First Call

First Call December 13, 2023

Dec 13, 2023

Thomas Thornton

  • S&P futures up 0.2% and Nasdaq futures are up 0.3% in Wednesday morning trading after PPI data. US equities finished higher on Tuesday with upside leadership from the Magnificent Seven group, other pockets of tech, airlines, biotech and select financials while it was another day with Russell weakness despite overall negative market breadth. Treasuries firmer across the curve with rates up ~3bps after PPI data. Dollar index up 0.1%. Gold up 0.25%. Bitcoin is flat. WTI crude is up 0.9%. I will be focused on Energy opportunities on the Mid Morning Note.
  • Equity bullish sentiment is now firmly in the extreme zone >80%. A lot of pending DeMark daily sell Countdown 13’s on indexes and an increasing number of sell Countdown 13’s on individual stocks within the S&P. Three measures of equity market risk below.
  • FOMC decision, updated dot plot and Powell press conference the key areas of focus for today. With Fed widely expected to leave rates unchanged, focus will be on the extent of the 2024 easing in the dot plot and whether Powell pushes back against a market currently pricing in 100 bp+ of easing next year. PPI the highlight on the US economic calendar this morning. A flat headline reading matching consensus and a 0.0 reading in the core measure vs. 0.2, YoY core comes in cooler at 2.0% vs the previous month’s 2.3%. Follows what was deemed a largely in-line CPI report on Tuesday.
  • I will have a short note following Powell’s press conference late today.
  • Path of least resistance for risk assets has remained higher on the back of the meaningful FCI easing driven by the intertwined disinflation, peak Fed/Fed pivot and soft-landing narratives. Stable 2024 earnings estimates and seasonality also mentioned as supportive, along with recent batch of corporate commentary highlighting a still fairly resilient US consumer. At the same time, still concerns about overbought conditions, DeMark exhaustion signals, extreme bullish sentiment following the outsized November rally, the lagged effects of Fed tightening, higher-for-longer Fed, macro risks to earnings/margins and a dampened positioning tailwind (and downside convexity now surrounding systematic longs).
  • TSLA in the headlines regarding loss of consumer tax credits for some Model 3 vehicles and recall of 2M+ vehicles for autopilot-related issue. PFE down big after issuing weaker-than-expected FY24 guidance. LUV guided Q4 unit revenues to the better end of its prior range and had fairly upbeat demand commentary, in line with what has been heard from other airlines as of late. TTWO up on news that it will join the Nasdaq 100. REKR is doing a call tomorrow at 9am ET 877-407-8037 regarding the closing of the revenue backed bond offering that will be used to deploy their systems. This is a positive and fills a need for capital for system deployment. I have heard PCT plant restart is going to plan.
  • Key Upgrades/Downgrades: LVMH Moet Hennessy Louis Vuitton downgraded to neutral from overweight at JPMorgan. Morgan Stanley upgrades ALLY, COF; downgrades BFH; revises target on AXP, DFS, NAVI, others; Consumer Finance sector upgraded. Microsoft initiated buy at Truist. Roblox initiated overweight at Wells Fargo Securities. Ferrari cut at HSBC.

market snapshot

economic reports today – post ppi data

premarket trading


S&P and Nasdaq bullish sentiment are now both in the extreme zone >80%.

In the last two years moves above 80% have seen market tops shortly after peak readings.

Bond bullish sentiment has bond sentiment at the elevated zone 70%

Currency bullish sentiment with a decrease with US Dollar sentiment and uptick with crosses.

Commodity bullish sentiment shows Crude sentiment making another new low. Natural Gas under 10%. Gold and Silver continued lower again. I will be focused on Mid Morning with energy markets and long opportunities.

three measures of potential equity market risk ahead with exhaustion

All three of these measures have been correlated with equity markets and is a risk for equity markets going forward.

VIX futures with new DeMark Sequential and Combo 13’s

CDX High Yield Credit Spreads with new DeMark Sequential and Combo 13’s

Bloomberg US Financial Conditions and GS US Financial Conditions with DeMark Countdown 13’s. Conditions are too lose and is a risk for the Fed’s inflation fight.

us markets

S&P futures 60-minute tactical time frame in upside wave 5 with Sequential sell Countdown 13 yesterday stalling last 4 days of stair step gains.

S&P futures daily grinding higher with Sequential on day 7 of 13. Now trading at 4700 which is higher than many strategists 2024 year end targets. RSI is at 77 and overbought again.

Nasdaq 100 60 minute tactical time frame stair step in the last 4 days with new Combo 13 in upside wave 5.

Nasdaq 100 futures daily now on day 11 of 13 with Sequential. RSI back in overbought zone.

Extra charts we’re watching

US Dollar Index daily with resistance at 104ish.

US 10-Year Yield backing off again small ahead of the PPI and Fed meeting.

Bitcoin Daily down small early today while holding the 20 day at 40,500 with big round number ~40k likely what people will be watching

DeMark Observations – Euro Stoxx 600