Futures are up ~20bps this morning as Asia recovers from recent weakness overnight and
Europe trends slightly higher. Asia was up ~1% on average and Europe is up 75bps on aggregate. On this side of the pond, news and volumes remain light, which is as to be expected given the holidays. For the moment, stocks continue their slow and steady “melt up” into year-end, probably for lack of bad news than anything else. There is some small M&A chatter this morning, however, as BJ’s Wholesale Club (BJ; +5%) is rumored to be a takeout target for Leonard Green & Partners. Oil -40bps. Gold +5bps. USD -20bps and EUR/USD 1.3133.
No economic data on tap for today, but Initial Jobless Claims and Continuing Claims are due tomorrow at 8:30am, and Pending Home Sales are due at 10am tomorrow.
Regarding recent stock action, here’s a pithy quote from Briefing.com:
There have been 19 trading sessions in December. The S&P 500 has logged a gain in all but three of the sessions; it has not had consecutive losing sessions; and its biggest loss has been a 0.5% decline on December 15. Since gaining 1.3% on December 2, the S&P 500 has not gained more than 0.6% in a single session.
Any guesses as to how today's session might go?
The odds-on bet is that there will be more "drifting" in the major averages during the day before things finally settle with a small gain for the S&P 500. That isn't a guarantee, but it certainly seems to have been the modus operandi for most of the month.
In other commentary, Knight also put out a cautious piece this morning that is worth a glance:
Drifting Into Year-End
Bottom Line – Yesterday’s US stock market action did nothing to change our current outlook. While our view is that the intermediate-term outlook is still positive for US stocks there are signs of some technical deterioration in the short-term indicators we follow suggesting the risk of a pullback is high. But seasonal influences are powerful witness yesterday’s recovery from early weakness so any pullback may be postponed until January.
Yesterday’s US market showed a softer tone than Monday with breadth mildly negative but volumes remained pre-holiday like and small-caps underperformed. Precious metal and energy related issues were aided by the recent strength in their underlying commodities.
Yesterday’s market action did nothing to change our view that the risks of a mild correction remain high. Upside participation has narrowed as has the new high list and volumes have been tepid as prices rise. Sentiment continues to be quite bullish.
The setup for a pullback would in our view be the following: SPX breaking 1251 sees 1233, DJIA breaking 11519 sees 11421, NASDAQ Composite breaking 2645 sees 2613, NDX breaking 2209 sees 2197 and Russell 2000 breaking 785 sees 768.
NBL announces new offshore discovery. RBCM ups CRNT. DARA announces $4M offering. CNBC’s Fast Money positive on IM. RNOW upgraded to OW at PIPR.
S&P 500 PreMarket 8:30am (last/% change prior close/volume):
Best Quotes: Hedgeye…