The Fuse
Equity futures mixed this morning, coming down from higher levels overnight. After the Senate passed the funding bill futures were sharply higher to start the overnight session but have since lost that gain. Short trading week, markets are closed Wednesday but open only half a session Tuesday.
Interest Rates are up slightly as bond sellers trim some of their holdings. The jury is still out on how 2025 is going to play out, whether inflation is going to have a big impact or if growth will win out. Fed futures for 2025 sees just under 2 rate cuts during the year which is just about in line with Fed thinking.
The STOXX in Europe was lower early but picked up some buyers and finished about flat. The dollar climbed .1%, gold is down a bit as is crude oil. German 10 yr bund yields rose up 3bps, US 10 yr treasury up 2bps while in Asia stocks were mixed. Japan was higher by 1.2%, Hong Kong up .8% while Shanghai was down .5%.
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 starts tomorrow and runs through January 3rd. ‘If Santa fails to call, the bears may come to Broad and Wall’
Can we finally say, a GOOD DAY OF BREADTH? We haven’t been able to spout those words in nearly a month, but certainly a 3-1 advantage of advancers is a good place to start. Oscillators pushed higher as well, it didn’t take much due to the math involved. New lows however are still beating out new highs, that will take some time to rectify.
Volume was very high today due to the options expiration. For the SPY and QQQ it was the loudest volume since early August. That is a big deal, especially as we buckle in for a rowdy end of year. The trading should be anything but boring over the next six sessions, and with holidays abound and investors looking to add names to their portfolio we should see good action.
Support levels were finally tested this week, overnight in the futures market much lower levels in the ES and Nasdaq future were tested and held. The SPX 500 was trying to lift above 6K but failed to do so on the close, perhaps a few more rips at that level could mount a nice surge to end the year on a positive note. Oversold conditions still exist, prior support is now resistance. We look for caution with the Industrials and small caps here.
The Internals
What’s it mean?
Now that is some improvement! The VOLD led the way and finished near its highs but the ADD still well off the best levels of the day. Ticks were mostly green until the end of the day when some sell programs hit. ADSPD finally had a trend up day, elevated put/calls from the prior day were down, that is bullish. VIX also declined sharply, more pressure there will get some steam underneath the markets.
The Dynamite
Economic Data:
- Monday:Consumer Confidence
- Tuesday:Durable Goods, New Home Sales
- Wednesday:n/a
- Thursday:Jobless Claims
- Friday:Trade Balance, Retail and Wholesale inventories
Earnings this week:
- Monday:
- Tuesday:
- Wednesday:
- Thursday:
- Friday:
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.
