The Fuse

Equity futures are modestly higher following the long three day weekend. Stocks are on an eight week winning streak and have not had a down week since late October. The Santa Claus Rally period is in full view, we’ll see if buyers step after Santa’s journey Sunday evening.

Freepik

Interest Rates are slightly lower on the long end of the curve while the 2 year is up modestly. Expect to see a bit of jostling with rates at the end of the week. Rate cut bets continue to be made as the 10 year fell below 3.9%.

Nothing much in the news overnight but gold is up as is crude, the VIX back up after a sharp move lower last Friday. There is hope geopolitical tensions will ease and crude oil declines more in support of the Fed’s lower inflation objective. They are down 8% in 2023. Small cap stocks will be the ones to watch if financial conditions remain loose.

Earnings are slow this week as nothing notable is on tap. The big earnings reports start after the first of the year.

Equities struggled to finish higher on Friday as it appears the bulls are starting to run out of gas. It would not be surprising to see a bit of giveback this coming week, but with four sessions left and new all time highs not far off maybe a big surge to end the year is upon us. Regardless, it’s a been a strong year all around with double digit gains for the indices and other asset classes like gold and bitcoin.

Breadth was decent on Friday as the bulls managed to pull one out, but the last couple hours of trading were rather slow, unlike how things ended on Thursday with a higher finish. Breadth has been strong for the past couple months and has been leading the charge higher, but we know it cuts both ways and if we start seeing red days that will be a sign of an imminent correction would be starting.

On this slow trading day turnover was pretty weak, expected during this holiday trading season. Most big trading desks are empty as we find junior traders are there to not do much damage.

We still see 4,600 as good support for the SPX 500. The Nasdaq has good strong support about 4% lower at 16,000 while the Industrials have strong levels of support at 37,000. The SPX 500 is up near an all-time high once again.

The Internals

What’s it mean?

A rather sleep session for the markets on Friday as we barely see a move in the VOLD and ADD. Ticks were strong all session long, see the heavy green while the VIX was down sharply again, often seen in front of a holiday shortened week. Put/call was elevated again as it was on Wednesday, more fallout from that heavy skewed down session..

The Dynamite

Economic Data:

• Monday: N/A
• Tuesday: Chicago Fed Nat’l activity, housing prices, consumer confidence
• Wednesday: mortgage applications
• Thursday: Jobless claims, retain inventories, pending home sales
• Friday: N/A

Earnings this week:

• Monday: N/A
• Tuesday: N/A
• Wednesday: N/A
• Thursday: N/A
• Friday: N/A

Fed Watch:

Nothing much on the Fed front this week though the prior week had some more jarring words from fed speakers. The current market or fed funds futures seems to be predicting a slew of rate cuts in 2024, far more than the committee expects. Inflation trends are certainly slowing down though and that may push the Fed to consider more cuts, but the data will help them decide.

Stocks to Watch

Apple – This company continues to pull a rabbit from its hat and hit their sales goals, with holiday shopping still going on can they do it again?

Amazon – It’s go time for Amazon as they simply dominate online sales. The holiday season is often a boom time for them, we’ll hear all about it soon.

Tesla – Plenty of news here with this company as the stock continues to grind higher. That is a big tell, big money is still coming after the stock.

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