The Fuse
Equity futures are slightly lower on this Xmas eve. It is a short day of trading but could have some powerful punches during the session. Precious metals and oil are mvoing up, technology shares are catching a bid. Markets close at 1pm EST today.
Interest Rates are slightly lower across the curve, high yield spreads remain tight and well bid, the GDP number on Thursday was strong and implies less of a chance for recession to hit. Fed funds futures are steady as well, seeing the next rate move as being a cut in March but most likely April.
STOXX in Europe were flat overnight, the FTSE lose .1%, the dollar index fell the same amount. Stocks in Asia were mixed, Japan down .1%, Hong Kong gained .2% while Shanghai up .5%. Gold is higher, so is silver this morning and crude up about .5%. German 10 yr bund yields fell sharply, down 4pbs but US 10 yr treasury yields held steady.
No major earnings releases to speak of this week.
The bulls piled on Tuesday after it appeared they might be out of energy. But while the price action was productive, if we look under the hood it is not so perfect. Breadth was horrible, small caps weak, bonds were down but the VIX called the shots. Today is a half trading session, expect some very weak action after the market opens as many traders head out early for the holiday. Trading resumes for a full day on Friday.
Breadth was negative again and that tells us more sellers are out there than many want to believe. Oscillators are back to hovering near the flat line, that means the froth has been wiped away. But price is higher, you say? Correct, there is now a divergence between price and breadth, and we always defer to the price action if this occurs until it breaks down. Simply means you play this market cautiously.
Volume trends remain sluggish, and we’ll have much less turnover to worry about today with a half session of trading. That will look bad on the chart but remember it is all about the trend. Price is looking strong here and could continue to work its way higher into the end of the year.
We continue to see the markets pulling up and away from the short term moving averages, and with it a chance for a massive decline at any moment. We are not being chicken little here, but the fact is markets are in need of another rest after moving up well over 1% over the last couple of sessions. We may not have that rest until next week.
The Internals
What’s it mean?
Some nice ticks all session with mostly buy programs pushing this internal into the green. Breadth indicators were poor, the VOLD, ADD and ADSPD all finished negative. Put/calls were rising but the VIX got hammered again, finishing under 14% for the first time this year. That’s a dangerous level, insurance is cheap here, if sellers take control. Internals were weak and show markets are in complacency.
The Dynamite
Economic Data:
- Wednesday:LIM
- Thursday:Holiday
- Friday:n/a
Earnings this week:
- 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.
