Regardless of the steep selloff in the midst of the week, the S&P 500’s restoration on Friday was sufficient to carry it again to a breakeven for the week. The NASDAQ Composite? Not so – it did find yourself within the crimson, closing beneath a fairly essential technical help degree that had been performing as a fairly dependable flooring. Even so, even then the NASDAQ stays above its most essential flooring, as does the S&P 500.
In different phrases, final week wasn’t a dying blow.
There are definitely extra crimson flags waving now than there week in the past although. Certainly, we’re nearer to a long-overdue meltdown than we’ve been in a protracted whereas. One or two extra tough days may nonetheless push the entire shebang off the cliff’s edge.
We’ll level out all these strains within the sand in a second. First, let’s have a look at final week’s largest financial information and preview what’s within the lineup for this week.
Financial Information Evaluation
The roles report that was initially due on Friday of final week ended up being postponed till Wednesday of this week. So, the one numbers we truly obtained had been the financial barometers from the Institute of Provide Administration. They had been good and unhealthy, however extra good than unhealthy. Manufacturing exercise was catapulted to a multiyear excessive, and although the providers index didn’t budge from December’s degree, it’s nonetheless holding above the pivotal 50 mark it fought its means again above late final yr.
ISM Providers, Manufacturing Index Charts
Supply: Institute of Provide Administration, TradeStation
This in fact leans in a bullish route, even when earnings and mass layoffs don’t make it seem to be the economic system’s truly firing on all cylinders.
Financial Information Report Calendar
Supply: Briefing.com, TradeStation
As was famous, January’s jobs numbers can be posted on Wednesday. Economists anticipate a repeat of December’s figures, kind of; the unemployment fee ought to maintain at a fairly wholesome 4.4%, and payroll progress of 55,000.
Unemployment Price, Payroll Development Charts
Supply: Convention Board, College of Michigan, TradeStation
There’s little room for disappointment right here, in fact, significantly after the market flashed some critical vulnerability final week.
Earlier than that report, although, we’ll be getting December’s retail gross sales figures on Tuesday. Forecasts name for a slight slowing from November’s progress tempo, however progress nonetheless.
Retail Gross sales Charts
Supply: Census Bureau, TradeStation
All issues thought of, retail spending stays a stunning brilliant spot for the economic system, and by extension, for the inventory market itself.
On Thursday we’ll begin a streak of essential actual property knowledge, with gross sales of current houses. They’ve been solidly rising for the reason that center of final yr, and whereas nonetheless at low ranges, that is encouraging. Simply know that economists don’t imagine this uptrend continued by final month.
Residence Gross sales Charts
Supply: Census Bureau, Natl. Assn. of Realtors, TradeStation
New-home gross sales needs to be launched by the Census Bureau someday within the week after this one. These gross sales stabilized at ranges under August’s surge. Even so, the larger development right here continues to be pointed upward, even when very erratically.
Lastly, on Friday search for January’s client inflation knowledge. It’s nonetheless holding on the Fed’s goal ranges of between 2.0% and three.0%, which — given the FOMC’s latest disinterest in altering rates of interest — is sensible. Regardless of the case, this can be a “no information is sweet information” scenario. A ho-hum assembly of expectations can be largely met with no perceived motive to cost this report into inventory costs.
Shopper, Producer Inflation Charts
Supply: Census Bureau, Natl. Assn. of Realtors, TradeStation
Producer inflation charges can be reported the week after this one, though it’s unlikely they’ll transfer a lot both.
Inventory Market Index Evaluation
It’s considerably a story of two markets. The S&P 500 managed to combat its means again to a breakeven earlier than taking over an excessive amount of water. The NASDAQ did endure a much bigger hit it didn’t bounce again from, besides, is holding above one ultimate — and essential — technical flooring.
In each circumstances although, there’s rising trigger for concern.
Let’s begin with a have a look at the every day chart of the S&P 500, drawing out one essential element. That’s, as soon as once more the 100-day transferring common line (grey) at present at 6,799 stopped the promoting on Thursday, and supplied a pushoff/reversal level.
S&P 500 Every day Chart, with Quantity and VIX 
Supply: TradeNavigator
Nonetheless, there’s trigger for concern. Chief amongst these worries is that the amount behind the down days stays a lot greater than the amount behind the up days; Friday’s large bounceback wasn’t a majority opinion.
Zooming out to a weekly chart of the S&P 500 sheds some extra gentle on the scenario. Specifically, the help line (pink, dashed) that extends all the way in which again to the center of final yr continues to be in play. However, the technical horizontal ceiling (pale blue, dashed) at 6,996 is as nicely. One or the opposite goes to want to offer ultimately.
S&P 500 Weekly Chart, with MACD and VIX
Supply: TradeNavigator
The weekly chart reveals us a few different issues as nicely. Certainly one of these is the truth that the bearish MACD cross we first noticed in November continues to be widening, confirming a broader improvement of bearish momentum. And, the S&P 500’s volatility index (VIX) seems to have ran into a longtime ceiling at 23.0… coinciding with Thursday’s low and subsequent rebound.
That doesn’t the weak point is over and performed. We’d anticipate the bulls to push again right here and drive the VIX to make a short-term peak; the pause is predictable. There’s nonetheless an excellent likelihood, nevertheless, that the bears will regroup and restart their effort this week. If the S&P 500 goes to interrupt beneath its rising help line, it’s prone to coincide with the VIX popping above the 23.0 degree. If-and-when that occurs, it’s prone to begin a corrective transfer that can be troublesome to cease.
And the NASDAQ Composite is nearer to doing that than the S&P 500 is. Check out the every day chart of it under. The NASDAQ did break beneath its 100-day transferring common line (grey) at 23,175 on Wednesday, and didn’t claw again above it by the tip of the week.
NASDAQ Composite Every day Chart, with Quantity and VXN
Supply: TradeNavigator
Discover on the every day chart that the NASDAQ’s volatility index (VXN) seems to have peaked at a longtime ceiling close to 29.0 with out truly transferring above it; that may very well be a short lived pause, as is the case with the VIX.
The weekly chart of the composite reveals us a bit extra readability on not solely how and the place the VXN is bumping right into a ceiling, however why. As you may see, the NASDAQ Composite itself continues to be discovering help on the long-established technical flooring that’s serving because the decrease boundary of a long-term bullish channel. It was examined once more final week, and held up.
NASDAQ Composite Weekly Chart, with MACD and VXN
Supply: TradeNavigator
All the identical, the bears are clearly testing bearish thresholds right here, and doing so after the composite’s confirmed horizontal resistance at 23,820 (crimson, dashed), and at a time with the bearish MACD divergence is widening. One stumble may very well be all that’s wanted to interrupt the technical help line right here, whereas concurrently sending the VXN above 29.0 for a extra sustained stretch of time.
We’ll solely want to speak about draw back targets if-and-when that occurs.