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THE PLAYBOOK REMAINS THE SAME

Outlook: With the debt ceiling now behind us, the stage is set for continued strength across risk assets as the Fed pause, stagnating dollar and disinflation all provide tailwinds during a favorable seasonal stretch when non-commercial shorts on the S&P are near all-time highs and the media perpetuates a bearish narrative based on one idea (supposed lack of breadth). Value and small cap equities will trail, not diverge, from the strength in large cap growth as the short squeeze eventually takes us well beyond the .618 Fibonacci retracement in the S&P 500.

QQQ: Remains one of the best charts and while AI hype may drive more frequent short-term blow offs, the general direction remains positive. 

SPY: As fears of recession melt away, SPY will show strength both relatively and absolutely, making an intermediate term run for 455-460.

IWM: Sitting above trendlines and breaking out of volatility compression off failure to make new lows suggest a bullish posture. Look for 190 and then 200.

DXY: Sideways action with a gentle downward slope in local highs and lows is good for risk assets. The 200D MA will be the ceiling on any attempts higher while a retest of the 101-102 zone looks likely.

Yields: Indecision in yields continues to be good for long duration equities. My expectation remains that the next big move will be down, not up.

Natural Gas: Renewed weakness on low volume indicates the potential for a bottom, and with momentum turning up the case is not lost. Stop below 2.1.

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JANUARY 12, 2025 OBSERVATIONS

Multiple selloffs in equities following strong jobs and ISM data highlights a general concern of returning inflation at a time when valuations are already quite...
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