The Fuse
Equity futures are sliding again after yesterday’s sharp pullback. Today is the last day of the Santa Claus Rally indicator and it looks like a dud. Many are watching the first five days of January, another calendar barometer (would point to a strong/weak January and then an indicator for the remainder of the year).
Interest Rates are rising again as the market continues to remove some rate cut hopes. Just last week the Fed funds futures were pricing in six rate cuts in 2024, about 3-4 more than the Fed was willing to commit to in their last meeting projections. We’ll see the meeting minutes later today.
Stocks were hit hard yesterday following the long weekend. Gold is pulling back, down about 1% while crude oil is mostly unchanged.
JOLTS report today will give us more clues as to the tightness of the labor market. 10 year treasuries are zooming in on 4%. The Fed meeting minutes will be scrutinized carefully to see if there is some different language from the statement three weeks ago.
Earnings are light this week and will really start trickling in next week.
Well, the new year was a new look for stocks, and that was red. Following the long weekend buyers were in no mood to take risk and in fact bonds were also lower. It is as if the calendar turned and suddenly traders/investors found the sell button. For all that we’ve experienced during this rally since early November, even a modest pullback won’t destroy the uptrend.
Weak breadth but it could have been much worse. Seems the small caps and tech stocks, which have been running like banshees lately were responsible for the market pulldown. The oscillator turned negative for the first time in 60 days, and that’s a warning flag. A further pullback could be warranted, this indicator is nearing a sell signal.
Turnover was elevated Tuesday as a concentrated amount of tech was sold in distribution. Certainly we should have expected that to happen at some point, markets don’t grow endlessly to the sky. Yet, we may see more volume later this week as jobs data is released.
New highs for the SPX 500 will have to wait a bit longer. We continue to digest recent gains and coming off a strong December this is reason to believe a scary pullback could frighten players out and reset the market. Support at 4,692 (20 MA) then 4650 and 4600.
The Internals
What’s it mean?
The internals were not horrible because some strength in energy and healthcare. But by and large the indices were chopped up, the VOLD down but a late buy program showed some green on this indicator. TICKS were red and bearish all day long while the VIX did manage to come down from intraday highs. ADD was bearish, too. We look for a turn in these internals later in the week.
The Dynamite
Economic Data:
- Wednesday:ISM, JOLTS, Fed meeting minutes
- Thursday: Challenger Job Cuts, ADP report, jobless claims
- Friday:NFP report, ISM services, Factory Orders
Earnings this week:
- 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.