Closing Breadth

Sectors

Nasdaq 100 Heat Map

S&P 500 Heat Map

Thanks for reading my Diary today, all week and for the last 28 years.

Enjoy the weekend.

Be safe.

Wolf Street howls about government job losses.

Why would the oil executives give anything but lip service to the Trump Administration in so far as investing $100s of billions in Venezuela (over a decade or more) given that the Administration could change in 2 1/2 years?

And I would love to hear what subscribers think!

(QQQ) s are now +$6.81. I'm taking a small short call position.

* A stock is not the same as a company

* The share-price performance of McDonald's (1972-1980) could provide an important lesson to today's bulls...

"In the 1970s, when I was heading Putnam Investments' Market Analysis Department, the market started a correction. Happily, I had anticipated it.

Some of the perma bull money managers, generally skeptical of technical analysis in the first place, were annoyed that the market was going down as I had predicted. They started coming into my office daily: "Is it time to buy yet?"

"Not yet" I said.

This went on day after day as the market kept going down. I got tired of saying "Not yet" over and over again. Finally I just shrugged my shoulders and said, "When the time comes to buy, you won't want to.""

- Wally Deemer, Introduction to his new book When the Time Comes to Buy You Won't Want To (Volume II)

On Thursday I wrote that the business media routinely simplifies a complex investment mosaic. For example, in interviewing strategists who made a 2026 S&P price target, some talking heads foolishly reduced the calculus of forecasted returns as to be a function of S&P profit growth coupled with a P/E "adjustment"' (down or up over the full year).

Investors Don't Buy Companies, They Buy Stocks

The investment mosaic is so much more complicated — as Wally Deemer's example of McDonald's'  (MCD)  share price performance during and after the collapse of The Nifty Fifty era (1972-1980) shows.

During that eight-year period, McDonald's share price ignored the extraordinary +25% per year compounded EPS growth. Instead its P/E ratio dropped from 75x to only 9x and its share price declined by -50%! 

"The McDonald's' saga is discussed at much greater length in Deemer on Financial Analysis - including the incredible tale of how Putnam bought the stock at its high in late 1972 -early 1973 and then sold it at its low in 1980. That selling kept me from recommending McDonald's, as I wanted to, when I was the special guest on Wall $treet Week on February 29, 1980.... I 've treasured the interoffice memo that follows the chart ever since."

- Wally Deemer, When The Time Comes to Buy You Won't Want To (Volume II) 

Here is a memo from Wally in 1980:

And here is the MCD chart from the 1970s:

Bottom Line

Perhaps 2026 is 1972 — when a top was made when "everyone was all in."

When the time comes to sell, you won't want to.

With S&P cash +43 handles and the S&P at an all-time high I am more aggressively shorting SPY calls.

Short  (GRNY)  S  (JOET)  S

With S&P cash +15 handles I am adding to my short  (SPY)  calls.

Reshorted  (ARKK)  this morning.

From Peter Boockvar

Jobs data rundown

December payrolls rose by 50k, below the forecast of up 70k and the two prior months were revised down by a total of 76k. The private sector added just 37k in the month vs the estimate of 75k. The household survey saw a job gain of 232k and combined with a drop in the labor force of 46k, the unemployment rate fell one tenth to 4.4% after touching the highest since 2021. The all in U6 unemployment rate was 8.4%, down 3 tenths m/o/m after the 6 tenths rise in November.

Health/social assistance and leisure and hospitality continue to drive most of the job growth with the former adding 39k and the latter hiring a net 47k. There was net job losses elsewhere as total services hiring was 58k. Retail lost 25k, transportation/warehouse fell by 7k, professional/business services dropped by 9k. There was zero job growth in information and financial services added 7k.

On the goods side, manufacturing lost another 8k jobs, construction shed 11k after rising by 22k in the month before. Mining fell by 2k.

Hours worked fell to 34.2 which is just .1 of an hr from matching the lowest since 2010 and that includes Covid. A drop in manufacturing hours to 39.9 from 40.1 was the main reason. The participation rate fell one tenth to 62.4% but held at 83.8% for the 25-54 yr old cohort which is the highest since August 2024. Average hourly earnings rose .3% m/o/m as expected but November was revised up by one tenth to a 2 tenths gain. Combining hours and hourly earnings puts weekly earnings up 3.8% y/o/y and flat vs November but October was up by .5% and September by .4% m/o/m.

Bottom line, smoothing out the monthly noise and taking out the government (with the shutdown influence), private sector job gains over the past three months has averaged 29k vs the 6 month average of 43k, the 2025 average of 61k and vs the 2024 average of 130k. A clear deceleration and we know the only area left of notable job gains are in healthcare and leisure/hospitality.

The Treasury market is little changed post data. The 2 yr yield at 3.51% is exactly where it was at 8:29am est. The 10 yr yield at 4.18% is down 1 bp while the 30 yr yield is unchanged at 4.85%.

What this means for the Fed? Not much. I think Jay Powell is done cutting unless the inflation further decelerates and/or the unemployment jumps before he leaves in May.

U6 Unemployment Rate

Hours worked

I have converted my short  (SPY)  common into short calls.

I moved to medium-sized short  (SPY)  at $692.12.

Fed Speakers

10 a.m.: Fed Bank of Minneapolis President Kashkari (Voter) gives welcome remarks and participates in fireside chat before virtual2026 Regional Economic Conditions Conference hosted by the Federal Reserve Bank of Minneapolis, Minneapolis, MN (Other details TBA. Event information: link.

1:35 p.m.: Fed Bank of Richmond President Barkin(Non-Voter) will speak at the Maryland Bankers Association First Friday Economic Outlook Forum, Linthicum Heights, MD (Text (repeat of Jan. 6th), audi-ence Q&A expected) Info link.

* Russell strong, Nasdaq weak

* Investors frantically moving from one sector to another...

As I recently observed, the market is behaving casino-like in the first few days of the new year. 

Investor sentiment is getting frothy. Investors Intelligence poll is at 56.6% Bulls, 17% Bears = 39.6%, or in the 90th percentile since 1972. Historically, extreme optimism leads to softer forward returns (especially over 1-13 weeks): 

And the S&P Short Range Oscillator grows more overbought (at almost 3.00%).

Traders and investors seem to be splashing around in one big bathtub (I am waiting for the water to fall out of the sides of the tub!).

* The Russell Index is crowing.  (IWM)  relative to Nasdaq is off to its second best start of the year since 1992:

* Semis are finally retesting:

 * Biotech is overbought:

* Consumer staples may have finally revived:

Revenge of the Nerds

There's been an abrupt change in market leadership consistent with my high-tech cautiousness/concerns (expressed in this morning's chart) — with Staples ( (PG) , (KMB) and (PEP) ) leading the pack.

Position: Long PEP (VL), KMB (M) and PG (S); Short PEP calls (S)

By Doug Kass Jan 8, 2026 2:37 PM EST

It's a strange market brew. 

Bonus — Here are some great links:

Three Sectors of Opportunity

The First Breakout of the Year

Do You Own Too Much Nvidia?

Broadening Everywhere

The Sector That’s About to Surprise Everyone

Wolf Steet howls about the Fed's balance sheet.

Well, I won't back down

No, I won't back down

You could stand me up at the gates of Hell

But I won't back down

No, I'll stand my ground

Won't be turned around

And I'll keep this world from draggin' me down

Gonna stand my ground

And I won't back down

- Tom Petty and the Heartbreakers, I Won't Back Down

Q won't back down:

I am shorting the S&P in premarket trading.

*  (SPY)  $690.55

From last evening:

Back Shorting the Indices

A bit after 6 PM I am re-shorting (SPY) at $690.59.

I am a scale seller on strength tonite.

Position: Short SPY (S)

By Doug Kass Jan 8, 2026 6:26 PM EST

The S&P Short Range Oscillator stands at 2.68% vs. 1.19%. That is an ever growing overbought.

Moreover the Investors Intelligence Bull/Bear ratio is now in the 90th percentile (over the last 53 years):