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I got a call from my good pal Guy Adami near the close.

He thinks today might end of being a fulcrum day for the markets -- as there were signs that the Goldilocks fairy tale and book might have been closed for now.

We will see -- it might be wishful thinking, but I can wish, can't I?

As Grandma Koufax used to say, "If wishes were horses then beggars would ride."

Thanks for reading my Diary today.

Enjoy the evening.

Be safe.

9 minutes ago

Bearish engulfing updates

Currently complete if holds SPY

Almost there (QQQ) (NVDA)

Likely not getting there (AAPL) (META)

4 minutes ago

Spy was the only one. But Spy is a big deal. Bet Walter comments on it.

9 minutes ago

Gap down open tomorrow leaving an island?

6 minutes ago

Which index? QQQ? maybe. It did not complete the bearish engulfing reversal. Very close.

At 2:21 pm:

* Recession alert...

See movers group at high end of intraday range column along with (XLU) ETF intraday graph.

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Randy

* Exxon Mobil forecasts increases in project spending, oil output

* Project spending to rise 5% per year, excluding acquisition

* Share buybacks to hit $20 billion annually

Targeting profit increase of $14 billion through 2027

• Exxon Mobil(XOM) will target annual project spending of between $22 billion and $27 billion through 2027, the oil major said in an update on Wednesday that largely continues existing spending and production goals.
• The largest U.S. oil producer laid out plans to boost spending on nascent lithium and low carbon businesses by 18% throughout 2027.
• Its presentation, however, left out details of projected gains from the $60 billion acquisition of Pioneer Natural Resources(PXD) that is expected be completed in the first half of 2024, and shares fell by more than 1% in morning trading.
• Company executives also said most profits from its push into energy transition businesses including carbon dioxide abatement and storage and lithium production would come after 2027. Profits from those units also will depend on government help through regulations and infrastructure.
• "All those things are coming together," said CEO Darren Woods. "But until they ultimately land, and we know what we've got" the outlook will remain "less certain."
• "Exxon will need to convince investors on the merits of the low-carbon spending from here," said Biraj Borkhataria, an equity analyst at RBC Capital in a note.
• The annual forecast is watched closely by investors for its spending and production targets. This year's outlook was keenly anticipated because of deals for Pioneer and carbon pipeline firm Denbury, both of which will underpin long-range targets.
• Exxon announced plans to buy Pioneer in October for nearly $60 billion in an all-stock deal, saying it plans to more than triple its production in the top U.S. shale field to 2 million barrels per day (bpd) by 2027. Denbury was a $4.9 billion acquisition to buttress its carbon business.
• Exxon's estimated production growth for next year excludes about 700,000 barrels per day (bpd) it would gain from the Pioneer acquisition. That deal would double Exxon's Permian shale oil and gas output to more than 1.3 million bpd, the company has said.

GOVERNMENT SUPPORT

• Exxon's spending outlook will raise outlays for its energy transition unit, called Low Carbon Solutions, to $20 billion between 2022 and 2027, from $17 billion. But the higher spending will require government support.
• "We need technology-neutral durable policy support, transparent carbon pricing and accounting, and ultimately, customer commitments to support increased investment," Woods said.
• Exxon will increase its share buybacks to $20 billion annually through 2025, from $17.5 billion currently, after the Pioneer merger closes, the company said. An ongoing divestment plan for its refining operations also will continue.
• Analysts said excluding any contributions from the Pioneer deal, the company's oil and gas targets were below expectations and its spending forecast higher than expected.
• Annual project expenditures could hit $32 billion by 2027, above market expectations, assuming an incremental $4-5 billion in spending on Pioneer's assets, RBC Capital said.
• Exxon projected earnings and cash flow to rise through 2027 by $14 billion on a combination of cost cutting, higher oil output from Guyana and U.S. shale and gains in its refining and chemicals business. The company is forecast to earn $37.2 billion this year, according to financial firm LSEG.
• Increase cash flow will come from higher earnings and a new $6 billion cost reduction target through the end of 2027. The company slashed project spending and overhead after suffering a historic $22 billion annual loss in 2020.

SHALE, GUYANA OIL GAINS Exxon forecasts production of 3.8 million barrels of oil equivalent per day (boepd) in 2024, from 3.7 million this year, as it bets on a lift from the Permian shale basin and Guyana. Spending on new projects will expand to between $23 billion and $25 billion next year.

The banks and financials look like they might have made an exhaustion peak over the short term.

The drop in yields, particularly on the ten-year, turned almost into a plunge and interestingly, it did not have the impact on the Magnificent Seven as it has had for weeks on end.

It is too early to tell, but there may be the early stages of a rethink about whether the drop in yields is beginning to indicate a weakening economy and that may separate or limit the inverse reaction we have gotten between stocks and yields.

The odd man out appears to be the Nasdaq as the high cap techs are showing that the divergence we just noted of the regional and community banks as well as the Russell now appear to be the beneficiaries.

We will continue to watch the yields, particularly the ten-year, but with a bit of a grain of salt and the question of the economy softening seems to be moving back on stage.

The other thing traders are concerned about is the S&P is nearing the presumed resistance at 4600 and will that be slowing things up.

The action of the balance of this week and all of next week will be watched carefully to see if the market seems to be moving into a transitionary phase after the rally begins to stall after last week's outstanding performance.

Luckily, the geopolitical headlines have not yet been of the kind to shake the equity markets.

We think the market will test its own internals and that is what we will be looking for.

While the equity bulls will worry about the resistance, they will also worry about the rally. It is one thing for it to ease back, but they can scarcely afford for the Dow and the Nasdaq go negative on them and/or, particularly to make lower lows?

We will get out the compass and protractor to see if we can develop those numbers.

In the meantime, stay safe.

Arthur

* At 11 am: 

- NYSE volume 156M shares, 10% above its one-month average 

- Nasdaq volume 1.54B shares, 17% above its one-month average

Breadth

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Biggest Movers

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Heat Map

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Tech

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Tech Sector (ETF - (XLK) ) is the first to go down:

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St. Joe (JOE) is trading well behind its homebuilding peers - I have been adding. 

I am placing the following stocks on my Best Ideas List: 

* (OXY) $57

* (CVX) $141.75

* (XOM) $99.89

On the opening weakness, I have moved from very small to medium-sized on (CVX) at $146.75, and from medium to large-sized on (XOM)  at $99.88

I also added to an already large (OXY) .

From Peter: 

ADP said the private sector added a net 103k jobs in November, 27k below expectations and October was revised down by 7k to 106k. The company size breakdown was mixed in terms of hiring/firing. The service sector hired a net 117k while the goods side lost 14k as jobs declined in manufacturing and construction.

Of particular note on the leisure and hospitality side, it seems that the multi year push to hire back people after the Covid lockdowns has been satiated. Jobs here fell by 7k. Job losses were also seen in professional/business services. Gains were seen in trade/transportation/utilities, information, financial activities and the usual job creator education/health services.

With respect to pay, there was a one tenth drop in the y/o/y gains for 'job stayers' and 'job changers' to 5.6% and 8.3% respectively. I'm really not sure about their calculations and how this squares up with the BLS average hourly earnings data or what we see from the quarterly employment cost index.

ADP said "Restaurants and hotels were the biggest job creators during the post pandemic recovery. But that boost is behind us, and the return to trend in leisure and hospitality suggest the economy as a whole will see more moderate hiring and wage growth in 2024."

Bottom line, the slowdown in hiring continues and is becoming more obvious as the 3 month ADP average for the private sector is now 99k vs the 6 month average of 208k, the 12 month average of 215k and the 2022 average of 306k. When I hear those who say 'soft landing' or even the word 'Goldilocks,' that is a moment in time. What I'm most focused on right now is the trajectory of activity and all I see is slowing in multiple places, including now the labor market.

Upside

-MLGO +65% (plans to establish a practice base to train graduate students for the university)
- (PHVS) +38% (primary endpoint met in positive top-line phase 2 data from the CHAPTER-1 study of Deucrictibant for the prophylactic treatment of HAE attacks)
- (SERA) +27% (announced that the Data Safety Monitoring Board (DSMB) overseeing its pivotal Prematurity Risk Assessment Combined with Clinical Interventions for Improved Neonatal OutcoMEs (PRIME) study recommended stopping enrollment due to efficacy)
- (KMDA) +24% (enters largest commercial agreement with Kedrion for US distribution of KEDRAB including $180M of revenues over first 4 year)
- (LGHL) +22% (earnings)
- (S) +19% (earnings, guidance)
- (PHR) +15% (earnings, guidance)
- (ASPN) +14% (announces additional EV thermal barrier commercial award and provides update on U.S. Department of Energy loan application status)
-COYA +9.6% (enters exclusive collaboration with RDY for development and commercialization of COYA 302, an Investigational Combination Therapy for treatment of Amyotrophic Lateral Sclerosis)
- (ACRS) +8.5% (announces patent license agreement with Sun Pharma for alopecia)
- (OLLI) +4.5% (earnings, guidance)
- (CAR) +3.8% (Board declares a special dividend of $10.00/shr)
- (SHAK) +3.4% (Raymond James Raised SHAK to Strong Buy from Outperform, price target: $78)
- (TOL) +2.6% (earnings, guidance)
- (VRA) +2.6% (earnings, guidance)
- (NTES) +2.3% (momentum)
- (UNFI) +2.2% (earnings, guidance)
- (NBIX) +2.1% (receives Breakthrough Therapy Designation from US FDA for Crinecerfont in Congenital Adrenal Hyperplasia)

Downside

- (IPA) -38% (prices $1.1M shares at $1.00/shr in public offering)
- (VNCE) -25% (earnings)
- (OPTN) -22% (announces 3-month extension of FDA Review Period for XHANCE sNDA)
- (YEXT) -16% (earnings, guidance)
- (ASAN) -14% (earnings, guidance)
- (FLNC) -13% (files to sell secondary offering of 18M Class A common stock by existing controlling stockholders)
- (INMD) -13% (cuts guidance)
- (BOX) -12% (earnings, guidance)
- (RENT) -12% (earnings, guidance)
- (PLUG) -7.3% (Morgan Stanley Cuts PLUG to Underweight from Equal Weight, price target: $3 from $3.50)
- (IXHL) -6.0% (provides update on IHL-42X drug candidate in Phase 2/3 clinical trial in Obstructive Sleep Apnea)
- (MDB) -5.3% (earnings, guidance)
- (BF.B) -4.7% (earnings, guidance)
- (CRDO) -3.7% (prices 10M shares at $17.50/shr in $175M offering)
- (TOST) -3.2% (Tier1 firm Cuts TOST to Neutral from Buy, price target: $16 from $22)
- (CYBN) -2.9% (announces grant of additional U.S. patent in support of its CYB003 Deuterated Psilocybin Analog Program)
- (PLTR) -2.7% (downside momentum)

At 8:53 am:

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From Arthur Cashin: 

Wall Street traders spent the bulk of Tuesday's session, the eve of the Feast of Sinte Klaus, hoping to find some of the financial jewels in their stocking that they had discovered over the marvelous month of November and into the dramatic up moves that we saw last week. Instead of the jewels, however, they found some mixed packages that were not glowing and gleaming in the manner they had hoped. It could have been worse. They might have found coal in their stocking (whoops, let's not forget that Secretary Kerry has just banned coal, depriving Sinte Klaus of his traditional opportunity to send caution to boys and girls who were not behaving as they might have been).

The day wore on and they did improve, and we moved toward the closing bell, but, nevertheless, we ended the session mixed with the Magnificent Seven coming back out of temporary retirement and not allowing the recent emergence of mid to small caps to populate the Russell. Though it was a somewhat frustrating day for the bulls, it exhibited that frustration a bit on and off as you can see by what we wrote in this late morning update:

Late Morning Update 12.05.23 - At the opening bell, it looked like we were going to do an exact duplicate of yesterday's morning action. In both cases, the Dow and the Nasdaq were smartly lower in preopening trading and then yesterday, almost immediately after the opening, they nearly cut the losses in half. Today, the Dow failed to do that and did not move much off the lows, despite the yield on the ten-year moving smartly lower, which in recent days, would have brought at least some speculative buying into the market. The Nasdaq did cut its losses, but not in the same dramatic fashion as we saw in yesterday's action. So, it would appear that the jury is still out. We will keep an eye on the Dow and see if they can come off the lows and begin to imitate yesterday's action.

We will continue to watch the yields and see if it is a trial separation with equities or will the lower yields begin to have an important impact on trading. IN THE BRIEF FEW MOMENTS THAT IT HAS TAKEN WONDER WOMAN TO TYPE UP THIS EMAIL, THE DOW DECIDED TO CHANGE COURSE AND CUT ITS LOSSES IN HALF, ONLY TO APPARENTLY STALL. NOW WE HAVE TO WATCH IT AND SEE IF IT MAKES A LOWER LOW. For now, it looks like the normally insightful Mr. DeMark might be on the mark, if you forgive the pun, as the Dow and Nasdaq do look a little bit like they are possibly putting in a mild topping process.

The headlines continue to bubble up out of the Middle East with some talk about flooding the hundreds of tunnels under Gaza City, but the concern is some of those tunnels may be housing hostages and the PR feedback to that would put Israel even further under the gun as their PR campaign seems to be eluding their grasp. I would, I think, watch the headlines for some possible naval action. So many vessels in the Red Sea area. If there is a strike by missiles, that could be quite disruptive through the market.

It always has the possibility that bad news could bring a flight to safety. You had best bring your decoder ring as we go through the afternoon. Watch the geopolitical headlines and please stay safe. That process of somewhat confused hope and frustration continued throughout the day, and it did not develop into a mid to late day clear trend and, therefore, we felt no compulsion to put out an early or midafternoon recap.

Even before you could hear sleigh bells on the roof, there was a frustration among the hopeful traders of Wall Street. It was not a depressing session by any means and, as I say, they got a reasonable effort out of things and, while not the sparkling jewels they hoped to recover, it was not the bituminous problem that we had alluded to earlier. With another hat tip to the technically insightful Tom DeMark, let's pause for a minute and see what our cousins offshore did with the input we saw here in New York. Overnight, global equity markets are generally leaning higher, including the U.S. futures in pre-opening trading.

In Asia, Japan closed up nearly 700 points in the Dow. Hong Kong was a far more modest 200 points in the Dow and Mainland China is up only about 30 Dow points. In Europe, as we go to press, London is up about 120 Dow points. Paris is up about 80 Dow points and Frankfurt is emulating London, up about 120 Dow points.

Today's economic calendar is numerically modest but has some heavy-duty data that traders will watch carefully. It being Wednesday, early on, we will get the Mortgage data and then at 8:15, we get the ADP Payroll projections. At 8:30, we will get some data on International Trade. Also, at the same time, we will see Productivity and Labor Unit Costs and at 10:30, we will get Oil Inventories. So, that will bear watching. Also, we have some key international economic meetings coming up.

China will be meeting with some trading partners and internally to talk about stabilizing and enhancing their economy and with the property and real estate companies still pretty much of a bother and President Xi looking to get the economy unstuck amid rumors that there is some restlessness growing among the populace. Putin and his aides will be out and about, making trips to the OPEC area and seeing what deals they can work out and at the same time, looking to get some money in to ward off the drain caused by the Ukrainian incursion.

We think you want to watch things in the Middle East. Again, we would keep an eye on the naval and shipping area. While the land war may be expanding, I think the risk of a dangerous surprise might come in the sea lanes. You know the current drill. Stay close to the newsticker.

Keep your seatbelt fastened. Stay nimble and alert. Watch those yields and see if the yield on the ten-year moves back above 4.25% and does that bring any pressure on equities, but most of all with all the geopolitical stuff going on, it is important to try to stay safe on this Feast of St. Nicholas. 

Break in! 

Citigroup (C) cuts guidance.

From Peter:

Before I get to a bunch of company stuff, something to watch again in 2024 is the BoJ. While we debate when the Fed and ECB, and maybe others, might cut rates next year, the BoJ is still trying to figure out when to get out of negative rate policy. Bloomberg is reporting today that a few weeks ago the Second Association of Regional Banks in Japan "called on the BoJ to scrap its negative interest rate when executives met with central bank officials last month, according to people familiar with the matter."

Rate policy has been a killer of regional bank profitability for many years now. The article said "The request likely served as a fresh reminder for Ueda of the side effects of the world's last subzero rate."

This story was then followed by another interesting story overnight that the Deputy Governor of the BoJ Ryozo Himino in a speech to business people in Japan today and gave a positive spin if they decide raise short term rates. BN reporting on this said "Himino indicated that the first hike since 2007 might not be as harmful as some have feared. Himino said households would probably benefit from improved net income if rates moved to positive territory and the impact on the corporate sector would likely be limited. He also said the financial system is resilient enough to cope with that transition."

Sounds like this could happen sooner rather than later but no market reaction today as yields fell, following the Treasury rally, and the yen is lower.

The comments from the Amex CEO that saw the stock fall was this, "If you just go back in the 2nd quarter, we had 8% overall billings growth. Third quarter, it came down to 7%. And in October, everybody got a little bit skittish, and I think other people have said the same thing that growth wasn't as strong in October. And we didn't see growth in October like it was in the third quarter." He did say though after that November he saw "sort of what we looked like in the third quarter."

At the same conference Brian Moynihan talked about the slowing spend by the consumer. After talking about Black Friday and Cyber Monday spend, "it's much more consistent with that money moving out of customer accounts with a lower growth, low inflation economy. And that's what you're seeing...The year to year growth rate ticking down, which doesn't sound good because it's still going up, but it's going up at a less high rate. You're seeing the way customers are spending, their money has leveled out." He referred to this as 'normalization.'

He mentioned too the reduced corporate demand for credit.

The Truist Financial CEO talked about the same thing. "And clients are generally...on the commercial side, generally more cautious, so no doubt about that. You can see some of that caution reflecting in loan demand. So a little more careful about the next addition to the truck fleet or the next warehouse of data center or whatever it may be in terms of those decisions. And I'm not so sure it's as much financing driven as it's just cautionary note about where the economy is."

He then shifted gears to the consumer side, "it's also bifurcated. And the higher end consumer is still spending and still lots of discretionary activity, and you see that in hotel and air traffic and destination experiences, all those type of things. But the lower end consumer, however, we might define that, let's call it, $100,000 income and below...I think that consumer is going to start feeling a little more stress. You're seeing a little more credit card utilization, a little more delinquency. We saw some of the buy not-pay later come into some of the holiday sale. So that consumer is starting to feel that stress, and I think that's going to manifest itself in some way to what degree we can all speculate, but into next year."

Auto Zone said this in their call, "We do feel the low end consumer started pulling back on discretionary purchases...For the 2nd quarter, we expect our DIY sales to remain more difficult and our commercial sales trends to improve." Kind of similar to what Home Depot and Lowe's said on the housing side.

Signet Jewelers in their earnings call said "Jewelry continues to be an important gifting category particularly among Gen Z with Black Friday weekend results in line with our expectations."

Big business for them is also engagement rings and "Google searches for engagement rings are now 10% higher than last year, the first time they've exceeded the prior year in nearly two years. The percentage of couples moving to the engagement phase has improved by 5 points, a statistically significant movement over the last 18 months." Much of this is the post Covid normalization where people usually date about 3 years before getting engaged.

There is hope for the young people to get married. "In our most recent survey, nearly 80% of non-married Millennial and Gen Z adults say they want to eventually get engaged and married, which is a notable improvement to younger adults from a 2018 survey...Moving forward, the majority of engagements in the US will be multicultural led by growth in Hispanic Americans."

They did say comps fell 12% y/o/y and "Traffic was down compared to last year in the mid single digits." They extend credit and they said "Consumer access to credit remains healthy." As we've heard from many others, "Consumers are very deal conscious, really waiting to make sure they're getting the best deal they possibly can."

Toll Brothers was pretty upbeat about their business as they try to fill the inventory vacuum, "We have continued to see solid demand through our fourth quarter...Based on our non-binding deposit activity through the first five weeks of our first quarter, demand remains solid and consistent with normal seasonality. As we approach the start of the spring selling season in January, we are encouraged by the recent 75 bps drop in mortgage rates. With resale inventories at historic lows, buyers continue to be drawn to new homes, and we expect lower rates with lower inflation to add to this already solid demand." We know Toll is a higher end builder in terms of price points where I'm sure many pay in cash.

The continued drop in the average 30 yr mortgage rate to 7.17% did help to lift refi's by 14% w/o/w, which are still mostly cash outs. Purchases were flat after four weeks of gains.

Box was cautious on corporate IT spend. "Our guidance also accounts for the continued pressure on seat growth that we anticipate due to the macroeconomic environment as well as lower professional services revenue vs our prior expectations."

In terms of its fiscal upcoming year, "While we have been seeing a more stable demand environment, we want to be prudent and assuming that this challenging environment persist throughout the coming year." They saw more stabilization in the US but "in international markets where there was some variability."

If there is one thing we've heard a lot over the past month plus when it comes to retail inventories, it's that companies have done a great job in right sizing them, which also means there will be less deals to be had via markdowns. To this, read what was said from the November Logistics Managers Index which came out yesterday which fell to 49.4, back under 50, down 7.1 pts m/o/m.

"November's dip was largely triggered by a decline in inventory levels which is attributable to Q4 holiday sales and the subsequent dips in warehousing capacity and transportation capacity and slowdown in warehousing utilization and transportation utilization...Essentially, November's decline seems to have come because firms are selling off inventories quickly." This also means that at some point inventories will be rebuilt and goods price inflation will inflect higher again.

As part of the transportation economy and with the LMI news, Old Dominion Freight gave us their November data yesterday and said revenue per day fell .9% y/o/y, "primarily due to a 2.3% decrease in LTL tons per day." The CEO said "The decrease in our November revenue reflects continued softness in the domestic economy."

While the German DAX hit a record high today, after doing so yesterday, their economy remains very challenged and maybe the prospect of ECB rate cuts next year in response is what is helping the DAX. Factory orders in October fell 3.7% m/o/m, much worse than the estimate of up .2% and only partly helped by a 5 tenths upward revision to September. There was a double digit drop in machinery and equipment while strength was seen in transportation related stuff like aircraft and trains.

There is no longer a debate within the ECB on whether to hike rates again, that's settled for sure. The debate now is when to cut next year in response to their challenged economy.

At what point does the flood of EPS estimate cuts lead to questions whether it is a soft landing or something worse?

Good stuff from my pal Danielle DiMartino Booth:

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The songwriting prowess of music legends Lou Adler and Herb Alpert wasn't enough to get "Wonderful World" to fruition. Singer-songwriter Sam Cooke added the finishing lyrical touches and then recorded the single during an impromptu session in March 1959, his last recording at Keen Records. Thirteen months later, in April 1960, the song was released. Peaking at No. 12 on Billboard's Hot 100, it performed better than many of Cooke's singles after he switched labels to RCA Victor in 1960.

Throughout the years, the tune has been covered by Otis Redding, Michael Bolton, and Art Garfunkel. On the big screen, it was featured in the 1983 Richard Gere drama Breathless and the 2005 Will Smith comedy Hitch. Hands down, the most memorable appearance arrived during the famous food fight lunchroom scene of the 1978 classic Animal House. It plays as background as Bluto (John Belushi) begins to feed off leftovers while students drop off their trays, especially the golf ball he infamously devours from a bowl of soup.

Cooke swooned that he "don't know much about history." What we do know about history is that it often rhymes. As we've highlighted of late, a core argument posed by the last inhabitants of the 'soft landing' camp theme is the strength of real Gross Domestic Product (GDP). We mere mortals on Planet Earth reference real Gross Domestic Income (GDI).

Through 2023's third quarter, the year-over-year (YoY) trends of these data clocked in at respective 3.0% and -0.2% rates (light green and orange lines). To help settle the "debate," in the same quarter, private job openings registered a -15.3% YoY drop and initially posted a -18.6% YoY decline to start the fourth quarter (purple line).

Rewind to the 2007-09 recession and the rhyme comes in loud and clear. Real GDP accelerated in 2007's third quarter to a 2.4% YoY rate, from 1.6% two quarters prior, while real GDI contracted at a -0.2% YoY pace. Private job openings tracked closer to GDI than GDP in the initial quarters of the Great Recession before GDP played "catch down." If you prefer to quantify the tie-breaker, over the last 20 years, at 0.82, the correlation of the path for private job openings with GDI surpasses that of GDP's 0.75. Despite the Job Openings and Labor Turnover Survey's (JOLTS) post-pandemic shortcomings due to reduced response rates, history sides with the income side of the U.S. economy's ledger, i.e., GDI, in tracking private labor demand.

Another entity that tracks employment is of the Federal tax deposit variety. A glance at a Yank paycheck reveals FICA deductions. It stands for the Federal Insurance Contributions Act and gets scored as withheld individual tax receipts. Once these dailies are deposited into the U.S. Treasury's coffers and summed to monthly totals, a picture evolves. Add in a seasonal adjustment (lilac line) and it draws a noticeably more volatile trend than the alternative measures of private nonfarm payrolls (brown line) and private household employment plus the self-employed (teal line).

To judge when things get toppy, however, withheld FICA deductions would begin to level off and even depict lower highs, something that can be drawn from the peaks in December 2021 and December 2022. Moreover, November 2023 registered a -4.0% seasonally adjusted month-over-month decline and stood nearly -10% annualized below where it was six months ago.

As for demand to come in 2024, the Logistics Managers' Index (LMI) is sporting a double-dip for the U.S. inventory cycle. After the initial pandemic shock, the LMI's Inventory Levels rose steadily. Average levels in 2020 of 58.4 built up in 2021 to 62.7 and stepped up further to 68.9 in 2022. That ended late last year, a precursor to levels plumbing to 42.9 in June and rock-bottom 41.9 in July. After a five-month stint under the 50-breakeven mark, October temporarily surged above the water line to 53.4. At 44.3, November's sharp relapse sealed the double-dip fate.

November's seemingly more optimistic 50.0 reading for Future Inventories (lower middle chart) must be unpacked to see the downside. At 54.7, Upstream Future Inventories are rising, while the soft spot is clearly in Downstream Future Inventories, which hit 41.5. If retailers are this pessimistic about future supply, how can their view about future demand be anything but bearish? Take retail job openings, for instance. The YoY decline of -33.6% was nearly twice as large as the private aggregate, while the six-month annualized drop was an even worse -67.6%.

With that as backdrop, this LMI's convoluted takeaway screams inconsistencies: "Essentially, November's decline seems to have come because firms are selling off inventories quickly. The previous large decline from April 2022 happened because firms had too much inventory and couldn't sell any of it. Both of these scenarios led to large drops in the overall LMI, but this more recent drop is significantly less concerning." The April 2022 LMI headline index fell -6.5 points to 69.7, while the -7.1-point drop in November 2023 left the index at 49.4. What's a 20-point difference between friends?

Recall that sellers want to sell in a rising market. Undersupply conditions help that decision. However, that is not the setup in November from an inventory sentiment standpoint. The combined 0.8 z-score of ISM manufacturing Customers' Inventories and ISM service Inventory Sentiment (inverted yellow line) points to deflation in goods prices. The core goods CPI stands on the precipice of falling into negative territory after printing at a 0.1% YoY rate in October. The bearish future inventory outlook for downstream retailers suggests that pricing power will be challenged. For retailer profit margins, the situation will end worse than taking a bite out of a golf ball.

* Markets rallied off the lows on Tuesday but breadth was quite poor, narrowing back into the Mag 7 (and ignored by the business media in their daily market rundowns):

Note: Several subs in The Comments Section asked me to summarize the prior day's action and I will begin to do that! (See above, for a start)

* Early futures strength is ignoring the rise in bond yields this morning

* Bullish investor sentiment remains at an extreme; the S&P Short-Range Oscillator is at 4.84% vs. 6.38%

* Downside risk likely dwarfs upside reward and, hey, as Michael Conrad said weekly, "Let's be careful out there":

"Let's be careful out there."

- Sergeant Phil Esterhaus, "Hill Street Blues" 

"The stock market will do whatever it has to do to embarrass the greatest people to the greatest extent possible." - Wally Deemer

"Workin' on our night moves Trying to lose the awkward teenage blues Workin' on our night moves In the summertime And oh the wonder Felt the lightning And we waited on the thunder Waited on the thunder."

- Bob Seger, "Night Moves"

This daily Futures feature is like inside baseball. I try to show you and write about what I believe thoughtful hedge fund managers are looking at when they awake -- let's call it our normal routine -- setting the stage for their strategy for the day. The market is a complicated mosaic and the more info you have, the better trader and investor you will be!

The market (and money) never sleeps -- and neither do I, it appears! I have previously described the importance that overnight futures trading hold for me here. It is a guidepost to my strategy in the regular trading session. Moreover, the overnight/early morning futures hold opportunities as they are (1) inefficient, though liquid and (2) it seems fear and greed are often exaggerated outside the regular trading session. I frequently try to capture those efficiencies by trading actively both in the pre- and after-market sessions.

Here are brief observations I wanted to highlight and provide a summary of overnight price movements in various asset classes:

* Stock futures were lower throughout most of the overnight session. S&P futures peaked at +15 and bottomed at -4. Nasdaq futures peaked at +79 and bottomed at -24. At 6:37 a.m. ET, S&P futures were +7and Nasdaq futures were +26.

* The S&P Short-Range Oscillator moved further to less overbought at 4.84% vs 6.38%..

* The VIX is now at 12.82, a gain of +0.03.

* The U.S. dollar is higher against the yen, euro and sterling.

* Treasury yields are broadly higher this morning. The 2-Year Treasury yield is +4 1/2 basis points at 4.62% and the 10-Year is +3 basis points at 4.201%. Over there, the yield on the 10-Year U.K. Gilt bond is +2 basis points.

* Overnight, the inversion of the 2s/10s Treasuries curve is slightly higher at -41 basis points. Real rates remain quite elevated; the 10-year is still over 2.05 in real terms.

* Commodities are mostly lower. Brent crude is -$0.77 to $76.44.

* Gold is +$2 at $2,038 after the recent spate of volatility.

* The newest shiny object, Bitcoin, is pausing after a big climb, now -$150 to $43.7k

Here is a synopsis of some of my columns I believe were important, or in the event you were out for the day and/or did not read my Diary. The principal intent is to review the logic of my market moves and other factors:

Russell Moves Into Overbought Territory

Investing Not Trading in Chevron, Exxon

Why He Sold Google

More Signs of a Weakening Consumer

Here were Tuesday's trades:

* SPY, QQQ Shorted

Aggressively shorted (on the ramp) (SPY) and (QQQ) at $457.45 and $388.35, respectively.

My guess is that the rally flattens out.

* Investing Not Trading in Chevron, Exxon

Initiating long in (CVX) $142.92

Adding small to (XOM) $100.57.

And, when will the decline in yields and in the price of oil be considered market unfriendly?

Headline: Six Governors Push Biden to Ensure Marijuana Is Rescheduled by the End of This Year

"The history of markets is one of overreaction in both directions."

- Peter Bernstein

This table is a valuable resource for momentum-based short term traders:

View Chart »View in New Window »

From JPMorgan:

US:Futs are higher led by Tech with the Mag7 all higher pre-mkt. Bond yields 2-4bps higher with a flatter yield curve. USD is lower pre-mkt, potentially its first down day this week. Cmdtys are mixed with Energy weaker, Ags stronger, and base outperforming precious. The macro data focus today is on ADP, 23Q3 readings on productivity/labor costs, mtge applications, and the trade balance. Recall that ADP has been a poor predictor of NFP and that NFP is expected to get a boost from the UAW deal.

and...

EQUITY AND MACRO NARRATIVE: As the market focuses on Friday's NFP and next week's CPI, Fed, and Retail Sales prints, yesterday's ISM was a reminder that the US consumer remains the lynchpin. While many focus on the cues provided by ISM-MFG, that indicator has been in contractionary territory since Oct 2022 and has done little to prevent the economy from growing materially above trend. ISM is a diffusion index which can indicate breadth but not depth so think it is important to marry that to bottoms-up data.

Yesterday, at an industry Financials conference the message from the sector's c-suite was that the consumer remains in good shape, continues to spend, and has yet to approach distress. Commentary from our Financials sector specialist James Goulbourne, in the following sections, help summarize those comments. Does this provide enough clarity, as we see earnings kick off in about 5 weeks, for companies to give stronger guidance? That may be critical to market direction in the near-term.