The market managed to hammer out a modest acquire final week. However, don’t learn an excessive amount of into it. It was a Santa Claus rally pushed extra by the calendar than by grounded optimism. It was nonetheless sufficient to push the S&P 500 to a brand new file excessive, nonetheless, even when the NASDAQ Composite didn’t do the identical.
Nonetheless, every day the market stays above its key transferring common traces and continues to make its method upward, and the broad momentum stays bullish, with each indices holding above a number of key technical help traces. Overvalued or not, the tide stays bullish, with room to maintain working. Till it’s clear we simply can’t anymore, we now have to lean bullishly.
We’ll outline the make-or-break flooring in a second. First, let’s take a look at final week’s financial numbers, and preview what’s coming this week… not that there’s loads for both.
Financial Information Evaluation
We proceed to play meet up with financial studies delayed by the federal government shutdown, with Q3’s first GDP estimate being revealed on Tuesday. It wasn’t jut good. It was nice, enhancing from Q2’s progress price of three.8% to 4.3% quite than slowing to a tempo of three.2%. That’s a particular win, to not point out an surprising one.
Additionally on Tuesday we acquired two months’ price industrial productiveness and capability utilization numbers from the Federal Reserve. They had been fairly good too, even when not nice. Even a little bit ahead progress solidifies what seems like a budding turnaround effort although.
Capability Utilization, Industrial Manufacturing Charts
Supply: Federal Reserve, TradeStation
The one different merchandise of any actual curiosity reported final week was December’s shopper confidence studying, from the Convention Board. The advance to 89.1 fell in need of the anticipated rebound to 92.9. However, that’s nonetheless an enchancment from November’s tumble to a multi-month low of 88.7. Though neither of those numbers for December are plotted on our chart beneath but, keep in mind that each are up barely from November’s poor ranges. It’s nonetheless method too quickly to say a turnaround is underway although.
Client Sentiment Charts
Supply: Convention Board, College of Michigan, TradeStation
Every thing else is on the grid.
Financial Information Report Calendar
Supply: Briefing.com, TradeStation
There’s not loads within the lineup for this holiday-shortened week once more, however there are a few associated studies slated for Tuesday. That’s the Case-Shiller Dwelling Value Index for October, and the FHFA Dwelling Value Index for a similar month. We have now no forecasts for something this week. Do discover, nonetheless, that the Case-Shiller Index that’s extra consultant of the city actual property market possible continues to dwindle, whereas the FHFA index –– which tends to incorporate extra rural houses — appears to be holding its floor. This retains issues tough to learn on the true property entrance, though whole house gross sales (new in addition to present) stay at very subdued ranges.
Dwelling Value Index Charts
Supply: Commonplace & Poor’s, FHFA, TradeStation
Inventory Market Index Evaluation
After a few torpid weeks, the market was due for a little bit of a bounce; Christmastime can be normally bullish. When all was stated and executed, the S&P 500 superior 1.4% final week, whereas the NASDAQ Composite gained 1.2%. Though the NASDAQ was capped by a earlier peak earlier than it might take a look at record-high territory, the S&P 500 chipped away at technical resistance effectively sufficient to achieve a brand new file. And, technically talking, the trail of least resistance for each indexes stays to the upside.
However first issues first. Let’s begin this week’s evaluation with a take a look at the day by day chart of the S&P 500 simply to level out the way it pushed its method above a horizontal ceiling (inexperienced, dashed) round 6,904, the place the index peaked in October in addition to across the center of this month. It wasn’t a convincing victory for the bulls, but it surely definitely wasn’t a win for the bears.
S&P 500 Each day Chart, with Quantity and VIX 
Supply: TradeNavigator
Now let’s take a step again and take a look at the bigger-picture weekly chart of the S&P 500. From this vantage level you possibly can extra plainly see the break above resistance round 6,900. Nonetheless, it’s also possible to see simply how effectively the index is discovering help at a number of rising help traces. Discover there’s additionally room to proceed rallying earlier than bumping into any one in every of a few technical ceilings that reach again for a number of months, if not a few years. The following resistance degree doesn’t come into play till early 7,300.
S&P 500 Weekly Chart, with MACD and VIX
Supply: TradeNavigator
Right here’s the day by day chart of the NASDAQ Composite, which clearly didn’t struggle its solution to a file excessive. It’s as an alternative bumping into technical resistance round 23,655 (pink, dashed).
NASDAQ Composite Each day Chart, with Quantity and VXN
Supply: TradeNavigator
The weekly chart of the NASDAQ considerably illustrates why it’s not performing in addition to the S&P 500 is now, nonetheless. As you possibly can see, the composite is way nearer to the higher boundary of its long-term bullish channel (pink, dashed). It’s going to be harder for it so as to add beneficial properties from right here, though this weekly chart additionally reveals us that — just like the S&P 500 — the NASDAQ Composite is discovering loads of technical help, largely from the convergence of a number of help traces round 22,573.
NASDAQ Composite Weekly Chart, with MACD and VXN
Supply: TradeNavigator
Regardless of the case, as can be the case with the S&P 500, the NASDAQ’s path of least resistance stays to the upside even when the bearish MACD crossunder that first materialized in November continues to be intact.
So what’s the decision? It is a difficult state of affairs for merchants, made even trickier by the point of 12 months — which is normally bullish, but in addition largely meaningless as a result of lack of quantity. That ought to change through the first full week of the 12 months forward, nonetheless, when buying and selling exercise resumes in earnest and is extra reflective of the bulk opinion.
Both method, though shares are nonetheless overvalued, the underlying momentum stays bullish, and there’s tons of technical help for each indexes… largely across the 100-day transferring common traces (grey). These flooring will must be decisively damaged earlier than we will entertain any actual bearishness, though we all know we’re overdue for a extra significant correction.