week ago.

Earnings

All eyes on Sandisk and Wester Digital (WDC), and while they beat estimates the market was not enthused. These stocks getting beat up early but we’ll have to see how things unfold during the day. ELF had a nice beat and might be up later, applovin (APP) is getting smoked, Axon (AXON) missed on the bottom line but raised guidance, this morning a beat by Datadog (DDOG) and also Unity Software (U), that stock up 15% in early trade.

Events

After five big up sessions in a row the buyers became exhausted. Still, new highs printed for the SPX 500 and Industrials and even the IWM squeaked out a high, but there was not enough energy flowing to keep the markets all in to the green. The Nasdaq took the brunt of the punishment as per usual, if the buyers don’t show up the rest of the week we could have some heavy back n’ fill action, we’ll see if dip buyers are active.

Breadth

Breadth turned lower today after a couple of decent sessions. No question the buying could not continue at this furious pace, but this indicator is back on a tepid buy signal. Oscillators came down but are still positive, and new highs continue to hammer the new lows, this indicator new are an intermediate buy signal.

Volume

We did not see too high of turnover today and that means with the sellers out we did not have a distribution day. That is important as it does not set up for more heavy selling later in the week. Of course, anything goes after the July jobs report, which could turn off the recent buying crowd and bring the bears out of hibernation – for a day.

Support Levels

Well, we have some resistance levels in place at roughly 7750 on the SPX 500 and just under 55K on the Industrials. If we get more pullback to say the 20 ma we’ll need to see how aggressive the dip buyers are this time around. A few months ago they were buying every dip, but the markets are rather thin of liquidity, so it may be challenging.

The Internals

What’s it mean?

The internals just collapsed as the bulls could not mount a decent rally attempt. Oh well, what should we expect after nearly 6% gains in 4 sessions on the SPX 500! VOLD was hammered but so was ADD, VIX was hit hard and is now in a bad spot for the markets, way too low. Look for some downside protection to be bought, we did see put/calls rise again yesterday, ticks were mixed but mostly red all session long.

The Dynamite

Economic Data:

• Thursday:Jobless claims, productivity and costs, trade

• Friday:July employment report, wages, unemployment rate, consumer credit

Earnings this week:

• Thursday: COP, QBTS, DDOG, CELH, HIMX, DNOW, FISV, VTRS, LNG, DKNG, ABNB, AAOI, TXG, RGTI, TTD, INOD, RCAT, MP

• Friday: OKLO, VST, TTOW, PPL, WEN, UAA, ASIX, ACMR, CYD, CGC

Fed Watch:

Fed policy remains in flux, and while the committee did not move rates this time around there is a good chance September is the move, if inflation does not cool down on its own. Chair Warsh was adamant about bringing inflation, others on the committee as well but action speaks louder than words.

Stocks to Watch

Semiconductor Names – With so much volatility around these companies it seems everyone is worried about the end of AI coming soon, but as we heard from the Mag 7 names that is hardly the case. Watch for AMD, Sandisk, Western Digital this coming week.

Oil prices – If this war continues, now in its 6th month there could be another spike in crude up towards $100. The Iranians are not giving up easily, they seem to have become an expert in being bombed. Oil prices will rise if the Strait is in flux.

Industrials – A good week for the Dow 30 and now some big less tech-sensitive names report this coming week like Disney (DIS) and McDonalds (MCD). These charts are horrible but maybe the bar is low enough.