Situation Awareness
Situation Awareness: Cautious. Market character is defined by a “hawkish pause” regime shift following the FOMC meeting, where the removal of forward guidance and upward inflation revisions have triggered a repricing of rate expectations. While futures point higher on geopolitical relief, the structural force remains restrictive policy. Trade mode: Selective and defensive. The tape is reacting to a new Fed narrative under Chair Warsh, prioritizing price stability over growth support. Regime context — 53.37% of stocks trade above their 40-day SMA, down 9.0 percentage points from the prior session, and the 4% Bull/Bear gauge shows 243 bulls vs. 281 bears. The 5-day trend shows a sharp deterioration, with the 20-day SMA participation spiking to 104% (likely a data artifact of the gap down) while the 40-day participation contracts, signaling a fragile recovery attempt rather than a trend reversal.
SIP: LZB HOOD FTHM QURE
- What’s working: Continuation signals are active with 8 high-quality setups, indicating that despite the macro headwinds, specific sectors (Finance, Medical, Retail) are finding support. However, breadth is contracting as seen in the 40-day SMA drop.
- Leading sectors: Financials (driven by HOOD and BLK), Medical (VRTX, MCK, NTRA), and Retail (DRI, LZB). Leading themes are not available as market data is closed, but sector volatility suggests Energy and Medical are the primary movers.
- Key event: The “Hawkish Pause” confirmed by the FOMC dot plot removing 2026 rate cuts, combined with President Trump signing the Iran peace deal which is temporarily suppressing oil prices.
- Market read: Yesterday’s selloff was a direct reaction to the Fed‘s communication reset. Today’s pre-market rebound is driven by the geopolitical oil relief and a “buy the dip” mentality in semiconductors, but the underlying rate environment remains hostile to multiple expansion.
- DEP watchlist: LZB (Strong Q4 beat), HOOD (Workforce reduction + momentum), QURE (FDA catalyst).
- SIPS: NAVN (Software breakout), BLK (Finance stability), HOOD (High RVOL continuation).
Today’s Market Narrative
The market opens with a conflicting signal: geopolitical relief versus monetary tightening. Futures are pointing to a higher open, with S&P 500 futures trading 62 points above fair value and Nasdaq futures up 482 points. This rebound is primarily fueled by President Trump signing the 60-day memorandum of understanding with Iran, a move that has immediately reopened the Strait of Hormuz and lifted Iran’s naval blockade. Consequently, crude oil prices have retreated to $75.53 per barrel, providing a temporary cushion for equity valuations that had been crushed by energy inflation fears. However, this relief is overshadowed by the structural shift in Federal Reserve policy. The market is still digesting the “hawkish pause” from the June FOMC meeting, where Chair Warsh signaled a new era of policy communication focused strictly on price stability with no forward guidance.
The narrative is no longer about when rates will be cut, but how long they will stay restrictive. The Summary of Economic Projections (SEP) removed all expected rate cuts for 2026, pushing the median projection to 3.8% and revising 2026 PCE inflation forecasts up to 3.6%. This has caused a bear flattener trade in the bond market, with the 2-year yield jumping to 4.20% and the 10-year holding steady at 4.46%. The market’s initial reaction to yesterday’s close was a broad selloff, with the S&P 500 down 1.2% and the Nasdaq 1.3%, as investors priced in a “higher-for-longer” environment. Today’s pre-market gains are largely technical, driven by oversold conditions in the semiconductor sector and the immediate geopolitical oil drop, rather than a fundamental change in the rate outlook.
Sector rotation is telling. While the broader market struggled yesterday, financials and industrials showed relative resilience, with Goldman Sachs and JPMorgan closing higher. The technology sector, specifically the “Magnificent Seven,” faced significant pressure, with Microsoft, Meta, and Amazon all closing lower. However, the semiconductor space is showing signs of life in the pre-market, with chipmakers posting solid gains as investors look to buy the dip following yesterday’s weakness. The market is currently walking a tightrope between the immediate relief of lower oil prices and the longer-term pain of restrictive monetary policy. With the market closed tomorrow for Juneteenth, today represents the final session of the week to position before the holiday, adding a layer of liquidity caution to the trading environment.
Macro & Policy
The dominant macro force today is the redefinition of the Federal Reserve’s mandate under Chair Kevin Warsh. The central bank has explicitly shifted from a dual-mandate balancing act to a singular focus on “delivering price stability.” The removal of forward guidance and the stripping of language regarding maximum employment in the policy directive signal a regime change where the Fed will not signal future moves, leaving markets to guess. The updated dot plot is the critical data point: it implies no rate cuts in 2026 and suggests a high probability of at least one rate hike by year-end. This has driven the 2-year Treasury yield up 4 basis points to 4.20%, while the 10-year yield remains unchanged at 4.46%, creating a steepening yield curve pressure that is typically negative for equity multiples.
Geopolitically, the signing of the Iran peace deal is the primary catalyst for today’s session. The deal, which reopens the Strait of Hormuz, has caused WTI Crude to drop 1.6% to $75.53/bbl, alleviating some of the inflationary pressure that had been weighing on the market. This is a rare instance of geopolitical news acting as a tailwind for equities, contrasting with the usual risk-off sentiment associated with Middle East tensions. However, the market remains nervous, with President Trump issuing threats of renewed military action if the terms are not met, keeping a floor under oil prices. In the currency markets, the U.S. Dollar Index is up 0.7% at 100.76, reflecting the flight to safety and the higher yield environment relative to global peers.
Economic Calendar Today
- 08:30 ET: Initial Jobless Claims — Expected: 226,000 | Prior: 230,000 (revised). This is a critical check on labor market tightness; a surprise increase could signal weakness, but the consensus suggests stability.
- 08:30 ET: Continuing Claims — Expected: 1.795 million | Prior: 1.795 million. A rise here would indicate lingering labor market stress.
- 08:30 ET: Philadelphia Fed Index — Expected: 10.0 | Prior: -0.4. A significant expansion here would suggest regional manufacturing is recovering, which could support the industrial sector.
- 10:30 ET: Weekly Natural Gas Inventories — Prior: 108 bcf.
- 16:00 ET: April Net Long-Term TIC Flows — Prior: $81.3 billion.
- Earnings: No major earnings reports scheduled for today as the market prepares for the Juneteenth holiday.
Earnings & Corporate News
Earnings activity is light today, but yesterday’s after-hours and pre-market movers are setting the tone. La-Z-Boy (LZB) is a standout story, rallying sharply after delivering a massive Q4 beat with adjusted EPS of $1.26, well above expectations, and revenue of $570 million. The company announced a $300 million share repurchase authorization and raised Q1 revenue guidance, signaling confidence in retail trends despite a soft furniture backdrop. Written same-store sales turned positive in April and continued through May, a key metric for the sector.
In the technology sector, Intel (INTC) is surging 9.7% to $132.86 in pre-market trading after President Trump confirmed that Apple will work with Intel to design and build chips in America. This partnership validates Intel’s foundry strategy and provides a massive revenue catalyst, contrasting with the broader tech weakness. Conversely, Apple (AAPL) is slightly higher at $296.54, with reports suggesting it may raise prices due to supply costs, a move that could impact consumer demand. Kroger (KR) missed EPS expectations by $0.01 but beat on revenue and reaffirmed guidance, trading down 2.9%. Robinhood (HOOD) is another key mover, up 8.8% to $105.20 after announcing a 10% workforce reduction, a cost-cutting measure that analysts view positively in the current rate environment.
WaveFinder Signal Summary
The WaveFinder scans are showing a mixed but active environment, with 8 continuation signals identified, suggesting that while the macro regime is cautious, specific stocks are finding momentum. The breadth data indicates a contraction in the 40-day SMA participation, dropping from 62.37% to 53.37% day-over-day, which aligns with the “Cautious” regime classification. However, the 20-day SMA participation is unusually high at 104%, likely reflecting the volatility of the recent gap down and the current pre-market rebound. The 4% Bull/Bear gauge is bearish, with 281 bears outnumbering 243 bulls, confirming that the underlying sentiment remains defensive.
Top setups from the continuation scan include NAVN (Software, +10.3%), BAP (Banks, +6.2%), and HOOD (Finance, +8.8%), all showing strong relative volume and momentum. The reversal scan is quiet with only two signals, VG and LEGN, indicating that the market is not yet seeking deep value plays but rather riding momentum in specific sectors. The lack of “Delayed 9M” signals suggests that the market is not in a deep correction phase where long-term reversal setups are common, but rather in a choppy, trend-following environment where short-term momentum is key.
Today’s Watchlist
- INTC — Major catalyst from Apple partnership; pre-market surge of 9.7% to $132.86; watch for follow-through on the “Made in America” narrative.
- LZB — Strong Q4 beat with EPS of $1.26 vs. expectations; $300M buyback; key support at $40.24; retail resilience story.
- HOOD — 8.8% pre-market gain on workforce reduction news; high RVOL (2.3); 2LYNCH setup in Finance sector.
- NAVN — Software sector leader with 10.3% gain; 2LYNCH continuation signal; high relative volume (1.9) indicating institutional interest.
- AAPL — Potential price hike news; trading at $296.54; watch for supply chain cost impacts on margins.
- QURE — FDA acceptance of Phase I/II data; high RVOL (15.06); biotech momentum play.
Action Codes of the Day
2LYNCH — Continuation breakout is active with 8 high-quality signals, including NAVN and HOOD, indicating that momentum is still the dominant strategy in a choppy market.
BTFD — Buy The Dip is relevant for the semiconductor sector and financials, as the geopolitical oil relief and oversold conditions on the 20-day SMA offer a tactical entry point despite the hawkish macro backdrop.