Thursday, January 20, 2022

Morning Note: The Age Old Problem

Clearly, as US equities have staged their latest, albeit minor, descent, the rip-sellers have overwhelmed the dip-buyers. Early in today's session US equities happen to be ripping higher. We'll see if this one holds. 

Considering the volume, the breadth (all, among the major sectors, but energy, materials and banks are on the rise) and the look of the 60-minute chart (see below), I'm thinking the S&P has a shot at finishing in the green. But of course we won't be holding our breaths on short-term market dynamics.

Regular video watchers will recognize the bullish setup captured by the shaded areas below:

Jobless claims came in higher than expected, and, yes, that seemed to spark a positive reaction in both equities (tech especially) and in treasuries (yield rally quelled a bit). Given literally all of the reports across US industry, I don't know that I'd remotely just yet call a slackening of the labor market. Here's economist Peter Boockvar on today's release:

"Initial jobless claims jumped to 286k from 231k in the week prior and that was well worse than the estimate of 225k. Smoothing out the influence of the holidays, the 4 week average rose by 20k to 231k. Delayed by a week, continuing claims totaled 1.635mm, about 70k more than expected and up from 1.55mm in the week prior.

Bottom line, the trip to the 200k level in December was a tease and I wish I can quantify the influence of omicron on this data today, especially for the leisure and hospitality sector. I’m still hearing too many stories of labor market disruptions because people are calling in sick. Expect February to normalize as the omicron numbers will soon be collapsing."

Asian equities leaned green overnight, with 9 of the 16 markets we track closing higher.

Same goes for Europe so far this morning, with 11 of the 19 bourses we follow trading up as I type.

US major averages are green across the board: Dow up 325 points (0.94%), SP500 up 1.23%, SP500 Equal Weight up 0.92%, Nasdaq 100 up 1.80%, Nasdaq Comp up 1.86%, Russell 2000 up 1.07%.

The VIX sits at 22.03, down 7.63%.

Oil futures are up 0.15%, gold's up 0.15%, silver's up 1.50%, copper futures are up 1.64% and the ag complex is up 0.05%.

The 10-year treasury is down (yield up) and the dollar up 0.06%. 

Led by solar stocks, carbon credits, wind stocks, base metals futures and emerging market equities -- but dragged by AMD (chip maker), Viacom/CBS, uranium miners, base metals miners and AT&T -- our core allocation is up 0.55% to start the day.

The age old problem when it comes to research, and other things in life, forever lies in the mind of the analyst:

“I think what is important is how we approach a problem. In what manner we approach a problem. Whether it is a prejudice, bias, or from a fixed point of view, the question will be directed or shaped by our motive."

--J. Krishnamurti

Have a great day!

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