The Fuse
Equity futures are down a bit this morning as we are in the middle of the Santa Claus Rally period. So far so good for the bulls however five days remain to see if the indicator is on track. Recall the last two years markets were lower, and there has never been three years down in a row in the SCR.
Interest Rates are making their way lower this morning as stocks are pulling back. Volatility is elevated, just getting back what was lost last week. 2 yr yields are steady, they may move later in the week after the minutes of the Fed meeting are released (tomorrow). High yield spreads are tight, 30 yr yields are slightly lower, seeing fed funds future a bit lower but only a 20% chance of a cut in late January.
Stocks are bit lower this morning despite flat trading in Europe, the STOXX unchanged, the FTSE added .1%. Gold is down sharply on profit taking as is silver, of 3%. Crude oil is rally smartly, up better than 2%, the dollar flat. Yields are declining, Germany off 1bp and the US 10 yr treasury down 2bps, Japan off by .4% while Hong Kong down .7%.
No earnings on tap for this week.
Not much negative to this market right now as seasonal trends take hold. Yet, there is a fear out there that market players ar getting a wee bit complacent. We see that in the volatility index, which made its low for the year year last week. Probably not going to see too much volatility though heading into another short trading week, and the Santa Claus Rally is on!
Breadth was back to its negative ways on Friday but remains on a tepid buy signal. Actually, Friday was a modestly positive day for breadth, the oscillators barely moving but remain above zero. New highs continue to beat out new lows.
Volume trends remain neutral, we do not expect to see strong turnover during these holiday-shortened weeks. In fact, unless there are some big funds coming into the market to buy stocks end of year, we may not see much turnover until say the second week of the new year.
Support levels are quite a bit lower but we are unlikely to test these for at least a week or so. Bullish seasonal trends are here and traders know it, and will likely be buying dips at every opportunity. No doubt we’ll see a soft patch before the start of earnings season, but that is weeks away.
The Internals
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What’s it mean?
Tough day for the bulls all around as the internals were struggling all session long. It seems traders were in a hurry just to get out of town before the weekend, volume and breadth struggled all day. The VOLD and ADD did finish positively but only on a late session surge, VIX closed dangerously low under 14%, put/calls are chasing lower still while the TICKS were spread evenly most of the session. We did not get a good read on this week following Friday’s session.
The Dynamite
Earnings this week:
- Monday:n/a
- Tuesday:n/a
- Wednesday:n/a
- Thursday:holiday
- Friday:n/a
Economic Data:
- Monday:Pending home sales
- Tuesday:home price index, chicago biz barometer, fed meeting minutes
- 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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