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Equity futures are lower this morning but only modestly so after the SPX 500 closed at a fresh new all-time high. The Nasdaq is not far behind and neither is the Dow Industrials. With only a handful of trading days left in January it seems investors are positioning for a strong finish. Let’s remember though after a strong November the often-solid December was a flop.

Interest Rates are dipping lower, barely today as fixed income short covering is taking place. Further, traders are positioning themselves in front of next week’s Fed meeting, which may be pivotal. The futures market is pricing in a pause over the next two meetings, a 50/50 shot of a cut at the May meeting. So, plenty of data to be released in between to move those estimates up or down.

Stocks are very strong this month, defying the seasonal trends that have been influencing stocks since the Fall. European stocks rallied overnight, the STOXX up .4% lead by gains in France and Germany. The dollar index fell sharply, nearly .6%. Gold is rallying, up nearly .7% as is crude and silver. German 10 yr bund yields were flat, US Treasury yields down 2bps.
Stocks were again mixed in Asia, Japan down .1% but in China a gain of 1.9% in Hong Kong and Shanghai up .7%

Earnings were strong last night from ISRG but they did rise up over a week ago, not so good from CSX and Texas Instruments as their guidance was lacking. This morning strong earnings from AXP but only mild guidance, we’ll have a few other reporting later this morning.

Stocks started off slow but did manage to push higher midday, languished for a bit but then surged the last ten minutes to put the SPX 500 at an all-time closing high.
It has been quite a journey, the big cap index is now firmly above 6,000 and while there are some levels below there that need testing, making this new high on good volume and better internals is certainly meaningful. As we move towards the end of January, only six trading days left and so far the bulls are winning the month./span>

Better breadth yesterday as stocks managed to pull out a win supported by this important internal. There is not much doubt if the market hits new highs with positive breadth, and the cumulative volume breadth hits new highs, too. Oscillators are mildly overbought here and that seems to have shaken the bears a bit. This indicator has remained positive even through a seasonally bearish trend. Talk about your contrarian indicator!

Turnover remains good but not great, when stocks are hitting new highs like the SPX 500 on good volume it means the bulls are in control. There is no disputing the price action when turnover is strong as well. We may see more heavy volume into next week with a Fed meeting and earnings, but don’t be surprised if it is two-way action.

We continue to wait for tests of support, but maybe the most recent pullback to the 100 day moving average was the ‘one’. Russell 2K continues to be the weak link, and while Nasdaq did post a winning day it was tough to get there, chips were down most of the session along with big tech until a late day surge put the ‘100 into the green. Industrials have been ripping higher this month, much like in September and November 2024. New highs may be just around the corner after a nasty correction last month.
 

The Internals

(Click on image to enlarge)

What does it mean?

We are going to call this a win for the internals Thursday but just barely. Ticks were mostly green and dominating all day, the VIX did finish under 15% but the put/call was very bullish, lower on the day. VOLD did finish positive but the ADD and ADSPD were just pathetic. Maybe we’ll have better action today.
 

The Dynamite

Economic Data:

• Friday: Existing home sales, consumer sentiment, PMI services and manufacturing

Earnings this week:

• Friday: VZ, AXP, HCA, ERIC, MOG.A, NEE

Fed Watch:

The Fed has lots to consider with some benign inflation readings and strong jobs report. The next meeting is in about 10 days, this will be the first one of 2025 with some new voting members on board. Most on the committee are reticent to move rates right here with the economy very strong, but if inflation moves lower then we could certainly see the markets looking for cuts in 2025. As it stands, maybe 1-2 at most.

Stocks to Watch

Earnings – A big week for earnings as some tech names start talking about the last quarter of the year. It’ll be interesting to see if the market holds up into this short week.

Rates – With a new administration in place, will inflation finally fall as promised? So far bond investors are taking the bait.

Volatility – The VIX was smashed last week into the long weekend, did it go down to far or will volatility sellers continue to hammer it?

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