The Fuse
Equity futures are strong, rallying sharply as the indices look to start Xmas week on the right foot. We’ll have a shortened week of trading, half session Wednesday as the market is closed Thursday for the Xmas holiday, but open again on Friday. the Santa Claus rally period starts this Wednesday, Xmas Eve.
Interest Rates are slightly higher once again today as bond traders try to figure out the direction before end of year. Fed futures see the next cut coming in March, though that is not a done deal yet. 10 yr yields are climbing as well, something we need to watch closely. Above 4.2% would be problematic.
Stocks across the pond in Europe were flat, the STOXX did not budge but the FTSE lost .3%. The US dollar index fell .2%, gold rising up sharply to a new high at 4,400 for the first time, silver also riding higher. Crude oil is up about 2% on heavy buying, German 10 yr bund yields were flat but the 10 yr US treasury yield was down 2bps. In Asia, Hong Kong was down .4%, Shanghai up .7% but Japan higher by 1.8%.
No major earnings releases to speak of this week.
Pretty good rally attempt Friday though it was plagued by a big options expiration. There is no better way to start the Santa Rally than a strong rally, and with the indices so close to all-time highs it seems inevitable, but we caution about being complacent. It is that sort of laziness and acceptance that gets in the way of the bulls’ plans.
Breadth was poor for the day, when you think that it should have been much better given the strong gains in the markets. Perhaps that will improve when the new year comes around, but certainly the breadth figures have not inspired the bulls to engage in some buying.
Volume was heavy on this expiration Friday, the biggest volume day of the year. That was to be expected on a triple witching day, but given the fact we are now in the last 7 trading day of the year look for some erratic volume prints, perhaps some heavy turnover after the holiday is over.
We continue to wait for some lower levels to be tested, the longer the markets go without it the harder it will fall. That’s not something we need to worry about at the current time, with markets still in an uptrend.
The Internals
What’s it mean?
We really had poor to average internals on Friday, the VOLD got slammed late as did the ADD, which barely finished positive. Notice the put/call and ADSPD, both showing some concern, but the VIX did not, falling hard as the markets rallied. Ticks were mostly strong early but faded late.
The Dynamite
Economic Data:
- Monday:N/A
- Tuesday:N/A
- Wednesday:LIM
- Thursday:Holiday
- Friday:n/a
Earnings this week:
- Monday:n/a
- Tuesday:GDP revision, durable goods, construction spending, industrial production, consumer confidence
- Wednesday:jobless claims
- Thursday:holiday
- Friday:n/a
Fed Watch:
Nothing but quiet from the Fed this week as they continue to chew on the latest data. With a jobs report in hand along with CPI there is a good sense the Fed will continue easing policy, but perhaps not at the pace many would like. Only three more meetings with Chair Powell before a new advisor steps into that seat, likely a very dovish official.
Stocks to Watch
Volume – Don’t expect to see much volume this week during a holiday-shortened week. However, erratic price moves are likely and that could really cause some consternation before the holiday break.
Metals – A very strong year for silver and gold, these metals may be ready to make a huge run before year end. That would make sense, as buyers plow into precious metals as the dollar weakens.
Bitcoin – Well, barring a miracle it does not appear the crypto coin will make alltime highs before year end as some suggested. Getting to 100K would be a good showing, though. Markets are keying off the liquidity in crypto now, so they are guided up/down by bitcoin.
