The Fuse

Equity futures are down sharply as the Dow Industrials and Russell 2K are pulling back sharply once again. This is day two of a corrective period that is getting the second quarter and new month off to a rough beginning. We’ll see if the bulls will pick up the ball at some point this week.

Interest Rates continue to rise as inflation remains a big worry. With the 10 year breaking through the 4.3% level there is some worry that bond sellers are simply letting go here. Bitcoin is also getting hammered, the binary relationship with rates and bitcoin holds, when rates rise up sharply money retreats from crypto.

UNH is getting hammered after the government said reimbursements will be lower than expected, this is hitting the Industrials hard. Gold is up sharply, higher by 1% while crude oil is also flying, WTIC is up near $85 per barrel. Stocks fell hard yesterday, and if there is followthrough to the downside that would be a change in character. Regardless, the long term uptrend remains in tact even if the market pulls back another 2-3%.

Earnings from PVH is getting hammered after the clothing retailer lowered revenue and earnings guidance last night. Dave and Buster’s will be out later this evening.

After the long weekend there were not buyers to be found. That’s not unusual, though did just have the first of the month, which is usually strong. for money flows. Volume levels dropped, that is what you like to see on a down session. We have some news releases later this week that could be favorable to the bulls’ cause, pay attention.

Breadth was ugly, a complete reversal from last week. That’s fine, a bit of back n’ fill is normal during a stock market uptrend. The oscillators, back in green territory are now near the flat line. New highs continue to swamp new lows, that indicator remains on a buy signal.

Turnover was down versus last week and with a down session that indicates far less conviction on the sell side. One thing we have noticed about this rally since late October, the down sessions happen and then then are done, within two trading sessions (always some exceptions). It simply means that after 1 or 2 down down sessions don’t get too aggressive on the bearish side.

For a day of consolidation the indices fell down but not too badly, in fact they only gave back a small portion of last week’s strong move up. The small caps were down hard as one would expect with rates rising upward. That is the relationship we discussed recently here and on daily bites. The jobs data later in the week will give us good information about the next move. We see support on the SPX 500 at 5,200, the IWM with support at 205. Nasdaq is inching its way towards 20K.

The Internals

What’s it mean?

Tough day for the bulls as sellers took command from the start after some upside in the indices overnight. The VOLD started down and just finished poorly, so did the ADSPD and the ADD. VIX soared (a bit) but finished near the lows of the session. Ticks were pretty red most of the session as the selling picked up towards the end of the day. We’ll see if there is a turnaround tuesday in our future.

The Dynamite

Economic Data:

Tuesday:JOLTS, Factory Orders
Wednesday:ADP Employment, ISM Services
Thursday:Jobless Claims, Challenger Job Report
Friday:March Employment Report, Consumer Credit

Earnings this week:

Tuesday:PLAY, PAYX
Thursday:KRUS, LNN, LWW, RPM

Fed Watch:Chair Powell with some comments last week basically reiterated what he said the prior week, and that is the data will tell the committee how to proceed. To be sure, the PCE data released on Friday was in line and rather friendly, as it met the committee’s expectations. They are wanting to see more data though and that requires a couple more months. The higher rates on the short end have been working.

Stocks to Watch

Volatility – The VIX often pulls down in front of a long weekend and rebounds after traders return. We’ll see if that pattern holds.

Equity Futures – No response Friday following Chair Powell’s comments and the PCE inflation data, but we’ll see how it goes early in the week.

Apple – Remains an enigma, plenty of news around this name but we often see buyers come to the rescue in times of distress, like now. A big tell on the market.