Market Lull Sets Foundation for Positive Action
The inability to build intraday momentum shows institutional liquidation is still taking place.
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A strong start on Monday turned into a mixed mess by the close.
Rotational action into the Magnificent Seven MAGS picked up steam, but Nvidia NVDA, Tesla TSLA, and a couple of others finished well off their intraday highs. Small caps IWM and DJIA lagged, and both closed around flat. There were some pockets of speculative action again, but it's very inconsistent action, and many of the names that did well last week disappointed on Monday.
There have been a number of sessions lately where the action deteriorated and closed weak. There haven't been big losses, but the inability to build intraday momentum is a sign that institutional liquidation is still taking place.
It is not very attractive action, but the good news is that there are still many oversold stocks near support that are in good shape technically for a bounce. Fourth-quarter earnings are fast approaching, and there will be substantial economic news flow when Donald Trump takes office on January 20. We are in a lull period, but because there was no Santa run-up, there is a good foundation for positive action as the market deals with some major news.
The main thing that is hurting the market right now is higher interest rates. Bonds are struggling, and expectations for rate cuts have declined to the point where only one cut is anticipated in 2025.
The market is pricing in a continuation of inflationary pressures, so a weak December jobs report later this week could turn into a positive one.
There are a lot of negatives already priced, which is making me optimistic about better bounce action in the weeks ahead.
Have a good evening. I'll see you tomorrow.
At the time of publication, DePorre was long NVDA.
