1-12-16 – Where is the market going?

Stocks see a second day of mixed trading as investors await earnings and economic news. After the modest 1.64-point advance Monday, the S&P 500 is up 7 points to 1930.87 heading into midday Tuesday.

Technology (XLK), Consumer Discretionary (XLY), and Healthcare (XLV) are keeping the S&P above water. However, Energy (XLE), Basic Materials (XLB), and Utilities (XLU) are seeing notable weakness.

Crude oil is off another 85c to $30.50 and gold shed $9 to $1087.

Meanwhile, Treasury bonds are steady in wait-and-see mode, as this week’s economic calendar is certainly back-end loaded. There’s no significant data until Jobless Claims Thursday. Then Friday holds reports on Retail Sales, inflation (PPI), Manufacturing (NY Empire), Industrial Production, and Consumer Confidence (U of Michigan). The yield on the benchmark ten-year Treasury remains near 2.15%.

On the option front, trading has slowed from the brisk levels seen late last week. Roughly 3 million calls and 2.9 million puts traded across the exchanges through the first 90 minutes of Tuesday’s session. Anticipated volume for the day is about 17 million contract, compared 25.1 million Thursday and 19.1 million on Friday.

SPDR Financial (XLF) Feb 22 puts, SPDR Industrials (XLI) 1/22/16 Weekly 22 puts, and Intel (INTC) April 38 calls are among the most active options.

Alcoa (AA) options are seeing heavy trading as well. Nearly 30K Jan 8 puts traded on the aluminum company. Jan 7.5 puts, Jan 7 puts, and Weekly 1/22/16 7 puts on the stock are also drawing heavy interest and the stock is not faring well – falling 10% to 52-week lows of $7.20 after the company posted earnings after the closing bell yesterday.

Alcoa is the first S&P 500 index member to release results for the fourth quarter and the results might be indicative of a larger trend expected during the reporting season. Namely, according to Zack’s, overall earnings for S&P 500 companies are expected to be down 7.4% from last year on a 4.7% decline in revenues. It’s one of the worst fourth quarter reporting seasons in recent memory.

Looking forward, Dow component JP Morgan (JPM) reports Thursday and a number of other big financials Friday morning. Then the floodgates on Q4 results open next week.

Naturally, some pre-earnings jitters are affecting investor sentiment ahead of the results. Furthermore, the energy sector continues to weigh with crude oil prices falling further and this week’s back-end loaded economic calendar is adding to the murky outlook, in the short-term.

However, unless the economic numbers and early results from the big financials really disappoint, the odds favor a relief rally towards the end of the week. The bar has been set very low ahead of the numbers. Until then, the trend of mixed and choppy trading in the equities market is likely to continue. Crude oil will get its next cue from Weekly Inventory Data tomorrow morning.

The S&P 500 is attempting to cling to support at 1920-1922, which coincides with Friday’s close and a September-October support/resistance area. The 50-day and 200-moving average crossovers from Friday are a bearish “death cross” technical signal. Beyond 1920, the next support lows are Monday’s low near 1900 and then the 1867 range. Plenty of overhead resistance, including today’s highs of 1947, then 1950 and 1960.