The Fuse
Equity futures are weaker and may open up lower this morning. This would be the fourth day in a row with a poor start and if we close down on the session it will be the first time in 58 years the stock market ended the year on a four day losing streak. Those are not common but there are few traders out to make a difference to drive prices higher. Stuck in a range.
Interest Rates are falling a bit as bonds catch a nice bid. As we have the last trading day of the year at hand, the bond market closes early, only a half day of trading. Yields are coming down across the curve, high yield spreads remain very tight as the economy shows robust gains, fed funds still looking to April and maybe March for the next rate cut, but not pricing much more in for the rest of 2026.
Stocks are slightly lower overseas with the STOXX down .1%, France hit the hardest down .4%. The dollar climbed .1%, gold is getting hammered as is silver in volatile trade. Hong Kong was down .9%, Shanghai up .1% while Japan was closed. German bund yields up 3bps while 10 yr US treasuries down 1bp. Last trading day of the year.
No earnings on tap for this week.
Another poor effort by the bulls as they just cannot muster any sort of buying interest. Stocks fell again, perhaps Santa will bring another lump of coal to ‘the street. There are three days left for the rally to finish to the upside, and while last Wednesday’s rally has been frittered away, there is some time left to make traders dance. Today we will print the last day of the month, quarter and year – along with it some options will be expiring across several classes.
Again the breadth was weak but not horrible, thanks to better numbers by metals, which helped breadth (think miners). However, this is not the way the bulls wanted to perform at the end of the year, in fact the oscillators are threatening to go deeper negative, the nasdaq already modestly oversold at -131, and it could go lower. The time period is often bullish with breadth and price so this weak is very disappointing, but there are a couple more trading days left – last of the year, and first of the year.
Volume levels are starting to rise and when the markets are down there is the risk of institutional selling. That is called distribution, and if we see a cluster of these days then there will be more downside to come. So far only a couple of these have been chalked up, so no panic just yet.
Pullbacks that are shallow that do not test relevant moving averages are frustrating. It is those moves down that tend to reset the markets, a pullback for dip buyers to become engaged. However, we are not seeing those important buyers stepping in just yet. Will it take more downside action? Possibly, but support is not far away now so there may be a good time to start dipping a toe in.
The Internals
What’s it mean?
Another day of horrendous internals, though the NYSE ticks were much better. It sure has the feel of profit taking before the end of the year, and no doubt that is a common occurrence in strong years. VOLD started up but finished poorly as did the ADD, VIX remained buoyant but finished modestly higher. Put/calls not really giving much of a signal here, the ADSPD remains below zero. Just nothing here to inspire buyers.
The Dynamite
Earnings this week:
- Wednesday:n/a
- Thursday:holiday
- Friday:n/a
Economic Data:
- Wednesday:jobless claims
- Thursday:holiday
- Friday:n/a
Fed Watch:
Not much going on with the Fed this week other than the meeting minutes will be released early in the week. No doubt we’ll see how the committee came to a conclusion and if there was some contentious moments. Remember, there were some on the FOMC who believed there should have been no cut in the meeting.
Stocks to Watch
Precious Metals – An amazing run for silver and gold this year as they hit new records and then some. Will we see them continue on?
Bitcoin – Not living up to expectations, the crypto currency is mired in a deep bear market, though we should not take that too seriously. Many are predicting doom for bitcoin, but that has been the case in the past and been totally wrong. When the bulls push the momentum is when we’ll see this start to shine.
volatility – The VIX is dangerously low and offers a great opportunity buy volatility and protection. There is not much good news to drive stocks higher but no question the sellers can get the markets lower in a hurry.
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