The Fuse
Equity futures are trading higher this morning as we start the first full week of trading in 2026. This is also the last day of the Santa Claus Rally Period, we would have to see a 50 handle move on the SPX 500 just to break even from the close on December 23, but you never know!
Interest Rates are on the move and pushing lower, fixed income traders are back and buying bonds. Still, rates are range bound but looking to move the lower end of that range, high yield remains well bid. 2/10 spread remains steady, and fed funds are still primed for a move in the Spring.
Stocks in Europe were up nicely overnight as traders came back from the holiday break in a buying mood. STOXX were up .5% in morning trade on good turnover, led higher by gains in France and Germany. FTSE was up a nice .4%, gold is ripping higher again as is silver, crude oil up by about 1% on developments in Venezuela over the weekend. Japan jumped higher by 3%, Shanghai gained 1.4% but Hong Kong was flat. Yields in Germany fell 2bps, 10 yr US treasury yields down 3bps.
Earnings start trickling in this week with HELE, STZ, WDFC amd a few other smaller names. Bigger earnings hit the following week.
At some point you knew the bulls would have a day, and Friday was it. After four down sessions in a row the dip buyers used lower prices to add shares, perhaps waiting for the calendar to change. We have one more day of the SCR to go and would need to rise just under 1% (50 spx points) to get into positive territory. Does it matter? Well, it did not matter much the last two years without Santa but the markets rallied up.
Breadth was pretty good, in fact much better than expected following some rancid numbers. No question this indicator is still on a sell signal but a few up sessions in a row could turn that around. New highs still impressive over new lows, further the oscillators are still in negative territory. This indicator has a tendency to flip back n’ forth.
Volume is starting to come back, it was a strong session of turnover Friday as the bulls chalked up an accumulation day. We expect to see more turnover in the week ahead especially if the VIX gets moving. Remember, a low vix means high complacency and ‘pleased’ with current positions, not willing to sell or add more – hence low turnover during these times. When the volatility rises we have a market that can move sharply.
Support levels were tested early in the week just before New Year’s. Is that it? The 20 ma for the Industrials and SPX 500 was tested while the 50 ma for Russell 2k and Nasdaq were the targets on the downside. We’ll have to see if these important levels hold this coming week.
The Internals
What’s it mean?
A pretty solid day for the internals with strength across the board. The VOLD stood out with strong performance on the first day of trading in the new year. ADD even finished positively, the VIX fell and TICKS were mostly buy programs, the bulls stifled the markets to close the down streak at 4 straight. TRIN was a bit lower, indicating bullish imbalances.
The Dynamite
Economic Data:
- Monday:ISM, auto sales
- Tuesday:Services PMI, Richmond Fed Barkin
- Wednesday:ADP, ISM services, JOLTS, factory orders, Bowman speaks
- Thursday:Jobless claims, productivity, trade deficit, consumer credit
- Friday:NFP for December, hourly wages, consumer sentiment, Barkin speaks
Earnings this week:
- Monday:N/A
- Tuesday:ARR, PENG
- Wednesday:APOG, MSC, ACI, STZ, JEF, AZZ, PSMT, SAR, RGP
- Thursday:SNX, HELE, RPM, SMPL, NTI, TLRY WDFC, AEHR, GBX
- Friday:
Fed Watch:
Fed speak is back, the countdown is on to a new Fed Chairman and with the change in the calendar a new set of Fed Presidents become very important. The first meeting of the year is at the end of the month, markets are not seeing a cut here in January but 50/50 for March.
Stocks to Watch
Technology – CES starts up this week in Las Vegas and is widely followed by analysts and technology experts. We often see deals of some sort happen during this week, as NVIDIA CEO will be a keynote speaker. Should be interesting.
Oil, Energy – With the US invading oil-rich Venezuela it stands to reason crude oil may rise in the short run. That is going to cause some big headaches for those short crude may be in for a rude awakening.
Magnficent 7 – This group has been the notable slacker in the markets of late but we could see them turn the tables as we head to a big earnings season.
