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Equity futures are mixed this morning with the Industrials once again in the red, though ever so slightly. Today is Christmas Eve, a half trading session so volume is going to be low, price moves erratic and really should be little to do other than some maintenance of positions (adding or trimming exposure).

Interest Rates are nudging up one more time as the 10 yr yield pushes to the Spring highs around 4.75%. That is not good for small caps, evident of the sharp correction taking place this month. Fed futures are steady and now lean towards just under 2 rate cuts in 2025, which may not exactly be in line with the Fed’s target.

Stocks in Europe were up modestly overnight, the STOXX higher by .2%. The dollar was flat, gold and silver are holding steady but crude has a nice bid this morning. German 10 yr bund yields surprisingly rose up 4pbs, US treasury yields flattish. Stocks in Asia were mixed, Japan down .3% but a nice rally in Chinese markets, Hong Kong up 1.1% and Shanghai up 1.3%.

Earnings are sparse this week, nothing significant to consider as investors await the start of next earnings season which starts in January.

It’s a short trading week but still some action will be had. Don’t forget, the Santa Claus Rally period starts today and runs through January 3rd. ‘If Santa fails to call, the bears may come to Broad and Wall’

Too much of a good thing I suppose. Breadth was poor most of the day, we again can thank the bond sellers for higher interest rates, which are simply killing the small cap stocks. Remember, these stocks do better when rates are down or falling. Oscillators remain negative but we could see a change there by next weeks, some large numbers will start to come off. New lows still dominant over new highs for now.

It will be a short trading day today and will register as one of the lowest volume prints of the year for that very reason. Turnover was not great Monday either, but some spillover selling from a big options expiration managed to filter through early in the day, but buyers came back fierce and with some heavy buy programs managed to put the indices in the green, but not an accumulation day.

Some selling midday helped to get everyone worried about the Santa Claus Rally and if it would truly be a bullish event. That of course depends on the conditions, but the dip buyers came in at support levels and bought back what was sold, in classic dip-buying fashion. Today could be a wild ride on the boat even with a half session scheduled. The bulls have some momentum from a followthrough day, it appears 6K is going to be tested again on the SPX 500 very soon.
 

The Internals

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What’s it mean?

A rather quiet day overall but plenty of volatility, yet the VIX was smashed. It started higher but ended down about 8%, a sharp move for this fear index that now has it zooming in on the 200 day moving average. That comes in at 16, about 4% higher than current levels but the trend is clearly down since that surge up last week. VOLD was modestly positive but the ADD finished at highs of the day, something we haven’t seen in awhile. Put/calls were lower, ticks spread evenly with a bias to the downside. Today is a short trading session, only 3 1/2 hours long.

The Dynamite

Economic Data:

• Tuesday:Durable Goods, New Home Sales
• Wednesday:n/a
• Thursday:Jobless Claims
• Friday:Trade Balance, Retail and Wholesale inventories

Fed Watch:

Did the Fed cause the Wednesday drop? Probably not entirely to blame, but certainly the Chairman did reiterate the committee’s distaste for sticky inflation. Friday’s PCE may have changed that thinking, but still the committee is going to be overly cautious and not be forced into a rate cut cycle that stimulates inflation any longer. Growth is still good, GDP revision up to 3.1%, so nothing wrong with the economy.
 

Stocks to Watch

VIX – A monster move up last week and right back down, but there is more decline likely into the holiday. Don’t forget, we often see volatility drop into the holidays, half day trading Tuesday and day off Wednesday.

Retail – This is IT for Christmas shopping, only two days left and then it’s over! But not really, we often see more buying happen after Christmas (sales) and then those gift cards get redeemed, often in January.

Bitcoin – It has been on a wild ride the past couple of months, if it can settle in around 90-100K for a month or so and actually become ‘boring’, we might see this crypto really take over in the first half of the year.

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