The Fuse
Equity futures are getting hammered this morning as the markets respond to a report there is a criminal investigation underway into the Fed and Chair Powell. Also, plenty of uncertainty on the geopolitical area, Venezuela being one area of concern. Gold and silver are higher as well, volatility is on the rise after the VIX sits under 15% (last week).
Interest Rates are pushing higher as the world is worried about inflation again. Even some of the big banks have withdrawn their estimate for a rate cut this year, saying the next move is a hike in 2027 (JPM saying this). Regardless, you have to believe a new Fed chair in May is going to be more aggressive and push rates lower. High yield spreads are widening modestly, the 2/10 spread as well. Seeing some lift in the 30 yr treasury yield, fed funds now less likely to see a cut in April as before the jobs report.
Stocks are down on some good volume this morning, in Europe the STOXX was down .2% led by a decrease in France. Gold is ripping higher by more than 2%, silver up 5% or more. The dollar index fell sharply, off .3%, crude slightly lower while stocks in Hong Kong and Shanghai were both up more than 1%. Yields on 10 yr US treasuries up 2bps, Germany steady.
Earnings season gets underway this week as the big banks will hit the confessional. Names like JPM, C, WFC, BAC and GS will talk about their quarter, but we will also hear from Delta and some smaller names.
Really good first full week of trading for the markets. Good breadth, spreading out the rally to small caps and the like, the IWM is up 5% in six days of the new year. Very impressive. But complacency is starting to set in, right at a point where we are about to enter a seasonally weak period. Markets may be ready to correct some but there would be a good omen if January ends up positively.
Breadth was solid on Friday with a bent towards the bulls all session long. In fact, there was only one poor breadth day all week and that was Wednesday, not be surprised after a strong start to the week. Oscillators are off their highs but still in positive territory, while new highs continue to crush new lows in impressive fashion.
Volume trends are starting to turn positive again after being somewhat neutral during the santa claus rally period. We’ll see volume pick up this week with inflation readings and readings and perhaps a reaction to some Fed speak. Also, Friday is a big options expiration day, LEAPS expire and we are in front of a three-day holiday.
Support levels have not been tested here for a bit, in fact since the middle of December for the SPX 500. That’s fine though, but the eventual pullback is going to be sharp and painful the longer we go without a retest. For now, the 50 ma is about 2.5% lower than current levels at 6811, if that is tested it’ll feel like death (but it won’t be bad). Russell 2K also very extended, about 8% higher than the 50 ma as that one looks vulnerable to some selling.
The Internals
What’s it mean?
Another positive day for the internals with the VOLD climbing again, the 4th time this week and closed right near the highs of the session. ADD and ADSPD were higher but less impressive, VIX declined sharply and is now well under 15%, which signals complacency and potential for some selling. TICKS were strong, bullish buy programs nearly all day long. Another day like this will just be more confirmation.
The Dynamite
Economic Data:
- Monday:Fedspeak
- Tuesday:CPI, NFIB optimism, new home sales, more fedspeak
- Wednesday:retail sales, ppi, biz inventories, home sales, beige book, lots of fed speak
- Thursday:jobless claims, empire state, philly fed, fed speak
- Friday:industrial production, cap utilization, Barkin and Jefferson speak
Earnings this week:
- Monday:SIFY
- Tuesday:JPM, DAL, BNY
- Wednesday:WFC, C, BAC, INFY, HBF RFIL, HOMD
- Thursday:TSM, MS, GS, BLK, BSVN, JBHT
- Friday:RF, STT, PNC, MTB
Fed Watch:
This is an important week for the fed, not for decision making but because so many speakers are out talking about fed policy and the economy. Seems the only one NOT talking is Chair Powell, but with so much division at the time it seems relevant to listen to every participant’s view and where they stand. The first meeting with some new voting members is end of the month.
Stocks to Watch
Silver and Gold – Again, the metals are on fire and pushed to highs last week. Seems the momentum is strong here and that could last for some time, pullbacks have been buying opportunities.
Crude oil – Since last week’s invasion of Venezuela the price of crude only rose up modestly. That should change soon, futures market sees higher prices soon and with any supply disruption that will happen quickly.
Banks/Financials – Kicking off earnings season are the big banks this week. Did they run too far? It’s possible, but earnings should be fantastic anyway.
[thrive_leads id=’60674′]
