The Fuse
Equity futures are pulling back some after stocks had a wild ride Thursday. The post-Christmas hangover was well in effect as volume was light but volatility sparked a comeback. The VIX is sitting now above 15%, a key level that may trigger more selling if it moves even higher.
Interest Rates are bumping up again this morning as the 10 yr makes a run at 4.7%. The 2 year is right at 4.33, above fed funds and bumping its head on the 200 day moving average. Fed futures are moving closer to the ‘one cut in 2025’ scenario.
Stocks in Europe were flat this morning, the STOXX barely budged. Gold is easing down about 10 bucks, crude oil is higher by 1% while silver is down .5%. The US dollar is flat. German 10 yr bund yields climbed 5bps, a sharp move as US treasuries also jumped higher, yields up 3bps. Stocks in Asia were mixed, Japan up sharply, 1.8% as Hong Kong was flat and Shanghai up slightly.
Earnings are sparse this week, nothing significant to consider as investors await the start of next earnings season which starts in January.
It’s a short trading week but still some action will be had. Don’t forget, the Santa Claus Rally period started Tuesday and runs through January 3rd. ‘If Santa fails to call, the bears may come to Broad and Wall’
Back from the holiday and buyers were in a good moving, bidding up stocks but then sellers hit the ground running and pulled the markets down about .5%. Breadth finished strong, the Nasdaq oscillator remains positive. We could see a bit more buying and higher prices through next week but then it becomes a coin flip as to which way it goes. Breadth has been a good leading indicator.
Turnover remains low in this holiday period, as expected. Stocks are responding to volatility now, liquidity is poor. That is quite common during slow, holiday weeks. We should see the turnover start to improve after the first of the year, probably in about two weeks. For now, we’ll have to navigate through murky waters.
Each time the market pulls back like it did yesterday it is testing a support zone. Each time it bounces that solidifies that level as something important if/when those levels are approached again. Over the last few weeks there have been several instances here, so the market has layers of support which may help the trend remain in place.
The Internals
What’s it mean?
A quiet day but the internals finally improved, even a small bit. VIX came back up, giving back some of what was lost Tuesday, put/calls rose up a bit but not in a huge way. Ticks were mostly green on the session, VOLD barely budged but the ADD did finish higher on the session, so a positive sign there. Look for slow numbers today and into the end of the year.
The Dynamite
Economic Data:
- Friday:Trade Balance, Retail and Wholesale inventories
Fed Watch:
Did the Fed cause the Wednesday drop? Probably not entirely to blame, but certainly the Chairman did reiterate the committee’s distaste for sticky inflation. Friday’s PCE may have changed that thinking, but still the committee is going to be overly cautious and not be forced into a rate cut cycle that stimulates inflation any longer. Growth is still good, GDP revision up to 3.1%, so nothing wrong with the economy.
Stocks to Watch
VIX – A monster move up last week and right back down, but there is more decline likely into the holiday. Don’t forget, we often see volatility drop into the holidays, half day trading Tuesday and day off Wednesday.
Retail – This is IT for Christmas shopping, only two days left and then it’s over! But not really, we often see more buying happen after Christmas (sales) and then those gift cards get redeemed, often in January.
Bitcoin – It has been on a wild ride the past couple of months, if it can settle in around 90-100K for a month or so and actually become ‘boring’, we might see this crypto really take over in the first half of the year.
