/ January 07
Daily Briefing
*The stock market started yesterday’s session in rally mode, as investors are slowly coming out of hibernation and recognizing the opportunity presented by current prices; despite the strong start, buying eventually faded by the close; the S&P 500 traded up as much as +1.3% at its session high before closing +0.6% higher than Friday; the Nasdaq Composite closed +1.2% higher while the Dow Jones Industrial Average (-0.1%) and Russell 2000 (-0.1%) closed with declines;
*The S&P 500 and Nasdaq Composite benefitted from buying interest in the mega cap and chipmaker space, which also faded from initial levels; NVIDIA (NVDA, +3.4%), which outperformed ahead of CEO Jensen Huang's keynote address at the Consumer Electronics Show (CES), traded up as much as 5.3% at its high;
*SPY managed to clear critical resistance at the 50-DMA, potentially turning this level into technical support going further; in our view, this acts as a good short term base to build further gains on, especially as the MACD signal appears to have bottomed and is moving higher; real resistance stands just above, at $602, near the recent reflexive rally highs and M-trend level; downside is quite large, at the 200-DMA area ($547 - $553, -8%);
*The MACD signal looks to have bottomed and is turning up again; a successful BUY crossover would occur from a fairly low reading, and should (in theory) lead to a decent rally;
*On that note, NVIDIA's outperformance was also linked to AI enthusiasm after Foxconn reported a 15% yr/yr increase in record Q4 revenues; this enthusiasm was a driving factor in the initial move higher for the broader equity market, along with some technical support after the S&P 500 opened above its 50-day moving average (5,948) and maintained a posture above that level through the entire session;
*Notably, our Enterprise strategy has increased risk exposure, from a fairly defensive ~40% to 84% at today’s close;
*Enterprise is probably seeing what we are seeing in that sentiment is still fairly depressed, while dollar transaction volume is simultaneously low - a bullish technical set-up;
*Despite this, price action in the Treasury market was worrisome for equities and led to a late-day retreat; presumably, this came about as President-elect Trump said in a Truth Social Post that it was wrong of the Washington Post to suggest his tariff policy would be pared back;
*The 10-yr yield, which moved as low as 4.58% and as high as 4.64%, settled at 4.61% in response;
*Factory orders decreased 0.4% month-over-month in November (vs. consensus -0.3%) following an upwardly revised 0.5% increase (from 0.2%) in October; excluding transportation, factory orders rose 0.2% on the heels of a 0.2% increase in October; shipments of manufactured goods edged 0.1% higher in November following a 0.2% decline in October;
*The key takeaway from the report is that the weakness in factory orders was concentrated in the volatile transportation equipment space; otherwise, there was a modest pickup in order activity;
*Seven S&P 500 sectors closed lower while four settled higher; the rate-sensitive utilities (XLU, -1.1%) and real estate (XLRE, -1.4%) sectors logged the largest losses; the communication services (XLC, +2.1%) and information technology (XLK, +1.4%) sectors closed at the top of the leaderboard, reflecting leadership from mega cap and chipmaker components;
*TLT closed -0.45% lower and remains in technical un-investible territory, now clearly breaking the series of higher lows that had been established since late 2023; we will completely close this position in the Sigma Portfolio as a consequence;