The market closed on Friday with a prolonged, balanced profile, while the volume structure continues to suggest short-covering activity carrying into today’s session. With the opening above the prior volume value, the market appears to have found core buying interest near the upper value extreme of the lower distribution, which technically establishes a bullish bias.
 

(Click on image to enlarge)

Over the weekend, the capture of President Nicolás Maduro in Venezuela introduced geopolitical risk. Venezuela accounts for roughly 1% of global oil output, limiting the immediate impact on supply; however, rising oil prices could still elevate inflation expectations. Market participants are now focused on Friday’s jobs report to further define the rate-cut path, as well as the announcement of the new Fed Chair, which could prove supportive.

Heading into the new year, the macro regime appears neutral. Equities have softened, while relative strength in the Russell 2000, emerging markets, and elevated Bitcoin prices points to ongoing risk appetite. Copper is trading higher, reflecting stronger growth and inflation expectations, alongside firm gold and silver prices. Oil remains a potential inflationary pressure point, especially in combination with a stronger dollar and elevated VIX.

Rate-cut odds remain dovish, and credit spreads near record lows continue to support risk assets. However, with equities showing signs of near-term weakness, the broader context favors a rotational market environment for now rather than a clear trending move.

More By This Author:

Equities Drift Into Rotation As Holiday Liquidity And Fed Minutes Cap Directional Conviction
U.S. Equities Rotate Lower From Balanced Profile As Rates And Holiday Liquidity Shape Trade
Are We Entering The 4th Metals Super Cycle?