The Fuse
Equity futures are rising across the board in the pre-market as the bulls make a triumphant return to Wall Street on the first trading day of 2025. Will this continue and push the Santa Claus Rally into the positive? There are two full trading days left to make it happen, the SPX 500 has 93 handles to make up during those two sessions. Recall last year the SCR was negative but the markets still rallied smartly.
Interest Rates are lower today as bond buyers step in after the recent bargain prices were too good to pass up. Fed futures are still pointing to less than two cuts in 2025, but plenty can happen over the next twelve months. Next meeting for the fed is end of the month. Fed Presidents Barkin and Daly are speaking today and tomorrow.
Stocks are posting nice gains in the pre-market paced by strength in Europe, higher by .3% with some good turnover across the pond. The dollar is falling, off by .1%, gold is higher by .7% while crude is rising, higher by 1.5%. German 10 year bund yields and US treasury yields both declined by 2bps, Hong Kong and Shanghai were both down by more than 2.2%, Japan was closed for the holiday.
Earnings are nascent this week, we’ll be picking up the pace in a couple of weeks as earning from Q4 come dribbling in.
The recent weakness spilled into the last trading day of the year. When markets opened the short-term oversold condition appeared to be reversing but the selling pressure just kept getting worse. At one point, the SPX hit a very important support level and did bounce from there, but that was of no consequence. The poor showing and lack of interest is making the Santa Claus Rally period look bearish.
A decent day of breadth but well off the best levels of the session. What can be said here is a lack of heavy selling and strength in small caps (IWM) were pacing the action, but overall most stocks were weak on Tuesday. The Nasdaq took the biggest hit, the SPX 500 tagged the 50 day ma and looks to find that as good support going forward. January is looking to be another tough month after markets were rattled in December.
Volume accelerated Friday with a big options expiration (monthly, quarterly, weekly and daily). With that behind us we may get back to some normal volume trends in the coming weeks, but don’t expect it to happen right away. The price action has taken a beating over the last few weeks as money flows downshift and seasonal trends turn bearish.
We’ll see if that test of the 50 ma by the QQQ will hold. It has in the past but the heavy pressure on price over the last few weeks is not inspiring any dip buyers to step up. The SPX 500 is trading below this mark now along with the DIA and IWM. For all intents and purposes the broader market is in a corrective phase, which might last longer than many believe.
The Internals
What’s it mean?
I can’t say anything great about the internals recently. Tuesday of course showed some positives but it lacks some energy and intensity.
VOLD and ADD were up but not inspiring. VIX was up then down, option prices were getting punished on that movement. ADSPD was lower on the day, ticks were mostly red.
Another day of meh trading, hoping the new month inspires the bulls to turn things around.
The Dynamite
Economic Data:
- 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.
