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“Believe nothing you hear, and only one half that you see.” – Edgar Allan Poe

Below is a snippet of commentary from today’s Morning Lineup.  Start a two-week trial to Bespoke Premium to view the full report.  

Equity futures are little changed and crude oil is modestly lower to start the week which is a bit of a surprise given the Iranian-backed militia attacks on a US military base that killed three and injured dozens. The calendar is light to kick off the week, but it will be the busiest week of earnings so far this earnings season, and we’ll get the Fed decision on interest rates on Wednesday. As if that wasn’t enough, on Thursday we’ll get the January read on manufacturing from the ISM, and Friday will cap things off with the Non-Farm Payrolls report.

Friday’s modest losses ended a streak of six straight daily gains of which five were record highs. Since bottoming out at extreme oversold levels back in October, the S&P 500 hasn’t skipped a beat, and since that low hasn’t seen a pullback of even 2% on a closing basis. During last week’s winning streak, the S&P 500 got close but never quite reached extreme overbought levels (2+ standard deviations above the 50-day moving average).

The Russell 2000 has been an entirely different story.  It outperformed during last fall’s rally but ran into profit-taking as the calendar turned to 2024.  While the S&P 500 hasn’t even pulled back 2%, the Russell experienced a peak-to-trough decline of over 7% on a closing basis before bouncing at support just above its 50-day moving average.  Over the last four days, though, there has been a lot of indecision at a key level representing the highs from February and July last year. With a busy week of earnings and a Fed meeting later this week, we should soon get a good idea of which way small caps will break.

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