The Fuse
Equity futures are slightly lower this morning as buyers ease up following the strong showing on Monday. It’s not unusual to see a ‘turnaround tuesday’ following a big move up on a Monday, just as long as the losses are minimal. We might feel some erratic trading today and the rest of the week.
Interest Rates are moving lower across the curve as bond traders see a few bargains in fixed income. The 10 yr and 30 year yields are ticking lower, high yield spreads remain tight while fed future are steady, seeing a better chance of a cut in March rather than January.
Stocks in Europe followed the lead on Wall Street and rose up, the STOXX higher by .3%, FTSE up .1% as the dollar fell another .3%. Gold is up sharply, about 1% while silver is ripping higher, by 1.5% and near 70 per ounce. Crude oil slightly higher. Yields in Germany and the US 10 year were down 2bps, in Asia stocks were mixed with Japan flat, Shanghai up .1% and Hong Kong down .1%.
No major earnings releases to speak of this week.
A solid rally on decent breadth and turnover, but it was volatility and metals that were the real story. The VIX closed at a yearly low of 14% as the volatility sellers got ahead of the holiday-shortened week. We often see that happen during this time, and gold/silver ripped higher to new all-time highs again, with heavy volume on the GLD and SLV. Those two metals have been shining bright of late and continue to see money flows. A full day of trading but we could see a bit of froth coming off before the break on Thursday.
Once again, good not great breadth yesterday as the bulls won. Third straight up session as the small caps were leading all session long. Oscillators are comfortably in positive territory now that bullish seasonal trends have started to have an influence. New highs are back to crushing new lows. Keep an eye out this week on the oscillators, in case they get overbought.
Much slower turnover yesterday as expected. Friday’s was huge as result of a triple witching options expiration, and that was positive. So, we had some followthrough that is good for the bulls but we should have some concern that the bullets from the gun may be empty. Perhaps there is less chance of seeing more upside here, as the market is now short term overbought. Don’t expect to see too much turnover the remainder of the week, Wednesday is a short trading session (1/2 day).
Waiting on a pullback to see how much corrective action happens when the sellers are the only ones left. We may not see much of it before the end of the year, many are pointing to the positives here with low volatility, good breadth, strength from small caps/metals/financials. Broad strength is a good counter to bearish tendencies.
The Internals
What’s it mean?
A mixed picture again but we’ll give the edge to the bulls on this day. The internals look good, the VOLD and VIX very bullish, the ADD and ADSPD finished positive but off their highs of the day, TICKS mostly red late in the day but green early. Put/calls remain subdued. If there is some profit taking later this week the dip buyers may be coming in for a bite.
The Dynamite
Economic Data:
- Tuesday:N/A
- Wednesday:LIM
- Thursday:Holiday
- Friday:n/a
Earnings this week:
- 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.
