The Fuse
Equity futures are getting hammered across the board as traders are not waiting for the market to open to start selling positions. After Friday’s drubbing we were hoping to see a bit of bounce back but no dice so far. A 1% drop would set the markets back below Friday’s lows.
Interest Rates are moving back down as some look to bonds as a safety trade. Market volatility is rising and that means fear and worry are taking over. That spells trouble in the short run, bonds have been beaten up and may be looked upon as a good value here. Fed futures have backed away a bit from the 2 rate cut scenario for 2025.
Overnight we heard of the passing of former President Jimmy Carter, who lived to be 100. The stock market may be closed some time in the next couple of weeks (for a day of National Mourning). Overnight stocks in Europe were down about .4% on good turnover. The dollar was flat while gold and crude barely budged. German 10 yr bund yields dropped 1bp, US treasury 10 yr also dipped 3bps. Stocks in Asia were mixed again, Japan off 1% while Hong Kong slid .2% and Shanghai up the same amount.
Earnings are nascent this week, we’ll be picking up the pace in a couple of weeks as earning from Q4 come dribbling in.
It is the last couple of trading days of the year, let’s hope Friday is not an indication of how things are going to unfold. The bulls may be stumbling to the finish line even with a strong performance, but that does not bode well for the start of the new year. Chances are if this week is poor the month of January is likely to be the same. Hold your protection as usual.
Breadth was awful on Friday, a rout of better than 4-1 negative. All eyes turn to this week though, breadth indicators were on buy signals but suddenly may flip with some followthrough. Oscillators are on the defensive once again, in negative territory. New lows are back on top of new highs, too. That is a bearish sign.
Volume trends have suddenly turned bearish. There was a heap of turnover Friday to the downside, some are pointing to some big re-allocation happening from pensions and funds. The volume though is much less than the recent down day and rebound, but still a distribution day was notched Friday. The end of the year is nigh and that could bring a slew of volume, some big option volume will come off the board Tuesday with monthly and quarterly expirations, not to mention the JPM collar is going to be discussed.
With that deep pullback Friday the markets tested some good support levels. Specifically, the 50 day moving average, which held firm on the SPX 500, but the Nasdaq has some more downside work to do for that test. The IWM and Industrials are well below the 50 ma and are in need of an electric charge.
The Internals
What’s it mean?
Very poor showing by the internals, it seems Santa delivered some coal to the markets. Weak VOLD and ADD showed it’s ugly head again, the ADSPD with a trend down day, too. Ticks were mostly red, the VIX gapped higher but finished near the lows of the session. This is an important week for the bulls and the internals to get it right.
The Dynamite
Economic Data:
- Monday:Chicago Biz Barometer, pending home sales
- Tuesday:home price index
- Wednesday:N/A
- Thursday:jobless claims, construction spending
- Friday:ISM manufacturing
Fed Watch:
Nothing happening this week as fed speakers are silent. We’ll have the meeting minutes coming up next week and probably some fed speak as well. So far the futures market is aligning with the the Fed’s posture, persuaded by the bond market that rate cuts need to slow down.
Stocks to Watch
Santa Claus Rally – Last four days of this period, can the bulls pull off a win as is normally the case, of will the Grinch steal the spotlight?
Volatility – The VIX made and appearance this week, running lower and then higher, settling around 16%>. We can expect to see more volatility in the coming year as not many are expecting that to be the case.
Technology – These stocks were hit hard Friday, let’s see if they can finish the year on a positive note.
