The market made bullish progress for the primary full buying and selling week of the brand new 12 months, reversing the earlier holiday-split week’s pullback. The S&P 500 technically reached a brand new file excessive, in actual fact, and closed at a record-high shut on Friday as properly. Spectacular.
Simply don’t learn an excessive amount of into final week’s positive factors although. The NASDAQ isn’t following go well with, and it’s the one which must be main the best way. Certainly, in some methods the current form of each index’s charts nonetheless seems like each may very well be establishing a corrective transfer. They only want the suitable technical set off.
We’ll focus on these setups and their technical triggers in a second. Let’s first run by way of final week’s financial studies and preview what’s within the lineup for this week. The excellent news is, we’re just about caught up with all of the postponements stemming from October’s shutdown of the federal authorities. The dangerous information is, among the information we’ve been ready on isn’t precisely bullish.
Financial Information Evaluation
The week began out with final month’s numbers from the Institute of Provide Administration. Manufacturing exercise fell only a bit moderately than edging larger, whereas providers exercise jumped fairly a bit moderately than dipping only a hair. Maybe extra telling, the manufacturing barometer continues to be beneath the 50 mark that divides ahead progress and contraction, whereas the providers index stays above the 50 mark. The factor is, in each instances the ISM indexes’ knowledge is now trending within the path these ranges recommend.
ISM Manufacturing, Providers Index Charts
Supply: Institute of Provide Administration, TradeStation
On Friday we lastly received October’s housing begins and constructing permits. Begins fell, and permits had been flat. On stability although, each metrics seem to stay in longer-term downtrends, jibing with different clues of weak point from the true property market (like house gross sales, as an example).
Housing Begins, Constructing Permits Charts
Supply: U.S. Census Bureau, TradeStation
Friday’s massive information after all was December’s jobs report, which regardless of a lot of the rhetoric surrounding tepid payroll progress of solely 50,000 jobs, technically confirmed progress within the type of a pullback of the unemployment price of 4.4% from November’s studying of 4.5%.
Payroll Progress, Unemployment Charge Charts
Supply: Bureau of Labor Statistics, TradeStation
The numbers you’re not seeing (that performed a task in creating these numbers) are a slight lower within the dimension of the whole labor power paired with a comparatively greater lower within the variety of people who find themselves formally unemployed… regardless of what looks as if an uptick in layoffs.
Every part else is on the grid.
Financial Information Report Calendar
Supply: Briefing.com, TradeStation
This week goes to be one other massive win, starting on Tuesday with a take a look at final month’s client inflation determine adopted by producer inflation on Wednesday. Economists are roughly searching for extra of the identical this time round, and that “identical” is kind of in-line with goal ranges. Nonetheless, at the very least on the patron aspect of the desk it seems like inflation is drifting downward. There may very well be some room for an additional price reduce or two.
Client, Producer Inflation Charge (Annualized) Charts
Supply: Bureau of Labor Statistics, TradeStation
Additionally preserve your eyes out for November’s retail gross sales numbers on Wednesday. Forecasts name for an honest reacceleration of October’s stagnation.
Retail Gross sales Charts
Supply: Census Bureau, TradeStation
We’ll additionally get final month’s present house gross sales replace on Wednesday, though December’s new house gross sales gained’t be posted till later this month. Economists consider we’ll really see some enchancment in gross sales of present houses, however nonetheless not sufficient to say it’s out of the funk it’s been in since 2023. As for brand new house gross sales, we’ll nonetheless simply have to attend and see if August’s surge was a one-off error or the start of one thing extra.
House Gross sales Charts
Supply: Natl. Assn. of Realtors, Census Bureau, TradeStation
Lastly, on Friday we’ll hear about December’s capability utilization and industrial manufacturing. The outlook is for continued flatlining of each measures, though manufacturing is at the very least flattening at comparatively wholesome ranges. The one drawback is, we actually must see each metrics making positive factors for this to be a truly-bullish cue.
Capability Utilization, Industrial Manufacturing Charts
Supply: Federal Reserve, TradeStation
Inventory Market Index Evaluation
The market logged positive factors final week, reversing the earlier week’s slight setback. Nevertheless, as has been the case so typically for some time now, the bears made their stands at well-established technical resistance.
Nowhere is that this extra evident than with the day by day chart of the NASDAQ Composite. Wednesday’s and Friday’s highs close to 23,750 merely matched the index’s early December peak, roughly lining up with its late-December excessive. There’s clearly one thing about this stage.
NASDAQ Composite Each day Chart, with Quantity and VXN
Supply: TradeNavigator
Additionally notice that the NASDAQ’s rising straight-line help (blue, dashed) continues to steer the index larger with larger lows. And sure, there’s little room left between help and resistance to proceed touring round inside from right here. Both the bulls or the bears are going to need to make a dedication, and shortly. As soon as they do, it might begin a protracted transfer that’s now considerably overdue.
Zooming out to a weekly chart of the composite places issues in additional perspective. Particularly, it reminds us that regardless of how technically overbought the NASDAQ could also be right here, the trail of least resistance continues to be to the upside. The composite is simply now pushing up and off of a few long-term help strains proper now, in actual fact, one among which is the decrease boundary of a bullish channel (yellow, dashed) that extends again to 2024. Certainly, there’s a path for the composite to advance all the best way to the 27,000 space (yellow arrow), as loopy as which will appear right now.
NASDAQ Composite Weekly Chart, with MACD and VXN
Supply: TradeNavigator
After all, we can also’t ignore the truth that the bearish MACD crossunder from November continues to be intact.
Right here’s the day by day chart of the S&P 500, which is analogous to the NASDAQ Composite’s however not equivalent. Just like the NASDAQ, it logged a acquire final week. Not like the NASDAQ, it managed to make new highs within the course of. Nonetheless, it’s seemingly caught beneath a short-term technical resistance line.
S&P 500 Each day Chart, with Quantity and VIX 
Supply: TradeNavigator
And the form of the near-term help and resistance strains (blue, dashed) is probably vital. Though it’s superficially and directionally bullish, this rising converging wedge sample following such an enormous runup from April’s low additionally has an opportunity of being the proverbial final hurrah…. the ultimate step earlier than a stumble off the cliff, so to talk.
After all, the bears have had loads of technical alternative to start out an overdue wave of profit-taking over the course of the previous a number of weeks. They’ve not been capable of capitalize on any of them. Certainly, because the weekly chart of the S&P 500 reveals us, just like the NASDAQ, there’s a fairly clear path as much as the higher boundary of a very long-term bullish channel (yellow arrow).
S&P 500 Weekly Chart, with MACD and VIX
Supply: TradeNavigator
So what’s the decision? As momentum merchants (at first), we’ve to proceed leaning in a bullish path. It will be recklessly, naïve, nonetheless, to disregard the danger right here. We simply must see each indexes decisively break beneath the aforementioned technical help earlier than entertaining that prospect, although we all know we’re due for this kind of transfer earlier than later. Don’t attempt to apply an excessive amount of motive within the meantime.