The Dragon awakens?
Economic Announcements:
- 3:00 PM: House Price Index
- 3:00 PM: Fed Governor Waller speech
- 4:00 PM: Consumer confidence
Earnings Reports:
- Home Depot (HD)
- Constellation Energy (CEG)
- MercadoLibre (MELI)
- American Tower (AMT)
- EOG Resources (EOG)
- Realty Income (O)
- Keurig Dr Pepper (KDP)
- NRG Energy (NRG)
- Workday (WDAY)
- Axon Enterprise (AXON)
- First Solar (FSLR)
- Fidelity National Information Services (FIS)
- CoStar Group (CSGP)
- HP Inc (HPQ)
Analysis:
VPOC: 6850
VVA: 6835 – 6879.50
High-Low: 6832.75-6930.25
PP: 6870
Open: 6858.25 (Zone 1)
VIX: 21.02
SP500 Trend: Overall neutral sentiment 🟠
Yesterday, the S 500 opened lower in the 6920–6930 resistance zone. Sellers pushed price down to the 6857–6866 support zone after moving fairly easily through the 6883–6900 support zone (even forming a single print on the way down). Price then moved sideways above support and climbed back above the 6883–6900 resistance zone ahead of the US session.
At the US open, buyers took control and tried to break the 6920–6930 resistance, but sellers defended the area and drove a sharp sell-off, bringing price back below the 6857–6866 support zone. During the drop, the S 500 created a single print at 6880–6892 just above VVAH-1, reinforcing the strength of that level. The index ended the day consolidating between the 6815–6830 support and the 6857–6866 resistance, closing at 6857.
Volatility remained elevated, with fairly sharp moves for much of the day. The VIX is around 21, and the session should remain volatile, especially given concerns around the tech sector and the tariff situation.
This morning, the S 500 opened in Zone 1 at the 6857–6866 resistance area, broke above it, and is currently moving sideways above this level. Delta appears balanced and, despite a buyer-led open, neither side seems to be taking control for now. VVAH-1 should be solid, supported by the 6880–6892 single-print area and the 6883–6900 resistance zone. To move beyond this area, strong bullish momentum will be required.
On the options side, the major call zone is at 7000. For puts, there are several notable zones, including 6800, 6750, and 6700.
Today, we have the House Price Index at 3:00 PM and consumer confidence at 4:00 PM. Fed’s Waller is also scheduled to speak, as is FOMC’s Bostic.
Scenario 1 🟡: On a rejection at VVAH-1 or at the 6883-6900 resistance zone, price could consolidate within the 6835-6900 range.
Scenario 2 🔴: On a break below VVAL-1 at 6835 and a break below the 6815-6830 support zone, price could move toward the 6770-6777 support zone.
Scenario 3 🟢: On a break of the 6883-6900 support zone, the price could head back up and target yesterday’s high at 6930. Upon breaking the 6920-6930 resistance zone, the price could then move towards the 6956-6963 zone.
Zones of Interest:
- 7030-7043 (Major resistance zone + ATH 7043)
- 6993-7000 (Resistance Zone)
- 6956-6963 (Resistance zone)
- 6920-6930 (Resistance zone + prior day high 6930)
- 6883-6900 (Major resistance zone + single print 6880-6892)
- 6857-6866 (Support Zone)
- 6815-6830 (Major Support Zone)
- 6,770-6,777 (Support Zone)
- 6715-6720 (Support zone)
60-second Chrono
Market Performance
Wall Street posted a decline, mainly due to losses in the software and financial sectors. Concerns about tariff policy, amplified by a recent US Supreme Court decision, also weighed on the market.
Bond and currency market reactions
Treasury prices rose as the US dollar weakened, pushing gold prices higher. Oil prices declined.
Upcoming Economic Data
Several economic releases are expected, including house prices and consumer confidence. Analysts expect a slight increase in consumer confidence and stable house prices.
Remarks from Fed officials
Several Federal Reserve presidents, including those from Chicago and Atlanta, are scheduled to speak at key events, addressing monetary policy topics and the economic outlook.
Impact of tariffs
The Supreme Court decision created additional uncertainty around tariff policies, leading to increased market volatility. President Trump warned of potential tariff increases.
Corporate activity
Many companies, including Home Depot and Constellation Energy, are preparing to report fourth-quarter earnings, and investors are particularly focused on the implications of tariff changes and the economic outlook.
Trends in the technology and financial sectors
Software companies are facing higher borrowing costs and increased pressure, while Canadian banks are expected to deliver solid results despite already elevated valuations.
China news
China announced more aggressive support measures for its tech sector this morning, supporting US futures today.
Macro
Manufacturing sector: A sharp drop in demand
- Factory orders (MoM) (Dec):
Actual: -0.7%
Forecast: -0.4%
Previous: 2.7%
-> This is a clear sign of weakness in the real economy. Not only is the figure negative, it is also worse than what the market expected. The contrast is even sharper given that it follows an exceptionally strong prior month. This is evidence that businesses are anticipating weaker future demand and are limiting investment, most likely due to high borrowing costs.
Summary
Cooling is having an effect: A decline in factory orders means companies are producing less. For the Fed, this is rather good news because it shows that its high interest-rate policy is successfully cooling overall demand, which helps bring inflation down.
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