The Fuse
Equity futures are down but well off their overnight lows. The December non-farm payroll report will be a market mover, volatility is elevated which means wide moves up and down. If jobs are strong that may take away some bid in the market.
Interest Rates are nudging up again as the long bond continues to bleed. Yields have become stretched and overbought but that is no reason for bond buyers to come back (at least today). However, the jobs data is going to help determine policy for the next few months. Some Fed speakers have been out recently talking about yields and policy, believing the last cut in December may have been the last one for awhile.
Stocks in Europe fell slightly overnight , markets were mixed in France and Germany. The dollar was flat. Crude oil is ripping higher this morning on supply issues and cold weather, up nearly 4% on heavy contract volume already. Gold is up nicely too as is silver. German 10 yr bund yields rose 2bps, the US 10 yr treasury up 1bp. In Asia stocks were lower, Japan off by 1%, Shanghai down 1.3% and Hong Kong down .9%.
Earnings are trickling in, beats Wednesday by Helen of Try and Acuity Brands but a slight miss by Jefferies and Greenbrier. Today we’ll have Constellation Brands and Delta. Strong earnings and guidance this am from Delta is pushing the airline group higher, Constellation Brands missed but guided in line.
Wednesday was as volatile a session as you could imagine. I think the markets crossed the zero line about 12 times, making one nauseated from the back/forth movements. The high VIX is the culprit along with the lack of liquidity and a trend. Stocks just simply are not finding any reason to go higher without a catalyst.
Breadth remains an issue and not a positive one. If advancers cannot exceed decliners on a regular basis it becomes a huge red flag. Why is that? Simple math and common sense really. If stocks are not going up, they are going down. Oscillators are still negative, new lows are crushing new highs again, which also is a bearish signal. Eventually it will matter.
Volume was up on the SPY and QQQ, so another distribution day. These have been sporadic but there is certainly a pattern here that is bearish. We have certainly had our share of selling in December which is now continuing into January. Some events on the horizon might trigger some to hit the sell button more frequently, if earnings fail to deliver and then there is a new Administration getting started. Also, options expiration next week is a big one, when we’ll se many LEAPS expire..
Another probe lower testing some areas of interest, the buyers picked up the pieces when it seemed assured the markets were about to fall apart. That is the good news, but the bad news is closing with a doji. If there is an up day however today and then followthrough next week then there is something to work with (a morningstar). The Nasdaq took the brunt of the punishment again but if rates come down then there could be a recovery. Into next week’s expiration that might be wishful thinking.
The Internals
What’s it mean?
Internals were bad most of the session and really were hammered midday during the market selloff. VOLD was awful and finished on its worst levels of the day, the ADD was down but did finish better, the VIX was higher most of the day but volatility sellers came in and sold it in front of Thursday’s off day.
Put/calls are on the rise again, ticks were pretty evenly distributed. Today’s job report is likely to be a market moving event.
The Dynamite
Economic Data:
- Friday:Consumer sentiment, December payroll report
Earnings this week:
- Friday:DAL
Fed Watch:
Not much fed speak scheduled this week but some members came out last week and talked down monetary policy. It seems they all really want to pause at this point, at least for a few meetings, making it very transparent of their path. The market may not like it but that does not matter. The meeting minutes released this week will be interesting. Richmond Fed President Barkin spoke again Tuesday, several speakers were out on Thursday.
Stocks to Watch
Volatility – Stocks have been on a rollercoaster ride for a month, will that volatile action smooth out a bit? With earnings season coming up it could be a bumpy ride until then.
Jobs – Markets are expecting a fairly strong jobs report for December (155K), and if that happens with little inflation the Fed will continue to be cautious and may pause at this month’s meeting.
Bonds – Fixed income continues to move lower as yields press ahead. There is no need to add bonds here if inflation remains sticky, which is what the data and the Fed have been telling us.
