The Fuse

Equity futures are soft this morning as the markets await the first of two May inflation reports. The all-important CPI will be released before the open as consensus is looking for a slight bump up in price inflation. Any surprise to the downside could trigger some heavy buying.

Interest Rates remain steady but are ticking up a bit early today. We saw rates move a bit lower on the 10 yr yesterday as they continue to carve out a range. High yield remains well bid as it reflects strength in the economy and stocks. Fed futures now reflecting no change in policy for the next two meetings.

With stocks down early this morning following a volatile overnight session the EuroZone barely budged again.
The FTSE, Dax and Cac40 all ‘surged’ .2% overnight, the dollar climbed .1% while crude is up sharply, better than 1.5%. Gold is modestly higher, silver down about 1%. German 10 yr bund yields and US 10 yr treasury yields both rose 1bp, in Asia stocks were up. Japan higher by .5%, Shanghai up the same with Hong Kong higher by .8%.

Terrrible earnings response last night to Gitlab but positive from Dave and Buster’s. GameStop was also a miss. Today we hear from Chewy, Victoria’s Secret, Vera Bradley and J.Jill then later big tech name Oracle.

The big event not many are talking about is Apple’s (AAPL) WWDC. The stock has been floundering of late but perhaps this event will bring out something new and special for all the Apple heads to grasp onto. This event in the past has been rather sleepy but not many have been predicting this time around, sets up for a surprise.

Stocks continued to push ahead yesterday with more good statistics. Volume and breadth were positive (more below) as the attention turned back to trade talk. It seems the officials in charge are really trying their best to hold the markets together and will say whatever is necessary to do it. In the end, we will need to see tangible results, the bar is getting raised higher each day.

Another strong volume print as the broadening out of the rally continues. Not only did SPX 500 have better turnover than Monday but so did Nasdaq, while IWM continued to push higher on good volume. This broadening out is important for the trend and likely means this can go much further.

New highs are not far away still as it seems the market is lacking some sort of catalyst. However, even an overnight retreat was not enough to scare the bulls away. Good breadth with better readings on the oscillators, which are nearly overbought. That might be a time to be cautious. New highs continue to expand, that is bullish.

The Internals

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What’s it mean?

Not much wrong with the internals, yet we did see a slew of selling hit with programs all day long, and alas most of those were sell programs. Don’t believe me? Look at the ticks, heavy red all day long that masked the weakness. VOLD did finish strong, VIX fell again but the ADD did not end well, higher but off its best levels. Next few days will be interesting.

The Dynamite

Economic Data:

• Tuesday:NFIB optimism index
• Wednesday:CPI for May, monthly US federal budget
• Thursday:PPI for May, jobless claims
• Friday:consumer sentiment

Earnings this week:

• Tuesday: ASO, SJM, GME, GTLB, PLAY, SFIX, PETS
• Wednesday: CHWY, VSCO, VRA, SAIL, JLL, ORCL, OXM
• Thursday: LOVE, ESTA, HOFT, CRMT, ADBE, RH
• Friday: MNY

Fed Watch:

It should be a quiet week from the Fed as they relax their ‘tongues’ a week prior to their next meeting (jun 17/18). The committee has been talking lately about the strong economy and the lack of need for lower rates, though President Trump still believes lower rates are the answer. We’ll err with the Fed and their policy mandates.

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