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Stock Market Today: December 31st - January 4th, 2019

Discussion in 'Stock Market Today' started by bigbear0083, Dec 28, 2018.

  1. bigbear0083

    bigbear0083 Content Manager
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    Welcome Stockaholics to the trading week of December 31st!

    This past week saw the following moves in the S&P:
    [​IMG]


    Major Indices End of Week:
    [​IMG]
    [​IMG]


    Bird's Eye view of the Major Futures Markets on Friday:
    [​IMG]


    Economic Calendar for the Week Ahead:
    [​IMG]


    Sector Performance WTD, MTD, YTD:
    [​IMG]
    [​IMG]
    [​IMG]
    [​IMG]
    [​IMG]
    [​IMG]


    What to Watch in the Week Ahead:

    • Monday

    New Year's Eve
    Final trading day of 2018

    Regular stock market hours

    Bond market closes at 2 p.m. ET

    • Tuesday

    New Year's Day
    Markets closed

    • Wednesday

    9:45 a.m. Market PMI

    • Thursday

    Monthly vehicle sales

    8:15 a.m. ADP employment

    8:30 a.m. Jobless claims 10:00 a.m. ISM manufacturing

    • Friday

    8:00 a.m. Cleveland Fed President Loretta Mester

    8:30 a.m. Nonfarm payrolls

    9:45 a.m. Services PMI

    10:15 a.m. Atlanta Fed President Raphael Bostic at American Economic Association and Allied Science Association Meeting, Atlanta

    10:15 a.m. Fed Chair Jerome Powell at AEA meeting in joint discussion with former Fed Chair Janet Yellen and former Chair Ben Bernanke

    1:30 p.m. Richmond Fed President Tom Barkin at Maryland Bankers Association

    • Saturday

    8:00 a.m. New York Fed President John Williams at AEA

    10:15 a.m. Atlanta Fed's Bostic at AEA
     
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  2. bigbear0083

    bigbear0083 Content Manager
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    Stocks Soar Then Slide Following Epic Pension Buying Fake Out
    It almost went according to plan.

    In what was a relatively quiet market until 2pm suddenly the Dow Jones blasted higher, supported by a burst of massive buy programs, when as noted earlier we observed the highest TICK print on record, and at 2:39pm, the number of NYSE upticks surpassed downticks by a record 1,775...

    [​IMG]


    ... and not just one massive buy program, but we got no less than three 1,650+ TICK prints in a space of 10 minutes as one trader tried to fake the arrival of a pension bid as other traders scrambled to figure out if pension buying had indeed returned for the third day in a row.

    [​IMG]



    This was good enough to fool the algos and mom and pop investors who were trading along, and successfully pushed the Dow Jones more than 200 points higher around 3pm but... there was just one problem because whoever was desperate to pretend they were a pension fund forgot to sell bonds and with the S&P trading at session highs, treasurys remained unchanged...

    [​IMG]

    ...in stark contrast with yesterday's true pension reallocation, which saw TSY yields spike as stocks jumped.

    [​IMG]


    And once traders realized that this was just one giant fake out meant to force stops and squeeze shorts, they started buying... bonds, with the 10Y yield sliding as low as 2.7146%, the lowest since February 2018. And as the bond were bid, stocks tumbled losing all intraday gains, and turning negative.

    [​IMG]

    Meanwhile, as it became clear that no real pension bid was coming, the selling returned, and stocks closed near session lows, with the Dow losing almost 400 points of gains and briefly dropping below 23,000 although the selloff was far more controlled than the liquidation puke observed on Monday.

    [​IMG]

    At the end of the day, the Dow was the biggest loser, the S&P was modestly lower, while the Nasdaq closed just green thanks to a strong bid for the FANGs:

    [​IMG]

    Back to Treasurys, where buying across the curve was not uniform, and while 30Y yields were almost unchanged, the short end crumbled, resulting in a sharp curve steepening.

    [​IMG]

    Another confirmation that there was no real pension bid today, the dollar not only did not slide as it did yesterday, but was mostly unchanged if slightly higher on the day.

    [​IMG]

    Meanwhile, despite the unchanged inventory print in today's DOE report (vs expectations of a 3+ MM drawdown) and yesterday's API inventory build, oil rose modestly cementing December's 11% plunge for the commodity, and the worst quarterly drop since 2014.

    [​IMG]

    With the dollar going nowhere, gold and silver were mostly unchanged, and as a result have enjoyed one of the best months for the precious metals in years.

    [​IMG]

    Meanwhile credit, as we noted earlier, did not buy either the Wednesday record point surge, or Thursday's biggest intraday reversal since 2010, and instead investment-grade bond spreads widened 3 basis points to 171bps, having widened every day since Dec. 14 and most trading sessions this quarter while junk bond also dropped as the high yield index widened 1 basis point to 531 basis points, the highest level since Aug. 4, 2016.

    [​IMG]

    The average junk bond yield now above 8% for the first time since April 2016.

    [​IMG]

    Finally, in what may be the biggest unspoken story of the day, the LSTA leveraged loan index tumbled to new multi-year lows: as shown below, the price of leveraged loans has been a one way train down, which together with another week of record outflows from the loan market, is the most ominous signal because should the loan market freeze up, 2019 will be nothing short of a credit disaster as billions of M&A and LBO deals lock up.

    [​IMG]
     
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  3. bigbear0083

    bigbear0083 Content Manager
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    Here are the percentage changes for the major indices for WTD, MTD, QTD & YTD in 2018-
    [​IMG]
    [​IMG]

    S&P sectors for the past week-
    [​IMG]
     
  4. bigbear0083

    bigbear0083 Content Manager
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    January Almanac: Top Month in Pre-Election Years
    [​IMG]
    January has quite a legendary reputation on Wall Street as an influx of cash from yearend bonuses and annual allocations typically propels stocks higher. January ranks #1 for NASDAQ (since 1971), but sixth on the S&P 500 and DJIA since 1950. It is the end of the best three-month span and holds a full docket of indicators and seasonalities.

    DJIA and S&P rankings did slip from 2000 to 2016 as both indices suffered losses in ten of those nineteen Januarys with three in a row, 2008, 2009 and 2010. January 2009 has the dubious honor of being the worst January on record for DJIA (-8.8%) and S&P 500 (-8.6%) since 1901 and 1931 respectively. Despite late-month weakness in 2018, S&P 500 still gained 5.6% and DJIA jumped 5.8%.

    In pre-election years, Januarys have been downright stellar ranking #1 for S&P 500, NASDAQ, Russell 1000 and Russell 2000 and #2 for DJIA. Average gains range from 2.9% by Russell 1000 to a whopping 6.6% for NASDAQ.
    [​IMG]
    Not a subscriber? Sign up today for a Free 7-Day Trial to Almanac Investorto continue reading our latest market analysis and trading recommendations and get a full run down of seasonal tendencies that occur throughout each month of the year in an easy-to-read calendar graphic with important economic release dates highlighted, Daily Market Probability Index bullish and bearish days, market trends around options expiration and holidays. In addition, the Monthly Vital Statistics Table combines stats for the Dow, S&P 500, NASDAQ, Russell 1000 and Russell 2000 and puts them all in a single location available at the click of a mouse.

    S&P 500 US Stock Market Snapshot — 2018
    Dec 27, 2018

    Below is a snapshot of the S&P 500’s performance in 2018. After a huge gain of 5.62% in January, the index stumbled in February and March before setting out on a six-month winning streak from April through September. Once October rolled around, though, you-know-what hit the fan. A 7% drop in October provided a jolt to the senses for investors. In November, the S&P saw a small gain, but then the bottom completely fell out in December with a 12.5% decline (thus far).

    In the second chart below, we show the daily percentage change for the S&P throughout the year. You can clearly see that during the two downturns (in Feb/Mar and Oct-Dec), volatility picked up significantly, while it was smooth sailing during the spring and summer.

    Finally, in the third chart, we show the S&P’s average change by weekday this year. As shown, Monday has been the worst day of the week this year with an average decline of 0.13%. Friday has been the second worst, while Thursday ranks third worst. Tuesday and Wednesday both averaged gains. Be sure to read our 2019 Bespoke Report for a more in-depth recap of the year and our expectations on the year ahead.

    [​IMG]

    Putting an Extremely Volatile Market in Perspective
    Posted by lplresearch

    On Monday, the S&P 500 Index came about as close as possible to the technical definition of a bear market without officially registering one (defined as a 20% or larger decline based on closing prices). Enduring these sharp declines can be unnerving for any investor, making it difficult to avoid the urge to react and sell at market lows. To hopefully provide some reassurance and perspective, we offer some historical context about this recent volatility and the relationship between bear markets and recessions.

    Going back to World War II, there have been 14 bear markets, with 7 of them accompanied by a U.S. economic recession and 7 during economic expansions. The recessionary bear markets were quite painful for stock investors, with an average S&P 500 decline of 37%.

    Bear Markets Occurring Without a Recession

    A look at the non-recessionary bears is a bit more comforting. Three of the past four non-recessionary bears ended at 19% corrections. The fourth, a 34% decline in 1987, occurred under very different conditions. The S&P 500 was up more than 40% year to date in August 1987, compared with gains just below 10% through the September 20 high this year, while long-term interest rates shot up from 6% to 9% in 1987. Including 1987 and the four other non-recessionary bears before then (1947, 1962, 1966, and 1978), the average non-recessionary bear market drop is 24%.

    Bottom line: U.S. stocks have endured swifter, shallower bear markets when the economy isn’t in a recession. When the U.S. economy is growing as it is now, and as we expect it in 2019*, those declines have tended to stop at around 20%.

    What Does That Mean for Today?

    Most relevant to our investment decisions today, it is important to consider that stocks have historically recovered quite a bit faster from non-recessionary bear markets than from those that are accompanied by a recession, as shown in the LPL Chart of the Day. According to LPL Chief Investment Strategist John Lynch, “In bear markets accompanied by recessions, the S&P 500 has taken an average of about 34 months to recover its prior peak. In bear markets without recessions, the S&P 500’s time to recover its prior peak is shortened to only about 11 months. In the last two bear markets without recessions, the S&P 500 recovered in 3 months (1998) and 5 months (2011).”

    [​IMG]

    We understand that in this volatile market environment, it can be difficult to stick to your long-term investment plan. We hope this historical perspective helps in that regard. Over the long term, stocks have proven to be quite resilient as the economy expands and companies adapt, innovate, and drive profit growth over time. We encourage investors to remain focused on the many fundamentals supporting growth in the economy and corporate profits, and stick with your investing strategy.

    Midterm Correction Sets Stage for 2019
    [​IMG]
    Tax cut legislation may have held off the usual midterm year correction until much later in the year, pushing the potential low toward yearend and possibly into 2019. But this bodes well for pre-election year 2019. If the market had kept chugging along to new highs throughout 2018, gains in 2019 would have been harder to come by.

    Now that we have had a sizeable correction and possibly a bit more downside in store, 2019 is setting up better than it was at the beginning of October. If the market can find support soon or early in 2019, the Fed comes to its senses and the folks in D.C. can cut some deals more normal pre-election year gains can be expected.

    The third year of the 4-year presidential election cycle is still the strongest and now with the market hitting new 52-week lows the stage is set. For perspective have a look at the average 1-year seasonal patterns for the Dow, S&P 500 and NASDAQ in the chart below.
    [​IMG]
     
  5. bigbear0083

    bigbear0083 Content Manager
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    Stock Market Analysis Video for December 28th, 2018
    Video from AlphaTrends Brian Shannon


    ShadowTrader Video Weekly 12.30.18 - Dow +1,000 Don't be fooled!
    Video from ShadowTrader Peter Reznicek
     
  6. bigbear0083

    bigbear0083 Content Manager
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    Here are the current major indices pullback/correction levels from ATHs as of week ending 12.28.18-
    [​IMG]

    Here is also the pullback/correction levels from current prices-
    [​IMG]

    ...and here are the rally levels from current prices-
    [​IMG]
     
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  7. bigbear0083

    bigbear0083 Content Manager
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    [​IMG]

    Here are the upcoming IPO's for this week-

    (NONE.)
     
  8. bigbear0083

    bigbear0083 Content Manager
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    Stockaholics come join us on our stock market competitions for this upcoming trading week ahead!-

    ========================================================================================================
    ========================================================================================================

    It would be pretty sweet to see some of you join us and participate on these!

    I hope you all have a fantastic weekend ahead! :cool:
     
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  9. bigbear0083

    bigbear0083 Content Manager
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    [​IMG]

    Here are the most anticipated ERs for this upcoming week ahead (I'll also have the weekly earnings calendar posted in here as well once it's out)

    ***Check mark next to the stock symbols denotes confirmed earnings release date & time***

    Monday 12.31.18 Before Market Open:
    NONE.

    Monday 12.31.18 After Market Close:
    NONE.

    Tuesday 1.1.19 Before Market Open:
    NONE. (MARKETS CLOSED IN OBSERVANCE OF NEW YEAR'S DAY!)

    Tuesday 1.1.19 After Market Close:
    NONE. (MARKETS CLOSED IN OBSERVANCE OF NEW YEAR'S DAY!)

    Wednesday 1.2.19 Before Market Open:
    NONE.

    Wednesday 1.2.19 After Market Close:
    NONE.

    Thursday 1.3.19 Before Market Open:
    [​IMG]

    Thursday 1.3.19 After Market Close:
    [​IMG]

    Friday 1.4.19 Before Market Open:
    [​IMG]

    Friday 1.4.19 After Market Close:
    NONE.
     
  10. bigbear0083

    bigbear0083 Content Manager
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    Here is the CME Globex futures holiday schedule for the upcoming New Year's Day holiday this week-

    [​IMG]
     
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  11. bigbear0083

    bigbear0083 Content Manager
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  12. Steven_Burt

    Steven_Burt Well-Known Member

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    Excellent kick off as always CY - We really appreciate all your efforts man!

    Just an observation, but on these holiday shortened weeks low float stocks can really move. Might be worth it to keep a few on watch this week.

    Happy New Year Everyone! 2019 is going to be awesome!!
     
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  13. bigbear0083

    bigbear0083 Content Manager
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    ^^ Thank you for that Steve! Gotta admit but that really fuels the fire right there. :cool:

    I know you have always been very appreciative of the work I do here. You rock!

    HNY to everyone on the forums! Here's to an amazing 2019 to all! :D

    [​IMG]
     
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  14. brucekeller

    brucekeller Member

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    Feels like this will be a pump and dump into Friday. Powell's speech is on Friday and then those negotiations begin next week. Seems like a good setup for the next real surge since Wednesday was kind of a BS volume day despite the breadth etc.
     
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  15. StockJock-e

    StockJock-e Brew Master
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    After this sell off, I think a few more days into Jan before we can start feeling comfortable with some change in direction
     
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  16. stock1234

    stock1234 2017 Stockaholics Contest Winner

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    Will be interesting to see how the market starts this Wednesday in 2019, we haven’t finished the year in red for a long time :D

    Market really pulling back from the HOD :eek: Treasury yields down and the yen is up, so it doesn’t seem like a risk on environment despite the stock market is up a little bit
     
  17. anotherdevilsadvocate

    anotherdevilsadvocate Well-Known Member

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    I'm looking at a pattern in the VIX, it goes down today and Wednesday, then on the 3rd it starts rising.
     
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  18. stock1234

    stock1234 2017 Stockaholics Contest Winner

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    Anyone has any stats on how January usually does after a down year? :D
     
  19. anotherdevilsadvocate

    anotherdevilsadvocate Well-Known Member

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    Dang, 10-year down pretty big today. Just keeps on falling
    [​IMG]
     
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  20. bigbear0083

    bigbear0083 Content Manager
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    Phew! It has been a year!

    I just want to quickly take this time out to thank all of you for another amazing year on the forums!

    many, Many, MANY thanks goes out to each of you who has contributed to this board in 2018. You guys rock!

    Here's to a very happy, healthy, and prosperous New Year to all!

    Let's do this all over again in 2019 shall we? :D

    Enjoy the day off tomorrow...then it's back to business as usual from Wednesday. ;)

    [​IMG]
     
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