Micron Sets A New Tone
The S&P closed down just 0.75% on the week after recovering from a fairly volatile range break that overshot the key 675 support zone and 50 SMA.
Although an overshoot, the low from Wednesday may now act as the higher low in the trend count, keeping the daily direction up.
This starts to setup a look below and fail on the daily, very similar to what happened headed into the Thanksgiving week, 11/24. Perhaps the Santa rally isn’t off the table!
*Reminder Holiday Market Hours
- Wednesday – Early close 1pm
- Thursday – Completely closed
Labor & Inflation – Cook the books!
Last week labor data released for October and November painted a picture of a still cooling hiring, and still low firing environment.
The largest job loss in October is from the Government sector as a result of the shutdown, and we can see in November the number is much less severe.
It’s worth remembering though that the Fed is going to revise these figures lower by 60k jobs.
This means that even without the negative print from the government sector in October, the 52k private jobs would be revised to -8k, and the November 64k print (all inclusive) would be revised to 4k.
This stalling labor markets is also reflected in the 4.6% unemployment rate.
We can see that although there is no October print, the on temporary layoff contribution makes a nearly 20% increase over September. Reentrants are up 12% over September. Permanent losers are technically down 4%.
This reinforces the fact that the instability seems less structural in nature, and more due to government shut down disruptions. It doesn’t invalidate odds of a labor induced recession, but it’s certainly lower odds.
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On the inflation front, the chefs out back did a particularly good job of cooking the number to perfection.
2.7% | 2.6% core – vs – 3.1% | 3.0% core expected
An unbelievable feat, that many argue is solely due to the omission of housing inflation. Note there will not be an October print.
But is it all that unreasonable to think that shelter inflation is not pressuring the headline print higher?
We took a look behind the scenes at the ZORI (Zillow Observed Rent Index) and found that although not a 0, shelter is alleviating some pressure on inflation.
Month over month November ZORI is down ~50% from 0.17% to 0.08%. Year over year November ZORI is down 9.25% from 2.53% to 2.29%. You’ll also observe that yearly ZORI has stabilized ~1% lower than the pre-pandemic average of ~4% at ~3% and now falling.
So what does it mean… any meaningful downtick in goods inflation proves the Fed’s point about tariff inflation remaining a one time price increase that is… dare we say “transitory.”
If the labor conditions continue to deteriorate, (perhaps on some new year restructuring headed into 2026?) expect the Fed to address that side of the dual mandate with lower rates than what they outlined in the SEP at 3.4% for 2026.
Markets are pricing in 3.1%.
So we still likely have Fed support noting the trend in both labor and inflation.
One way to break this base case without a black swan is services inflation reaccelerating into easing Fed policy if wage growth sees an uptick.
Why might that happen? Labor supply contraction, which doesn’t currently seem to be the case. Keep an eye on any sharp moves in labor participation rate reports and JOLTS.
MU Earnings
Before getting into the technicals of the broad market, I did want to address a change in the way market perceived MU earnings last week.
NVDA, AMD, AVGO set the precedent of fading after strong earnings numbers for the semiconductors.
MU smashed the markets expectations out of the park on future guidance (what really moves the stock), and although it faded on day 1, day 2 closed at a brand new all time high.
This change in tone may be enough to thwart the continued skeptics in the short term on the AI trade.
Keep in mind that money flows like this and MU is somewhere in the middle of the value chain (bold):
Capital → Power & Infrastructure → Data Centers → Chips & Systems → Models → Middleware → Enterprise Software → Consumer Products
It’s a reminder if the capital never shows up from OAI or other stakeholders in the AI loop this all falls apart.
So as long as capital isn’t under question, strong earnings and forward guidance continuing to move forward through the value chain will remain bullish for the AI trade, and thus markets.
Trade Brigade Live Squawk
Why wait for the holidays? Give yourself the early gift of intraday clarity.
Check out this recording for a taste of what each morning session is like: 07/09 Live Squawk
Onboarding support will be available through the evening and Monday morning starting at 6:30am EST before the 8am premarket-prep kick-off.
Broad Market Analysis
SPY – Weekly
Main highlight this week is the close back over the two week balance range after breaking below. Great hold over the 20 SMA for a higher low. Over the ATH and its simple trend continuation.
SPY – Daily
Wednesday’s bar though frustrating, does start a look below and fail from the sellers. Very similar to how the 11/20 bar failed to gain traction. Headed into a short holiday week, we may be setup for similar circumstances to the Thanksgiving week.
Great recapture of the daily 50 & 20 SMAs. Remaining above the 279 level ideally gets traction to the top of the balance range up near 689 ATH level.
Back below 675 complicates the story.
SPY – Hourly
Ideally markets attempt to firm up the daily higher low by converting the 1h trend to more cleanly up. We can see that take shape via higher highs over Friday high, then subsequent higher lows over 679.5.
Don’t forget we have an unreparied overnight all time high.
If markets weaken, its looking like under 675 and the daily 50 SMA is where the trouble starts.
Market Internals – NYSE
Friday was okay. Doesn’t really support overwhelming buy side, but also not bearish.
Market Internals – NASDAQ
If you look to the Nasdaq side of the market, which remember S&P is 35% weighted to tech, internals look much more compelling on the long side. Volume flows much more substantial and bullish cumulative TICK.
Market Profile
Relative to the Wednesday move, value has progressed higher, and there was no acceptance below the single prints. Note the poor high in need of repair at the Friday high. Looking further left towards Monday and Friday of last week, note the singles above.
HYG – Junk Bonds
Junk still shows a subtle bearish divergence post OpEx. If youre bearish, this is where you want to place emphasis. Note though, more realistically, this is just ONE data point of the many we’ve covered so far.
If you want the full take, including all of the nuance of breadth, risk appetite and much, much more, check out the weekend episode here:
Economic & Earnings Calendar
This is the calendar through January 09.
Mostly interested in ISM PMIs and Labor upcoming starting with JOLTs on Wednesday January 07 based on our discussion above.
Top watches: NONE!
Swing Stock Scans
AKAM – Daily / Weekly
Weekly flag with a daily trendline in play for a potential break back up through an earnings gap towards 100. Thematically correct in cyber as we know the administration has been pushing for a 2026 reconsideration. (Not necessarily this stock, but this sector.)
ALK – Daily
High tight flag on a daily 200 SMA recapture. Looking for a move over the 52.85s to get in gear towards the 65.65 pivot high. Generally bullish on leisure / travel with CCL reporting killer earnings and guidance Friday.
FIVE – Daily
High tight flag in a thematically correct spot. Retail has been on the move recently with $M, $KSS, $ROST, $AEO, $ANF. Old earnings gap to trade through above if it gets going.
ISRG – Daily
Weekly consolidation after an earnings gap to recapture the daily 200 SMA. Over 579.65 things get interesting towards 609.3.
TTAN – Daily
Great higher low after a look below and fail of the daily 200 SMA. Over 110 can get interesting towards a 119.60 retest.