The market managed to hammer out a modest achieve 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, nevertheless, even when the NASDAQ Composite didn’t do the identical.
Nonetheless, every day the market stays above its key shifting common strains and continues to make its method upward, and the broad momentum stays bullish, with each indices holding above a number of key technical assist strains. Overvalued or not, the tide stays bullish, with room to maintain operating. Till it’s clear we simply can’t anymore, we’ve got to lean bullishly.
We’ll outline the make-or-break flooring in a second. First, let’s have a look at final week’s financial numbers, and preview what’s coming this week… not that there’s quite a bit for both.
Financial Knowledge Evaluation
We proceed to play meet up with financial stories delayed by the federal government shutdown, with Q3’s first GDP estimate being printed on Tuesday. It wasn’t jut good. It was nice, enhancing from Q2’s development price of three.8% to 4.3% moderately than slowing to a tempo of three.2%. That’s a particular win, to not point out an sudden one.
Additionally on Tuesday we received two months’ value industrial productiveness and capability utilization numbers from the Federal Reserve. They had been fairly good too, even when not nice. Even just a little ahead progress solidifies what appears 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 development 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 under 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 Knowledge Report Calendar
Supply: Briefing.com, TradeStation
There’s not quite a bit within the lineup for this holiday-shortened week once more, however there are a few associated stories slated for Tuesday. That’s the Case-Shiller Dwelling Worth Index for October, and the FHFA Dwelling Worth Index for a similar month. Now we have no forecasts for something this week. Do discover, nevertheless, that the Case-Shiller Index that’s extra consultant of the city actual property market doubtless continues to dwindle, whereas the FHFA index –– which tends to incorporate extra rural houses — appears to be holding its floor. This retains issues troublesome to learn on the true property entrance, though complete dwelling gross sales (new in addition to present) stay at very subdued ranges.
Dwelling Worth Index Charts
Supply: Customary & 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 often bullish. When all was mentioned and achieved, 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 check record-high territory, the S&P 500 chipped away at technical resistance nicely 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 have a look at the every 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, however it definitely wasn’t a win for the bears.
S&P 500 Every day Chart, with Quantity and VIX 
Supply: TradeNavigator
Now let’s take a step again and have a look at the bigger-picture weekly chart of the S&P 500. From this vantage level you’ll be able to extra plainly see the break above resistance round 6,900. Nevertheless, you may also see simply how nicely the index is discovering assist at a number of rising assist strains. Discover there’s additionally room to proceed rallying earlier than bumping into any considered one 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 every day chart of the NASDAQ Composite, which clearly didn’t combat its solution to a file excessive. It’s as a substitute bumping into technical resistance round 23,655 (purple, dashed).
NASDAQ Composite Every 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, nevertheless. As you’ll be able to see, the composite is way nearer to the higher boundary of its long-term bullish channel (purple, dashed). It’s going to be more durable for it so as to add positive factors from right here, though this weekly chart additionally exhibits us that — just like the S&P 500 — the NASDAQ Composite is discovering loads of technical assist, largely from the convergence of a number of assist strains 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 remains to be intact.
So what’s the decision? This can be a tough scenario for merchants, made even trickier by the point of 12 months — which is often bullish, but additionally largely meaningless because of the lack of quantity. That ought to change in the course of the first full week of the 12 months forward, nevertheless, 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 assist for each indexes… largely across the 100-day shifting common strains (grey). These flooring will have to be decisively damaged earlier than we will entertain any actual bearishness, though we all know we’re overdue for a extra significant correction.