Closing market internals:

• New York Stock Exchange volume hit 371 million shares, 15% below its one-month average;
• Nasdaq volume hit 4.21 billion shares, 16% below its one-month average;
• VIX + 0.21% to 14.07
• NYSE Highs: 21 Lows: 9
• Nasdaq Highs: 44 Lows: 44

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Thanks for reading my Diary today.

I hope it was helpful and aided your investing and trading decisions.

Enjoy the evening.

Be safe.

From Hedgeye's Keith McCullough:

The energy sector is near the day's lows.

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Separately, I have a 3 pm research call with a company. 

Radio silence until the close.

Google's (GOOGL) shares have retraced back to yesterday morning's level - no bueno:

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Run don't walk to watch Guy and Dan on MRKT CALL. 

It's the best free subscription extant! 

Here is the link.

Break in!

Our newest short (this morning!), McDonalds (MCD) , falls by -$5/share on cautionary comments of the company's CEO.

More coming.

I initiated or added to the following shorts today: (AXP) , (COF) , (BX) , (DHI) , (KKR) , (APO) , (MCD) , (WBA) , (YUM) , (XLF) , and shorts in (SPY) and (QQQ) calls. 

I have made no buys. 

For a complete list of my longs and buys, see here. 
__________ 

Short WBA (S), AXP (S), COF (S), BX (M), DHI (S), KKR (M), APO (M), MCD (S), YUM (M), XLF (L), SPY calls (M) puts (VS), QQQ calls (VL) puts (VS).

I am shorting (DHI)  ($149.55) against my (GRBK) long.

I am initiating an investment short in McDonald's (MCD) ($296.70) based on our analysis and channel checks over the last two months. 

More next week. 

But for now we have concluded: 

* Steady menu price increases over the last several years could bring on demand elasticity if and when a consumer-led economic downturn/deceleration commences.

* Given the profile of the McDonalds (lower/middle-income) consumer - the company is especially vulnerable to a squeeze on the lower-end consumer.

* Without question the quality of McDonalds' product offerings has deteriorated significantly.

* Trading near a 52- week high and more than +$50/share since the market low in October, this popular stock holding seems vulnerable to disappoint on both the top and bottom lines.

Crude, for the second day in a row, has more moves than a shortstop batting .110! 

Today, crude oil traded up to $74 (+$1.30) and now is near the day's lows at $72.18 (-$0.46).

* At 10:45 am

- NYSE volume 120M shares, 23% below its one-month average 

- Nasdaq volume 1.40B shares, 21% below its one-month average

Breadth

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Biggest Movers

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Heat Map

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ETFs

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With S&P cash now +13 and the Nasdaq about even, I am shorting more (SPY) calls and (QQQ) calls.

Here is a partial list (names only previously mentioned in my Diary) of long and short positions at my hedge fund. 

Remember, I don't disclose all of my positions for a variety of reasons previously discussed - e.g., I would lose access to management contacts if I disclosed certain shorts. 

LONGS

(BMY) M
(CHWY) VS
(CNPOF) S
(CVX) L
(ELAN) VS
(FRPT) S
(GRBK) VS
(GS) VS
(GTBIF) S
(JNJ) M
(JOE) S
(MS) VS
(MSOS) M
(OXY) VL
TSNDF VS
(XOM) L

SHORTS

(AAPL) S
(ABR) S
(APO) M
(AXP) S
(BX) M
(BXMT) S
(CHGG) S
(COF) M
(CRLBF) VS
(FIGS) VS
(FMC) S
(FRHC) S
(FXLV) VS
(HOOD) S
(KKR) M
(LOPE) S
(MPW) VS
(PARA) S
(RILY) VS
(ROL) S
(SBUX) S
(SNBR) VS
(WBA) S
(WBD) VS
(WGO) S
(WOOF) VS
(XLF) L
(XPOF) S
(SPY) M
(QQQ) VL

From Peter: 

ADP said there were a net private sector jobs add of 164k in December which was above the estimate of 125k and up from 101k in November. Almost all of the job gains were seen in the service sector which contributed 155k of the 164k with the goods side adding the rest. Leisure/hospitality led the way with a job gain of 59k, followed by the always consistent job creator education/health category which hired a net 42k. There was little change, up 1k, for professional/business services and information (includes tech) shed 2k.

Financial services added 18k jobs and trade/transportation/utilities added 15k. On the goods side, in the context of a manufacturing recession, jobs of 13k were lost and also by 2k in natural resources/mining. Construction added 24k and includes the benefits of factory builds induced by government incentives/largesse. Among small, medium and large businesses, the job gains were almost evenly split.

Wage growth slowed but some of this is certainly just the comparisons. 'Job Stayers' saw a 5.4% y/o/y pay gain vs 5.6% in November. For 'Job Changers', the pay raise was 8% y/o/y vs 8.3% in November. These are still pretty robust figures and trending above average hourly earnings because of calculation differentials I assume.

ADP said "We're returning to a labor market that's very much aligned with pre-pandemic hiring." The 3 month private sector job gain average is now 124k vs the 6 month average of 159k and the 2023 average of 207k. Thus, a clear slowdown in the pace of hiring, though firing's remains very muted as seen in the still low initial claims figure. The estimate for private sector job adds from the BLS tomorrow is 130k.

Initial claims totaled 202k vs 220k in the week before and that was 14k below expectations but because it was for the week ended 12/30, assume the timing of the holidays messed with the seasonal adjustments, though the BLS tries its best to smooth things out. Continuing claims, for the week ended 12/23, and less influenced by the holidays as its counting those that continue to collect benefits, remained elevated at 1.855mm, though down from 1.886k in the week before. We of course don't know if this is because people found new jobs or benefits expired. We'll see tomorrow to what extent after the ADP report.

The bottom line with the claims data remains the same and highlighted with the ADP report when looking at the trend in hiring as 2023 progressed. Hiring is slowing but firing's remain low, especially because companies had their challenges in adding back staff post Covid and aren't easily going to give that up.

Walgreens Boots Alliance (WBA) . 

From Comments Section earlier: 

Dougie Kass

I took a short rental in WBA on the poor guidance and warning.

At $25.78.

And based on dividend cut. 

From Arthur Cashin: 

The main influence on Wall Street during the second trading session of the year was not Spartacus or Hitler or any other notable celebrities. Rather, it was a somewhat rotund red cheeked fellow named Santa Claus and what was happening to the supposed Santa Claus rally, which seemed to be disappearing rapidly before the eyes of Wall Street traders. After a setback on the first trading day of the year, things began to look a little difficult for the Wall Street bulls as we were headed for a negative session in the second trading day of the year.

As you probably recall from the writings of Yale Hirsch, who developed the now proverbial Santa Claus rally, it is the last five trading days of the outgoing year and the first two of this year. The first trading day was a lousy session to begin with and traders became more concerned as they moved into the second session, and it did not seem to hold many promises. In fact, as they struggled through the morning, that became the topic among traders, and we touched on a good deal of that in this late morning update: The Wall Street bulls are beginning to worry that a rebellious elf has pushed Santa out of the sleigh.

This is the final day of the so-called Santa Claus rally and the last couple of days it has swung into negative territory. This is not a very good sign for the seasonal success marker. My friend, Jeff Hirsch, editor of the invaluable Stock Trader's Almanac reminds that when the Santa Claus rally fails, it puts in jeopardy or at least puts on the alert signal from a variety of other early seasonal indicators, making it a bit of an uphill fight for the bulls.

The process so far has not been at all helpful to the bulls and the lingering weakness in Apple continues to provide a slight negative tone to the market overall.

Unless the bulls can get the Cavalry out and promote a rescue rally for the afternoon, the old rule of thumb will be getting talked about and that is - if Santa comes to Broad and Wall, the bears may return to make the call. The yields are not providing much influence either way and does seem to look like the markets moving pretty much on its own internals.

Let's see if the newsticker can provide some help because the algorithms are not finding much hope in the internals. If nothing else, a negative close today may, at the very least, slowdown the insertion of funds for the New Year as money managers start to look for sectors that are showing any real promise. Remain alert. Certainly, remain wary, but please stay safe.

Shortly after the update went out, it was convenient that my pal, Josh Brown, partnered with another of my Wall Street trading friends, Barry Ritholz, was on the screen and in Josh's own plain-speaking way nailed down what may be the causation of the Santa Claus rally disappearing and it had little to do with chart angles and moving averages and the like. It had more to do with capital gains and taxes as Josh aptly pointed out. A lot of people with that super late rally in 2023 were thinking about taking some profits and shifting sectors and not making a major decision, but basically repositioning themselves and their portfolios.

As Josh succinctly pointed out, one of things they normally would have to think about was their financial officers looking over their shoulder and saying - if you trim your position or shift your position here in the closing days of 2023, you are going to have to declare it on the taxes of this year that is now ending or if you wait and change those positions and make those decisions in the opening days of the new year 2024, you had the luxurious latitude of waiting days, weeks or even months before you had to declare for taxation purposes the day of that trade and make payments on the capital gains you might or might not owe.

What prompted this selling in the first two trading of this month - shooting Santa Claus in the foot - in all likelihood was something that had technically nothing to do with the stock market but more to do with tax positions of the entity who is doing the trading. Simply succinct and right on the mark as usual and once again, Josh laid it out to all of us that the answer was something you did not need a slide rule, calculator or a computer to determine.

Just tax timing. Pretty simple. Well, simple it may have been, but it did cause them to shoot the Santa Claus rally in its foot, perhaps even in both feet as it raised questions about the indications of the first few trading days toward the overall trading for the year 2024 and that will cause us and many others over the next several days to try and compute - are we seeing a true indication of what the balance of the years trading may look like or are we just stubbing our toe on an axiom of tax declarations. Nonetheless, the guidelines of an indicator are certainly the guidelines of the indicator. We were going to review those rather rare occurrences when the Santa Claus rally does not kick in, but overnight, our friend Jeff has magnanimously dipped into his prodigious files, and this is what he wrote:

On the heels of last year's momentous rally, the market is showing some signs of weakness causing the Santa Claus Rally to fail to materialize. Profit taking in January has become more commonplace in the last 25 years or so and January is notably softer in election years like 2024. Some profit taking is understandable following the massive rally from the end of October ranging from just over 16% for DJIA and S&P 500 to 19.9% for NASDAQ and 26.2% for Russell 2000 at their respective recent highs just before yearend. But the selling over the past few days is notable and a warning sign. Defined in the Stock Trader's Almanac, the Santa Claus Rally (SCR) is the propensity for the S&P 500 to rally the last five trading days of December and the first two of January with an average gain of 1.3% since 1950.

This indicator was discovered and first published by Yale Hirsch in the 1973 edition of the Almanac. The lack of a rally can be a preliminary indicator of tough times to come. This was certainly the case in 2008 and 2000. A 4.0% decline in 2000 foreshadowed the bursting of the tech bubble and a 2.5% loss in 2008 preceded the second worst bear market in history. Down SCRs were followed by flat years in 1994, 2005 and 2015, and a mild bear that ended in February 2016. Of the 15 down SCRs since 1950, 10 years have been up and 5 down, but the average gain is a measly 5.0%. As Yale Hirsch's now famous line states, "If Santa Claus should fail to call, bears may come to Broad and Wall."

With the Santa Claus Rally a no show we will be watching for a positive First Five Days (FFD) and January Barometer (JB), the second and third legs of our January Indicator Trifecta. Since 1950 there have been only three occurrences when SCR was down and both the FFD and JB were positive. Two out of three of those years were up over 20% and 1994 was a flat -1.5% with a 14.8% average gain on all three. Since there are only three down SCR years with up FFDs and JBs we present to you the other years with one of the Trifecta components down and the other two up. Of these 18 years 14 years were up and 4 were down with an average gain of 7.9%. So, as we said 2 out of 3 ain't bad when it comes to our January Indicator Trifecta.

Remember: if these seasonal indicators are negative and the market does not rally as it normally does during this time, we will likely shift to a less bullish posture - if not outright bearish. Thank you, Jeffrey, for that thorough review of some past occurrences.

Okay, now back to this morning. Overnight, global equity markets are once again showing signs of individuality. Japan closed down the equivalent of 180 Dow points. Hong Kong was flat. Mainland China was off about 130 Dow points and India was a bit of an odd man out, closing up the equivalent of about 250 Dow points. As we go to press, Europe is marginally optimistic. London is fractionally higher, but Paris and Frankfurt are up about the equivalent of 100 Dow points.

The calendar is not overly busy, but we begin with some job type information. Early on, we get the Challenger Layoff Report and at 8:15, we get the ADP Payroll Estimate and then at 8:30, of course, the Initial Jobless Claims and right after the opening, we get the PMI Composite. In midmorning, we get Natural Gas Inventories and, a little bit later, we get the Oil Inventories because of the New Year holiday earlier in the week.

After the close, traders will go to the newsticker to see what the Fed Balance Sheet looks like and if quantitative tightening continues and to what degree. A lot of finger pointing in the Middle East and some speculation that a further crackdown with the Houthi rebels may be in order, but no official confirmation one way or another.

Given the fact that geopolitics is bubbling up again, best stick to the current drill and that is stay very close to the newsticker. Keep your seatbelt fastened.

Stay nimble and alert and given these fractious times, please stay safe.

Upside

- (OMGA) +105% (Novo Nordisk enters research collaborations with Omega Therapeutics and Cellarity on novel treatment approaches for cardiometabolic diseases)
- (ATXI) +99% (reaches final agreement with FDA for phase 3 safety study for IV Tramadol)
- (RPID) +26% (Growth Direct platform selected by Samsung to automate critical microbiology quality control testing)
- (AREN) +22% (reportedly former CEO has offered $4.50/shr for a 45% stake)
- (BCTX) +18% (confirm robust anti-tumor activity in patient with "Eye-Bulging" metastatic breast cancer)
- (ACET) +14% (provides program updates and milestones for 2024 with cash runway into 2H:2025)
- (NKLA) +6.7% (reports 2023 production at 42 Class 8 Nikola hydrogen fuel cell electric vehicles)
- (PTON) +6.5% (signs exclusive partnership with TikTok to bring Peloton's workout content to the TikTok community)
- (CPE) +6.1% (to be acquired by APA Corp in $4.5B all-stock transaction at implied value of $38.31/shr)
- (XERS) +4.0% (guidance)
- (OCUP) +3.6% (receives FDA Agreement Under Special Protocol Assessment for LYNX-2 Phase 3 Trial of Phentolamine Ophthalmic Solution for the Treatment of Decreased Visual Acuity under Dim (mesopic) Light Conditions)
- (FUBO) +3.5% (Nexstar Media reaches multi-year distribution agreement with Fubo covering 89 TV stations)
- (ATAI) +2.7% (announces $50M strategic investment in Beckley Psytech Limited, a private clinical-stage biotechnology company)
- (CXM) +2.7% (authorizes $100M stock buyback program and affirms Q4 and FY24 outlook; names new COO)
- (RGP) +2.7% (earnings, guidance)
- (PLTK) +2.6% (Holder Alpha Frontier to buy 18.9M common shares of Playtika at $10/80/shr from Hazlet Global)
- (RYTM) +2.6% (completes screening for enrollment in Setmelanotide Phase 3 Hypothalamic Obesity Trial)

Downside

- (MBLY) -27% (guidance)
- (SLS) -24% (files to sell public offering of common stock of indeterminate amount)
- (OPK) -16% (files to sell private offering of $200M convertible senior notes due 2029)
- (ICCT) -12% (announces strategic acquisition of Teamworx Dental)
- (CALM) -5.1% (earnings)
- (STM) -4.9% (lower in sympathy with MBLY)
- (APA) -4.8% (acquiring CPE in $4.5B all-stock transaction at implied value of $38.31/shr)
- (NXPI) -4.8% (lower in sympathy with MBLY)
- (RPM) -4.8% (earnings, guidance)
- (AVNS) -3.3% (earnings, guidance)
- (DYN) -3.2% (files to sell public offering of $175M of common stock)
- (STT) -3.0% (Tier1 firm Cuts STT to Underperform from Neutral, price target: $81)
- (CAG) -2.9% (earnings, guidance)
- (CCCS) -2.3% (prices upsized secondary offering from 20M to 22M)

At 8:59 am:

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* Higher bond yields

Responding to better jobs data, the bond market is suffering - and equity futures have dropped from earlier gains - especially of a Nasdaq-kind -70 handles: 

* The yield on the 2 year Treasury is +6 bps to 4.378%.

* The yield on the 10 year Treasury is +8.5 bps to 3.991%.

* The yield on the long bond is +8.5 bps to 4.141%. 

And that is the rest of the story.

From Peter: 

Here is a chart of the World Container Index to see it pre Covid, the spike, the comedown and the move higher over the past few weeks. Lori Ann LaRocco at CNBC in a piece yesterday quantified the dollar amount of trade that is being impacted and she said "To avoid attacks by Iran-backed Houthi militants based in Yemen, carriers have already diverted more than $200 billion in trade from the Red Sea." Of note, and contributing to the shipping price increase, "Adding to the strain, about 20% of vessel capacity isn't being used due to a massive drop in manufacturing orders, according to industry experts."

Now we of course hope the war in Gaza ends soon and this shipping situation will clear up but it's just another supply disruption that will result in higher prices of goods after the recent disinflation. The Fed can't do anything about this but it does give them reason to stay on their toes with regards to inflation and not to get complacent by notably cutting interest rates.

WCI

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I forgot to mention the Tuesday release of the December Dallas Fed Banking Conditions survey. Things eased up a bit in terms of lending standards, the demand for loans and the cost of capital but loan nonperformance continued to mostly soften.

The survey said, "Credit standards tightened at a slower pace across all loan types. Loan demand continued to decline, though at the slowest pace since the end of 2022. The decline in loan volume eased across all loan types, with the greatest stabilization in commercial real estate and consumer loans. Loan nonperformance rose again, driven by consumer loans. Loan pricing continued to increase but at a slower rate. Although bankers remain pessimistic and expect future business activity and loan demand to decline, the slowdown is anticipated to be milder than prior expectations. Survey respondents do, however, expect loan nonperformance to continue increasing at a slightly faster rate over the next six months." 

Bottom line, the access to credit and the cost of capital will remain challenging for some small and medium sized businesses in 2024 as banks deal with their own balance sheets and any Basel 3 changes that come their way and the demand for loans at current rates should be subdued at current rates. All eyes of course on the new wave of refi's in 2024 needing to get done with mostly trouble in commercial real estate where many loans include balloon payments where the prior few years of loan payments in many cases were interest only.

Auto sales in December totaled 15.83mm at a seasonally adjusted annualized rate (SAAR) and that was above the estimate of 15.5mm. That also compares with a 13.3mm run rate in December 2022 and a 16.7mm pace in December 2019. It's tough to separate out the influence of better inventory levels, holiday incentives, fleet sales and the end of the UAW strikes.

When looking at sales in 2024, the chief economist at Cox Automotive this week highlighted the affordability challenge for some, "We've seen a big reduction in median and lower income households buying new cars" as the buying "almost exclusively go to the top 20% of income households." Keep in mind that with US disposable personal income per capita at about $61,000 pre tax and the average price of a car at around $46,000 according to JD Power, it was easy money that allowed many to buy a high priced vehicle.

We got some more PMI's from overseas ahead of the S&P Global US services PMI revision today and the ISM services index tomorrow. Singapore's December PMI was little changed at 55.7 vs 55.8. S&P Global said "Singapore's private sector economic expansion was sustained at a solid pace at the end of 2023...Furthermore, businesses employed staff at a survey record rate and raised their purchasing activity in December, which bodes well for economic activity.

That said, forward looking indicators provided mixed signals...On one hand, quicker backlog accumulation hints at continued business activity growth in the near term. On the other hand, business optimism diminished among private sector firms." Input prices remained "elevated" but selling prices fell. We remain bullish and long on Singaporean stocks.

China's Caixin services PMI rose to 52.9 from 51.5 and that was 1.3 pts above expectations. Also, "Chinese services companies remained upbeat that business activity will increase over the next 12 months in December. Businesses that forecast rising output over the course of 2024 often attributed this to forecasts of stronger economic conditions and a corresponding increase in client spending. The level of positive sentiment remained below the series average, however, despite improving to a three month high." Many like to paint China's economy with a broad brush but consumer spending on services and experiences like travel, gambling, eating out, and going to the movies to name a few have recovered nicely.

Hong Kong's PMI also improved to 51.3 from 50.1 and that is the best since April. S&P Global said "Higher demand helped to boost private sector output and contribute to faster employment growth." I still believe the Hang Seng will outperform the S&P 500 in 2024.

The Eurozone services PMI was revised up to 48.8 from the initial print of 48.1 but that is below 50 for the 5th straight month. S&P Global said "It's not quite recession territory yet for services, but the vibe is far from growth oriented. There are a lack of clear signals indicating an imminent return to robust expansion." As for the outlook, "Business confidence improved during December, rising to its highest level since mid-2023. Nevertheless, growth expectations remained weak by historical standards." On pricing, take note of this, "Eurozone services firms were more aggressive with their price setting, despite input cost inflation slowing to a 5 month low."

On inflation we get Germany's national read at 8am and France told us their December CPI was up 4.1% y/o/y as expected vs 3.9% in November. Service prices higher was a key reason for the uptick.

The UK services sector ended 2023 on a good note with its PMI revised to 53.4 from 52.7 initially, up from 50.9 in November and that is the best since June. S&P Global said "December data indicated that the UK service sector ended last year on a high, with business activity growth accelerating to its fastest for six months as the turnaround in order books gained momentum. The recovery in client demand was attributed to hopes of lower borrowing costs and an improving global economic backdrop in 2024. However, many firms continued to cite challenging underlying business conditions due to the stagnating UK economy and strong pressure on margins from rising labor costs."

European sovereign bonds are weak across the board with yields higher and while US yields are higher too, though off yesterday's high tick of 4.0% in the 10 yr in particular. The ECB and BoE also have a tricky balance in 2024 in balancing receding inflation, almost no economic growth but still elevated inflation, particularly in the UK.

* At 8:00 am:

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* Investor sentiment remains bullish - though the recent market weakness has resulted in a turn down (from deep overbought to more modestly overbought)-- the S&P Short-Range Oscillator is at 3.09% v. 4.27%)

* This morning, much like yesterday, yields (+4 bps) and crude oil prices (+$0.78) are higher - and so are le gold (+$12.30) and bitcoin (+$400)

* Stock futures are modestly higher

* The U.S. dollar is again climbing against the Euro

* Bad breadth on Wednesday:

* Yesterday I mentioned the most important chart - really applies after yesterday's weakness in Nasdaq? (A beauty from The Divine Ms M):

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It was on a sweet Thursday
Monday, Tuesday, Wednesday all had passed
Came the day I'd waited for at last
And you were there, with love to spare

Making it a sweet Thursday
Not like any other day I'd known
Giving me a dream to call my own
A dream that you are sharing too

-Johnny Mathis, Sweet Thursday

"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 have reversed yesterday's weakness and are modestly higher. S&P futures peaked at +11 and bottomed at -1. Nasdaq futures peaked at +52 and bottomed at -5. At 6:24 a.m. ET, S&P futures were +7 and Nasdaq futures were +34.

and...

* Commodities are somewhat higher. Brent crude is up $0.62 to $78.87.

* The S&P Short-Range Oscillator remains largely overbought at 3.09% v. 4.27%.

* The VIX is up again to 13.94 (-0.10).

* The U.S. dollar is much stronger against the yen and down v. sterling and euro.

* Treasury yields are higher overnight, and as I've mentioned, we may be at the point that lower rates will hurt equities. The 2-Year Treasury yield is +3 basis points at 4.343% and the 10-Year is +5 basis points at 3.957%.

Remember what I wrote in my 10 Surprises for 2024:

The yield on the 10-year Treasury, which today is at 3.9%, never declines below 3.75% and fluctuates between 3.75% and 4.75% most of the year. A developing US recession, late in the year, sends the budget deficit as a percentage of GDP to 10% or more -- overwhelming Treasury supply and sending the 10-year yield back above 5%.

The U.S. federal debt problem is no longer shrugged off by investors -- it looms larger in late 2024 and slowly becomes a serious systemic problem in the years ahead.

Over there, the yield on the 10-Year U.K. Gilt bond is up +6 basis points.

* Overnight, the inversion of the 2s/10s Treasuries curve is unchanged at -38. Real rates remain quite elevated; the 10-year is still about 1.75 (again in real terms).

* After some weakness, Gold is up +$12.20 at $2,055.

and...

* Bitcoin is +$400 and at $43.1k. 

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. 

I think there were some valuable output in my Diary yesterday: 

Why I Remain Bearish (important update!)

Chart of the Year? (QQQ from Divine Ms M)

Riddle Me This, Batman!

The National Debt Chart

More on US National Debt

Just Wishin' and Hopin' (OXY)

The Russell Is Not Crowing

Johnson and Johnson Is Streaking

Are We Already in a Recession?

Question For Jim Bianco

Here were Wednesday's trades:

* I sold more (SPY) and (QQQ) calls short.

* I added to (OXY) .

* I shorted (XLF) (Large).

* I put on more straddles on SPY and QQQ

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

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"Risk is not inherent in an investment; it is always relative to the price paid."
- Seth Klarman

Bonus- Here are some great links:

* A Whole Lot of Nothing

* New Trends

* Don't Buy The Dip

* A S and P Compare

* Are Junk Bonds Starting to Weaken?

From JPMorgan:

US: Futs are higher after the NDX posted consecutive down 1% days to begin the year; today appears to be a relief rally with MegaCap Tech names higher pre-mkt, ex-AAPL (-77bps). Bond yields are higher as part of a bear steepening, pre-mkt, potentially a delayed reaction to the higher-for-long message from the Fed. Rate cut expectations declined, with implied probabilities falling 6ppts - 10ppts across the Jan, March, and May meetings. USD is weaker this morning and cmdtys are stronger led by Energy. Today's macro data focus is on ADP, Jobless Claims, and Job Cuts. Tmrw, we get NFP and ISM-Srvcs, which should help shape the macro narrative as we kick off the JPM Healthcare Conference and enter earnings season.

and...

EQUITY AND MACRO NARRATIVE: Yesterday, the ISM-Mfg data showed a disinflationary environment and thawing labor market. The Fed Minutes, while more hawkish than Powell's press conference, so a central bank that has likely concluded its hiking cycle and is evaluating the conditions to begin cuts. The commentary seemingly pushed back against expectations for 24Q1 rate cut expectations and against the potential for 24H1 cuts, too. Separately, the Fed acknowledges the need to discuss parameters surrounding a reduction in the pace of QT; one factor to consider is the health of short-term funding markets which could force the Fed into action resembling QE. Overall, bond yields moved lower, and stock started rebounding after the print. Ultimately, the inflation and labor market data mean more than the Fed's discussion and if we see inflation solved, then the Fed will cut to prevent an increase in real yields from steering the economy towards a recession.

From 'Jazzy' Jeff Hirsch of the Stock Trader's Almanac:

Santa Fails to Call, But Trifecta 2 Out of 3 Ain't Bad 

Dear Doug Kass,

On the heels of last year's momentous rally, the market is showing some signs of weakness causing the Santa Claus Rally to fail to materialize. Profit taking in January has become more commonplace in the last 25 years or so and January is notably softer in election years like 2024. Some profit taking is understandable following the massive rally from the end of October ranging from just over 16% for DJIA and S&P 500 to 19.9% for NASDAQ and 26.2% for Russell 2000 at their respective recent highs just before yearend. But the selling over the past few days is notable and a warning sign.

Defined in the Stock Trader's Almanac, the Santa Claus Rally (SCR) is the propensity for the S&P 500 to rally the last five trading days of December and the first two of January with an average gain of 1.3% since 1950. This indicator was discovered and first published by Yale Hirsch in the 1973 edition of the Almanac.

The lack of a rally can be a preliminary indicator of tough times to come. This was certainly the case in 2008 and 2000. A 4.0% decline in 2000 foreshadowed the bursting of the tech bubble and a 2.5% loss in 2008 preceded the second worst bear market in history. Down SCRs were followed by flat years in 1994, 2005 and 2015, and a mild bear that ended in February 2016. Of the 15 down SCRs since 1950, 10 years have been up and 5 down, but the average gain is a measly 5.0%. As Yale Hirsch's now famous line states, "If Santa Claus should fail to call, bears may come to Broad and Wall."

With the Santa Claus Rally a no show we will be watching for a positive First Five Days (FFD) and January Barometer (JB), the second and third legs of our January Indicator Trifecta. Since 1950 there have been only three occurrences when SCR was down and both the FFD and JB were positive. Two out of three of those years were up over 20% and 1994 was a flat -1.5% with a 14.8% average gain on all three.

Since there are only three down SCR years with up FFDs and JBs we present to you the other years with one of the Trifecta components down and the other two up. Of these 18 years 14 years were up and 4 were down with an average gain of 7.9%. So, as we said 2 out of 3 ain't bad when it comes to our January Indicator Trifecta.

Remember: if these seasonal indicators are negative and the market does not rally as it normally does during this time, we will likely shift to a less bullish posture - if not outright bearish.

* This tweet (and stats) argue against a broadening...

* I remain short of Apple...

This time it's Piper Sandler.

A reminder: Here was one of my Surprises for 2024:

Surprise #5. The biggest and most popular stock in the world, Apple, suffers a large percentage loss in 2024 as trade tensions with China escalate.

With China supporting Huawei, Apple loses substantial market share in that country and overall revenues decline again in 2024 (over 2023). Meanwhile, as a result of the Google Anti-Trust case, Google (GOOGL) stops paying Apple $18 billion in search fees. Apple's shares drop to below $130/share. Berkshire Hathaway (BRK.B) "doubles down" on its already large Apple stock holdings - raising its position to nearly two billion shares.

The broad herd (and consensus), much like July 2023, has endorsed the notion that the market's advance will broaden out -- led by the Russell Index.

Well, the opposite has occurred over the last few trading days (despite the historic seasonal strength) and, for sure, the Russell Index is not crowing ( (IWM) was down by another -$5.32/share or -2.7% on Wednesday)!

As Keith McCullough at Hedgeye observes on Twitter:

Wolf Street howls about job openings.