The Fuse
Stocks are soft this morning after a good surge to start the week, the buyers are missing in action. That’s fine, we have to expect some giveback after the market shows high complacency. we see that in the low VIX, which rose slightly yesterday and is on the move today.
Interest Rates are slightly higher this morning as bond traders position themselves before the December labor report hits tomorrow morning. This is a big one of course, if it aligns with the recent ADP report the Fed may put off rate cuts a bit longer than expected. High yield spreads are tight but are now overbought, if bond selling hits the stock market these spreads will widen. 2/10 spread has been rising and is now near 70bps, highest since 2021.
Stocks are donw across the pond, the FTSE in London down .2% and STOXX off .1%, but German climbed .3%. Gold is down as is silver in volatile trade, crude oil up sharply. The dollar index was flat. German 10 yr bund yields up 1bp, US 10 yr treasury yields down 1bp, in Asia stocks were down. Shanghai off .1%, Hong Kong down hard at 1.2% and in Japan the Nikkei off 1.6%.
Earnings start trickling in this week with HELE, STZ, WDFC amd a few other smaller names. Bigger earnings hit the following week.
Stocks tried to make it three in a row but the buying pressure was simply not there. The bulls seemed to run out of fire power to push the markets to another new closing high, but they did hit the mark intraday, same for the Industrials. Nasdaq demonstrated the best relative strength and finished in the green, barely. Perhaps just a bit of rotation going on here, but with a very important jobs report coming there is some positioning to be done.
We just couldn’t get another strong day of breadth, but that’s fine. This indicator remains on a buy signal for now, but it has been sensitive and could move back to a sell if the short term trend down continues. Oscillators are still positive but barely, and if there is negativity again they could slip down to bearish signals. New highs crushing new lows again, that seems to be the trend of late, we’ll see if that continues.
Volume trends continue to show bullishness, though that was not the case on Wednesday. But we have to remember big money tends to ‘hold back’ some and put it back into the markets when things smooth out. With some uncertainty over geo-political/macro issues and a looming jobs report there is reason for some hesitancy.
Could this be the point where some short term support is tested? That reversal yesterday was not bullish, and if there is some followthrough to the downside today and tomorrow there could be trouble ahead. Still, testing lower levels tends to scare people into believing the trend is over, but not necessarily so.
The Internals
What’s it mean?
That was some reversal! It was nothing earth-shattering but no question a big turnaround, the VOLD having been bullish for three days straight just collapsed under its own weight. TICKS were mixed but mostly red end of day with a slew of sell programs hitting hard, ADD fell sharply while put/calls were on the rise. Nasdaq ticks more positive on the day. We’ll see if the internals are calling for more down today.
The Dynamite
Economic Data:
- Thursday:Jobless claims, productivity, trade deficit, consumer credit
- Friday:NFP for December, hourly wages, consumer sentiment, Barkin speaks
Earnings this week:
- 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.
