The Fuse
After a difficult couple of days for the bulls they are trying to bounce back on this final trading day of 2024. We have seen a very strong year with broad strength at times but a genuine focus on the Mag 7 names for most of 2024. Will that continue next year or will a different group step up to guide the markets higher?
Interest Rates are down again as bonds catch a bid on this last trading day of the year. We’ll see some wackiness in rates today as is customary on the last day of a quarter. Further, several option strikes will expire today (monthly, quarterly) as pension and investment managers re-allocate their portfolios to align with their expectations. That might include adding more fixed income. Fed futures are softening a bit.
Stocks in Europe were flat in morning trade, the dollar fell .1% while crude oil is rising to try and finish the year above $70 per barrel.
Gold and silver are up modestly. German 10-year bund yields fell by 3 bps, the US treasury 10 year yield fell by the same amount. Japan’s markets were closed, Shanghai down 1.6% why the Hang Seng was slightly higher.
Earnings are nascent this week, we’ll be picking up the pace in a couple of weeks as earning from Q4 come dribbling in.
Another atrocious day as the markets could really not get on track. The futures sold off sharply in the pre-market and never really recovered. There was some buying midday but nothing ever close to turning the indices to the green. At days end this represents another day of distribution, the short term indicators are pretty much oversold.
More bad breadth and that puts this indicator in the dog house. There is simply nothing to venture from the bull side if advancers continue to trail decliners. It has been weeks since there have been consistent bullish readings but this month has really been a dud. Oscillators are pretty deep negative and may be ready for a jump, but it may not come until the start of the new year. Would be a surprise now to see the bulls pull off a win on the last trading day of the year.
Turnover was rather slow, we often see that happen during a holiday-shortened week. But the concern has been volume trends are turning bearish. This simply means the leaking market is having trouble finding a bid, and when that happens big money tends to flee the scene. Basically, more heavy volume is coming in to the downside, and that usually leads to distribution (professional selling). Expect big volume prints end of day as some heavy option volume is going to be experienced.
More probing of downside support yesterday and a good bounce off some levels, but still a lower high, lower low on the chart. This coule be the start of a bigger downtrend, but more importantly indices like the IWM and DIA fail to recover above key moving averages like the 20 and 50. If those cross over and start moving down they will act as very strong resistance.
The Internals
What’s it mean?
Just downright ugly internals once again. There is little for the bulls to be happy about here, with VOLD and ADD finishing poorly.
TICKS red most of the day as sell programs dominated, the put/call rose up and the VIX jumped sharply higher but did sell off towards the end of the session. This being the last trading day of the year, anything goes!
The Dynamite
Economic Data:
- 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.