The Fuse
Equity futures are getting pounded on this first day of trading in 2024. The new year offers some promise but after such a strong year in 2023 we have to expect to see some giveback, and remember – nobody rings a bell at the top.
Interest Rates are rising sharply this am as investors on the long end of the curve start to contemplate just how many rate cuts are likely in 2024. It appears the market is looking for more than the Fed is willing to offer this year, but things can change quickly. Regardless, stocks are due for a pullback and the technical condition is ripe for it.
Over the long weekend oil prices went up and continue to fly higher, crude up over 73 per barrel, news that Iran dispatched a ship into the Red Sea. Stocks often give back gains following a long weekend, that seems to be the case today.
Not much on the earnings calendar this week but we’ll hear from Lamb Weston, RPM and Greenbrier. Next week starts the bigger earnings with financials and banks among others.
Stocks just could not make it out of the gate on Friday and finished poorly but on pretty heavy volume thanks to a big options expiration day. For the month the SPX 500 finished higher once again up by 4.2% while the the small cap Russell 2K finished the best, up 11% in December. That was some outstanding performance from an index needing to play severe catchup. For the year, Nasdaq was by far the best with a 53% gain, wiping out losses from 2022.
Breadth was poor all day as buyers just could not step up to add stocks. That’s fine, the indicator was pretty close to overbought and now that condition as been burned off. We’ll be looking for better breadth in the coming days as money flows start trickling into markets following the holiday.
If strong breadth does not return it means January is going to be a very tough month.
Volume was spiked on Friday following a big options expiration day. We should note many of these monthly and quarterly options have been open awhile and with some big open interest, so most were closing trades. When the A traders come back to work we may see volume start to rise again, it’s been rather sublime for the past couple weeks.
The markets are floating here which is rather dangerous for the uptrend to continue. If stocks are not going up, they will wind up going down. On the weekly SPX 500 chart we’ll move support down to connect the lows from 2023, and that level is currently 4,250 or so. Plenty of room to correct from current levels and still have the uptrend in tact.
The Internals
What’s it mean?
Traders and investors were really in no mood to buy stocks on Friday. The internals bear that out, the VOLD was straight down especially late in the day while the ADD continues to point lower. VIX was down as is often the case before a three day holiday weekend, ticks were demonstrably red all session. Simply means the buyers are exhausted here and a breather may be upcoming.
The Dynamite
Economic Data:
- Monday:N/A
- Tuesday:Global PMI, Construction Spending
- Wednesday:ISM, JOLTS, Fed meeting minutes
- Thursday: Challenger Job Cuts, ADP report, jobless claims
- Friday:NFP report, ISM services, Factory Orders
Earnings this week:
- Monday: N/A
- Tuesday: N/A
- Wednesday:CALM, RGP
- Thursday:CAG, LW, RPM, WBA
- Friday:STZ, GBX
Fed Watch:
The Fed meeting minutes from the December session will be released on Wednesday afternoon, which could offer more clues as to what the committee was thinking. Certainly the projections and the promise of rate cuts is going to ignite a response, but perhaps the minutes show the committee will poor some cold water on the market. Fed funds futures are looking for 6-7 cuts in 2024, probably far too much exuberance.
Stocks/Issues to Watch this Week
Jobs Report – Will this week’s job data start to show the economy is slowing down? Following a couple of strong numbers we could see that happen, and if there is some friendly wage data that might juice the markets on Friday.
Energy – Oil prices remain elevated but supply issues remain a problem. We are watching the $75 per barrel level closely and if crude rises above then technically there is room up to $82.
Retailers – We may hear from some retailers this week on how holiday shopping ended. Most companies were fairly optimistic and had good inventory levels, we’ll have to see the numbers before making an assessment.
