NFPs Profit Bonanza

S&P 500 went into the data release on a weak note, and little wonder given that bonds couldn‘t catch a bid. The immediate figure aftermath (true, above expectations, but prior month was tellingly revised lower, from 150K to 105K only – and this Friday‘s participation rate declined to 65.4% and government payrolls rose to 52K while manufacturing ones declined to merely 6K), which if anything, rules out no landing thesis. And we‘re likely to see gradual deterioration in the real economy, first from corporate profits turning out overly optimistic for Q1 and especially Q2, then as regards the job market with unemployment to go for 4% as GDP growth goes to 1.2% in 2024.

But debt service and national debt would still keep rising as if without end, with current $34T seeing another $1T added in less than 90 days. Even if the Fed slowed down balance sheet runoff, they are in no mood to cut rates, but will be hard pressed to do so for Mar FOMC. The minutes release anyway provided for this disappointment, and yields are no more into retreating across the long and short end, with Jan rate cut odds being shelved quite for good.

That makes for a trading market, and the week just in couldn‘t confirm that more to clients‘ satisfaction – therefore the bonanza title as regards our intraday channel serving winners regularly and of course more gains for swing trading clients too, or the $71.20 long oil call made bringing them a fine entry on the long side. As regards gold, I warned about locking in profits too.

The clues had been there as Santa rally created negative divergences with prices reaching higher but oscillators making a lower high – therefore I tightened stop-loss to protect open gains so much on Jan 01.

Suffice to say that sectoral winners of 2024 won‘t be the repeat of XLK, XLC and XLY in 2023, and today‘s review brings a strong pick for this year.

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Let‘s move right into the charts (all courtesy of www.stockcharts.com) – today‘s full scale article contains 5 of them, featuring S&P 500, sectoral pick, credit markets, precious metals and oil.

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S&P 500 and Nasdaq Outlook

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4,765 again did the trick in capping upside progress (if you remember which level I talked as key first support midweek, it was 4,755 – threfore, I mean upper border of the range established in this context), and the S&P 500 is still bottoming without any evidence yet of a lasting rally ahead. Both Nasdaq and Russell 2000 don‘t present daily view of strength, and rotations can take the 500-strong index only so far. Advance-decline line of 242 provides no peak to speak of, and the same goes for the daily volume – the uptrend isn‘t ready to reassume.

What‘s the event this week to unsettle the apple cart? CPI of course that can raise question marks over the disinflation trend (beware of its shelter component and oil having found bottom, too) as that would feed into the Fed rate cuts deferred bets.

Credit Markets and USD

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Markets have clearly dialed back the rate cuts enthusiasm, and at the same time aren‘t yet worried about economic slowdown. Rates stabilizing in the current range of 15bp above would still provide for trading range in stocks, for limited downside in the near term there. Real assets again offer better appreciation possibilities than stocks – and are wiating for rate cut bets to come back into vogue sending the USD back down (103.50 is still a bridge too far, and would require spike in volatility), which of course though wouldn‘t happen before the nearest FOMC – I reiterate that 25bp cut in Mar is still most likely to happen.

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