December 26th Market Overview

Happy Thursday everyone.

Not a ton of happenings or news in the market today as everyone’s digesting from the holidays. Market sentiment remains positive heading into the final trading days of 2024.

I hope everyone had a fantastic Holiday yesterday and got to eat some great food with people you care about.


Let's dig in...

Executive Summary

• Market breadth indicators suggest potential new all-time highs, with technical analysis pointing to a minimum 4% recovery from recent Fed-induced lows
  

• Historical data reveals the current 293-day streak without a 10% correction sits below the average of 331 days, indicating stability through year-end
  

• Santa Claus Rally momentum continues driving positive sentiment across major indices
  

• Mixed signals from employment data as continuing jobless claims reach highest levels since November 2021
  

Market Overview

Key Market Drivers

1. Santa Claus Rally effect providing seasonal tailwinds for market momentum
   

2. The Mag7 stocks continuing to drive significant portion of index gains since Election Day
   

3. Mixed labor market signals creating uncertainty around economic strength
   

4. Strong institutional buying emerging from oversold technical conditions

Stock Spotlight

• $AAPL: ▲ New all-time high at $325, market capitalization approaching $4 trillion milestone

• $KULR: ▲ 41% following strategic bitcoin treasury purchase announcement

• $TM: ▲ 8% after unveiling plans to double return on equity target to 20%

• $HMC: ▲ 18% amid automotive sector consolidation talks with Nissan

Big Names

• $HMC: Tracking for best weekly performance since 2008, leading industrial sector gains amid confirmed Nissan merger discussions

• $BA: Recovery momentum accelerating, driving broader market optimism in aerospace sector

• $MA: Holiday retail sales data shows 3.8% year-over-year growth, reinforcing consumer spending resilience

Industry Moves

• Automotive Sector Consolidation: $HMC, $NSANY, and Nissan merger discussions signaling potential industry reshaping

• Consumer Spending: $MA's holiday sales data indicating sustained consumer confidence despite economic headwinds

• Tech Giants: $AAPL's push toward $4 trillion valuation highlighting continued mega-cap technology strength

Sector Watch

Bond Market

Current focus on unemployment trends and their potential impact on monetary policy decisions heading into 2024.

Policy Watch

The market's current 293-day streak without a 10% correction provides important context for 2024 positioning. NDR research highlights that while the average duration between 10% corrections is 331 days, making our current streak not unusual, the rarity of consecutive years without such corrections is noteworthy. Historical data suggests elevated probability of increased volatility in 2024.

Supporting this analysis is the current state of market “bellwethers” - key institutional indicators that historically signal recession risk when trending lower. Currently, the majority of these bellwethers continue making higher highs, suggesting minimal recession risk in the next 12 months despite potential volatility ahead.

Technical Context

Following the recent Fed meeting selloff, technical analysis suggests a minimum 4% recovery based on historical precedent. This aligns with patterns observed throughout the bull run since 2022, where similar oversold conditions in breadth oscillators consistently led to swift recoveries of 4% or more.

What to Watch

1. Santa Claus Rally Development:

• Historical data shows 1.3% average returns during this period

• Market behavior in final five trading days crucial for maintaining momentu

1. Jobless Claims Trajectory:

• Continuing claims reaching November 2021 highs

• Potential indicator of labor market softening

• Impact on Fed policy decisions

2. Technical Resistance Levels:

• 6,105 target based on historical 4% minimum recoveries

• Breadth indicators suggesting momentum continuation

• Volume patterns during holiday-shortened week

3. Bellwether Indicators going into new presidential admin:

• Majority showing higher highs

• Historical correlation with recession probability

P.S. 

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Happy Holidays 🙂

- John