Investors are looking at economic data as the possible catalyst for a market trend. We either need some very bad news to produce a washout or some very good news that will help to create a little fear or missing out. What we are getting is mixed news.
That mixed news on Wednesday came from the Institute for Supply Management, which showed manufacturing data was mostly weak -- favoring the view that inflation continues to soften -- and the JOLTS job opening data, which was still strong. That jobs data is what the Fed is most worried about.
Job openings held steady in November at 10.5 million. According to Nick Timiraos of the Wall Street Journal, who is widely regarded as having special access to the Fed, this is still too high. "The Fed would like to see the ratio of vacancies to unemployed workers decline. It's holding at 1.75".
That news caused a little early weakness, but it is being shrugged off now as the market looks forward to the minutes of the last Fed meeting. That meeting surprised the market with its hawkish tone and the increase in the forecast of the terminal rate, but market players will be digging into it and looking for some dovish clues.
The gloom and negativity seem to have finally become extreme enough to finally bring in some contrarian buyers that are helping. The indexes are being held back mainly by Microsoft (MSFT) , which had a downgrade from UBS and is trading down over 5% currently. Without that, the indexes would be acting much better on three-to-one positive breadth. Strong breadth is reflected in small caps. The Russell 2000 is up 1.4%.
I've been positioning a few things for trades that I think will develop over the next few weeks. Aurinia Pharmaceuticals (AUPH) settled a lawsuit, and there is renewed chatter that it will be a takeover target again. Origin Materials (ORGN) will benefit from the approval of $1.5 billion in tax-exempt bonds in Louisiana. Its first factory should come online later this month.
I'm not expecting a sustained market rally at this point, but I plan on doing more positioning on news flow.
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(Please note that due to factors including low market capitalization and/or insufficient public float, we consider some stocks mentioned in this story to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.)