Image Source: Pexels
 

The Fuse

Equity futures are are showing some early strength on this Friday as the SPX 500 and Nasdaq look to close the week in the green. Stocks are still trying to adjust to this new world of tariffs and announcements out of the blue but suffice to say any positive developments are good for market action.

Interest Rates are higher again as the 10 yr yield makes another run towards 4.5%, which is bad for stocks. We see fed futures still expecting three cuts this year, high yield is still performing well as spreads remain tight. This market does not see a recession coming.

Positive move so far for the larger indices but that of course can change during the trading day. Over in Europe stocks were up .4% (on the STOXX) led higher by gains in France and Germany, England was also higher. The greenback index dropped .2%, gold is higher by nearly 1% and crude is back above $61 per barrel. German 10 yr bund yields rose smartly, up 4bps while the 10 yr US treasury yield was flat. In Asia stocks were mixed, Japan ripped higher by 1.6%, the Hang Seng up .3% but Shanghai down .3%.

Earnings last night from Toast were strong as were Pinterest, they guided higher. Cloudflare also with a beat and raise, good earnings from DraftKings and The Trade Desk but a bit weaker on CoinBase. Affirm was a total miss.

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.

Well that was a nice session for the bulls, though the last hour was not so kind. Stocks managed to push higher though well off their session highs and are still down on the week. Breadth was positive but also well of the highs. Oscillators continue to see higher numbers in the triple digits, this has lasted for quite some time. New highs are expanding again, something to watch for here.

A solid up day for the bulls with good turnover by the end of the session. That means an accumulation day was notched, something we haven’t seen too often over the past six weeks, but we can start here. Good volume on the up sessions is good to see but it is better when they are clustered together. Market volatility dropped and with it some volume came in midday. Friday’s have not been great this year but we’ll see if the bulls can extend the streak to two.

The 200 day moving average is nigh for the SPX 500 and was challenged by the Nasdaq today. It seems to me that level is going to be toppled within days. Momentum is strong and the bulls just won’t let go here at the moment. With potential good news on trade if you’re positioned wrong you’re going to get smacked around. Support is still below at 5,100 on the SPX 500, 19,200 on the Nasdaq.
 

The Internals

(Click on image to enlarge)

What’s it mean?

A nicely positive day for markets also confirmed by the indicators. The VOLD led the charge all session long even though it faltered late in the day. That heavy selling in the last hour took several issues down and that showed up in the ADD and ADSPD. TICKS were mostly green all session, save for the last hour while VIX is trying to make a run to the teens. Put/calls continue seeing so much more call buying.
 

The Dynamite

Economic Data:

• Friday:Lots of Fedspeak

Earnings this week:

• 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.

More By This Author: