Economic resilience remains in play, but little else does. Even the Fed 'beige book' supports this case, but there is just a lot of irregularity going on. 

Freepik

Many disconnects. While people are generally getting by there is 'upset' talk which is a dominant tone one hears many times in discussion events or even in local politics.

The late 2023 upside was per our forecast, but was ridiculously concentrated in the 'mega-caps', which were destined (and we thought so) for 'tax-gain sale early in the new year'. By-and-large that's happened, and while digesting lots of what comes next is almost impossible with regard to geopolitics, there are parts of it that are predictable. Including a softish landing, but hard politics.

Short-term, washout or not, we ought to head for a rebound into February, but with the 'Generals far ahead of the Troops', it is again not a breadth-enhanced market, but a bifurcated one that is tricky. Especially when it comes to stocks likely to be impacted by continuing 'commercial' property declines, New York as well as other cities, as we've often discussed. (Why these cities emulate failed policies already proven to enhance poverty not prosperity, and tax any citizens nearly succeeding so heavily that it inhibits success, is hard to fathom given enough examples already... San Francisco and even Chicago.)

Anyway, the stock market is still in an unsettled by slightly oversold daily S&P status that looks like the 'top of the roller-coaster' (noted double-top precedes) or a preparation for a meaningful recovery. It's possible just to stay in a wider trading-range of sorts, with an uncomfortable year, which is how this feels and there's nothing I can do about that. The last year we tried to point-out narrow leadership, and then modest breadth improvement toward year-end. We have argued against chasing the already-played expensive stocks, holding some of course from lower levels, but definitely not chasing upside. Small-caps have a better value coefficient generally, but the vast majority are basically stalled.

Market X-Ray: 

One should work through 'static' in the market matrix, as S&P gets ready for a stabilization and rally into February.

However, that's primarily a recipe for a 'normal' seasonal market, especially in an Election Year, but this is no normal market, not a normal 'peaceful' time in history, nor even normal politics domestically.

To quote Jimmy Dimon: things are not so 'hunky dory'. Well yes, that also is implying the Fed did its work calming things with higher rates (too high for a too long period was my point) ... and if not 'hunky dory' then the next phase is stabilization and get things to a better place. If there's an anticipation of that, a stock market tends to discount it in-advance and the question is whether so much of that 'discounting' has already occurred that there's not much room for error. However it's only in the big-caps, hence the perpetuation of bifurcation.

There are a number of interesting individual stock patterns, but primarily with leadership potential by the usual suspects: Microsoft, Nvidia, AMD, etc. 'If' we can get these to levitate further in the next couple weeks, there's money 'wanting' to push those and probably a bunch of others would follow along.

It's not easy, and those that do lots of business in Asia are impacted by what are short-term (at least, or continuation depending on how it's assessed) trend patterns that have brought into question their business results 'should' China, and Japan, remain in contractions. And it's a mix when you factor-in lots of AI changes which often can be implemented within existing products (today's new Samsung AI phone comes to mind or how that helps Qualcomm too).

Warning signs in the economy exist, but are overshadowed by geopolitical concerns, several of which (Iran in particular) could mushroom uncontrollably. I actually don't understand Iran attacking Sunnis in Pakistan, particularly since it will provoke Saudi Arabia, which recently 'smoked a peace pipe' with Iran so it seemed. Apologist groups would argue such attacks on Islamic cells just supports the U.S. / Israeli stance about Tehran, so why do they do this?

Bottom-line: 

Coping with anxiety might as well be the title of this year, and not just the stock market. However, as people's habits and spending adjust to this 'disequilibrium' in so many aspects of society, perhaps it's a good set-up for a surprising comeback.

Thursday should see more shuffling, but there's enough negativity out there, perhaps enough to get another effort at upside, barring news inhibiting that.

More By This Author:

Market Briefing For Wednesday, January 17
Market Briefing For Tuesday, January 16
Market Briefing For Tuesday, January 9