Prices had dipped after this week’s policy meeting of the US Federal Reserve, where the central bank forecast a slower pace of monetary easing in 2025. The two crude oil benchmarks, West Texas Intermediate on the New York Mercantile Exchange and Brent on the Intercontinental Exchange, have been trading in a narrow range over the last couple of months. Prices have struggled to break out of $68-$72 per barrel range for WTI, and $71-$75 a barrel for Brent. “Crude oil sold off in the aftermath of the Fed’s announcement and the release of its December Summary of Economic Projections,” Morrison added.  But it was as much a reaction to general investor sentiment elsewhere, which was itself a kneejerk reaction to the Fed’s stating the obvious. In other words, nothing fundamental has changed.  OPEC+ output cuts provide a floor to pricesThough the Organization of the Petroleum Exporting Countries and allies have been adhering to steep voluntary production cuts, the reductions have not effectively boosted oil prices this year. Oil prices have struggled to sustain their gains from earlier this year and have since been trading in a narrow range. Eight members of the OPEC+ group, including Saudi Arabia and Russia, agreed to delay the unwinding of the 2.2 million barrels per day of voluntary output cuts from January 2025 till the end of March next year.The voluntary output cuts had been extended multiple times over the last six months, which was originally set to expire in June. The extensions were part of a strategy to support oil […]

Image Source: On Wednesday the FOMC cut interest rates by 1/4% as expected. Stocks sold off about 1/2%. Then Jay Powell’s press conference began. No one seemed to like what Powell was selling. Lots of new uncertainty. Fewer rate cuts. Wait and see. Well, all was said and done the “risk on” were battered, bruised, and pleading for mercy.While I had been discussing a mild and modest pullback I absolutely did not expect that kind of magnitude on the downside. As I wrote about and tweeted the other day, a few outlier studies suggested a quick shock to the downside, but not enough to change my outlook. Today is the final expiration of derivatives of the year. And it is the largest expiration of the year. I speculate that Wednesday afternoon’s plunge was exacerbated by this. I also won’t be surprised to see more volatility today.I have been saying that the seasonals turn positive by today. However, the decline does not look complete. I think the market needs to see a new low for the week before a good trading low is established that sets up a rally into 2025. Ideally, 5850 on the S&P 500 gets breached first, but it’s not absolute. That’s the upper horizontal blue line in the chart below.While my thesis has been for a mild pullback followed by a rally to new highs in January and then a deeper pullback, I may have to rethink that depending on how much lower stocks go here.On Wednesday we […]

Image source: The Federal Reserve’s policy committee met on Wednesday, December 18, 2024, and  by one-quarter of a percentage point. Long-term rates, such as on the 10-year Treasury bond, actually rose by 10 basis points (10 hundredths of a percent) because of the Fed’s own projections of few interest rate cuts in 2025. The inflation and employment outlook has changed significantly in the last few months. Business leaders should now anticipate very slow interest rate declines over the course of 2025. Fed Sees Solid Labor Market and Stubborn Inflation  The Fed officials entered their meeting having seen a solid labor market. The jobs count rose every month this year. Although the rate of growth declined over the year, it ended up right in line with population gains. Some other indicators have shifted from very positive to moderately positive. The rate of voluntary quits declined but now sits at its long-term average. The number of open positions reported by employers declined but remains above anything seen prior to 2021. And the best leading indicator of the job market, the number of initial claims for unemployment insurance, rose a little over the year but remains 40% lower than its long-run average. So the labor market is neither booming nor busting, but closer to strong than to weak.The Fed’s dual mandate is to keep employment strong and inflation low. But prices are still rising too fast relative to the Fed’s target, two percent as measured by the personal consumption expenditures price index excluding food and […]

Image Source: Micron Technology () recently issued a financial outlook that fell short of Wall Street’s expectations, causing significant shifts in its stock performance. The company projected its fiscal second-quarter revenue to be around $7.9 billion, which is below the anticipated $8.93 billion as per analyst consensus. Additionally, Micron forecasted  between $1.16 and $1.36, again trailing behind market predictions. Despite these disappointing projections, CEO Sanjay Mehrotra expressed optimism, noting that while consumer markets may face challenges in the short term, they are expected to recover in the latter half of the fiscal year. Micron Reports Notable Growth in First Quarter, Outlook Disappoints  Micron’s first-quarter results showcased notable achievements, with a reported profit of $1.87 billion, or $1.67 per share. This marks a significant recovery from the previous year’s loss of $1.23 billion, or $1.12 per share. The company’s revenue also saw an impressive 84% increase, reaching a record $8.71 billion. Although this figure was slightly below analysts’ estimates, it exceeded the midpoint of the company’s guidance. These results highlight Micron’s robust performance in the datacenter segment, which continues to drive growth amid fluctuating market conditions.Following the announcement of its financial outlook, Micron’s stock experienced a sharp decline, dropping over 13% in extended trading. Despite this setback, the stock had been performing well throughout 2024, with an overall increase of nearly 22% up to the day before the announcement. Analysts attributed the stock’s decline to the company’s revenue and EPS forecasts falling short of expectations, which dampened investor sentiment. However, the long-term outlook […]

Image Source: The broad stock market, as measured by indices such as the S&P 500, continues to probe new all-time highs. Last week, there was a positive catalyst in the form of the CPI number, which was benign enough to raise hopes for a further rate cut by the Fed. There is support at 6,010, with much stronger support at 5,870.As long as remains above 5,870, we will maintain a “core” bullish position. That number may have to be raised eventually, but that’s where the strong support is now.Equity-only put-call ratios just plunged to 2024 lows, but have begun to curl upwards over the past couple of days. This is one of the internal indicators that is beginning to show some weakness, even though SPX is trading near all-time highs.At this point, I have marked this curl upward as a questionable sell signal (“S?” on the chart), because it’s possible that this is yet another sideways move by the put-call ratio, such as we saw in October.Breadth is another internal measurement that is not keeping pace with SPX. Breadth oscillator sell signals were confirmed in the past week, and this is our only confirmed sell signal at this time. On many recent days, breadth has been negative even while SPX is up on the day.The has continued to trade at low levels. The trend of a VIX buy signal remains in place. That buy signal will remain in place until VIX closes above its 200-day Moving Average for two consecutive days.In […]