Market Brief – Wednesday 1/2/19

US investors ignored risks from abroad by buying stocks early despite a contraction in China’s Caixin small-business manufacturing survey contracted. Following the report out of China, South Korean exports fell in December, posting a 1.2% YoY growth rate.

To make matters worse, manufacturing survey’s out of the Eurozone show some countries in contraction, and the rest hovering just above contraction. The Markit US manufacturing survey came in at 53.8 (below 50 is a contraction), the lowest since September 2017. Yet for some unknown reason, traders drove the price of oil and US stocks higher on the news of slower global growth.

Stocks managed to close the day higher as all of the major equity indices were nudged into the green in the final minutes of trading. Trading volumes are shrinking, which is indicating there are fewer buyers and sellers at these levels. Buyers need to keep pushing, as the Fed was expected to destroy over $18 billion today, which continues to pull liquidity from the markets.

The bond market didn’t share in the equity markets excitement, as 10-year Treasury yields closed at 2.62%. The bond market is signaling, along with global manufacturing PMIs, that global growth is slowing.

Apple announced its first-quarter revenue guidance is going to be $84 billion, $7 billion less than analysts expected. Apple shares were down 9% in after-hours trading.

Agricultural commodities continue to hold their six-month low, as sellers cannot seem to push prices down any further. The longer prices hold this level, the higher they will go when the short-sellers are squeezed out.

Gold mining stocks continue to fight to break above their resistance level, which is proving to be a very strong price where buyers and sellers have been meeting. From a Bullish perspective, the amount of buying here is a good indication of where market participants think gold mining share prices are going. Trading volumes are starting to fade, suggesting buyers may be running out of steam.

From a Bearish perspective, should the Bears win out at this price level, there should be a nice move down confirming either the 50- or 100-day moving averages or a prior area of price support. As long as the buyers hold, the Bears shouldn’t be able to drive prices down too far.

From a momentum perspective, when looking at my proprietary year-over-year momentum charts, annual momentum is starting to turn upwards. Often, when momentum starts to turn upwards, there is usually an initial move down in price. This is where technical support levels will be key.