Regardless of Friday’s greatest efforts from the bulls, the market simply wasn’t capable of unwind the injury accomplished earlier within the week. Even when the economic system seems to be doing “OK,” shares as a complete at the moment are is a few fairly critical bother… virtually. There are a few remaining straws to place in place earlier than the load of the brewing correction effort simply turns into an excessive amount of to bear.
The excellent news is, the traces within the sand are crystal clear.
We’ll take a look at them intimately in a second. First, let’s assessment final week’s financial stories and preview what’s coming this week.
Financial Information Evaluation
It was a busy week certainly, beginning in earnest on Tuesday with December’s retail gross sales knowledge. It wasn’t nice. Retail spending was primarily flat, suggesting customers are feeling some extra critical monetary ache than first believed, in the end main one to surprise if the economic system wants extra rapid assist in the type of an rate of interest lower that wasn’t precisely on the near-term radar.
Retail Gross sales Charts
Supply: Census Bureau, TradeStation
That thought was retracted a bit on Wednesday, nevertheless, with a January jobs report that was a lot better than anticipated. The U.S. economic system added 130,000 new jobs versus expectations of solely 55,000 which was sufficient to dial the unemployment charge again down from 4.4% to 4.3%.
Unemployment Fee, Payroll Progress Charts
Supply: Convention Board, College of Michigan, TradeStation
The variety of formally unemployed individuals fell by 141,000, regardless of headlines of sweeping layoffs, as soon as once more elevating the query of whether or not or not we really need decrease rates of interest from right here.
The factor is, possibly we do. That’s the final take-away from Thursday’s report on gross sales of present properties. Economists anticipated them to peel again a bit of from December’s annualized tempo of 4.27 million, however they fell fairly a bit extra, to three.91 million.
Dwelling Gross sales Charts
Supply: Census Bureau, Natl. Assn. of Realtors, TradeStation
The subsequent take a look at new dwelling gross sales (for November and December) is approaching Friday of this week. Analysts are calling for about the identical tempo as we noticed in October, which was higher than the current common, however hardly sufficient but to name “progress.”
Lastly, on Friday we obtained January’s inflation numbers. As anticipated, worth will increase proceed to chill off. This makes it a lot simpler for the Federal Reserve to justify the aforementioned rate of interest cuts which were on the radar for a while now.
Client, Producer Inflation Charts
Supply: Census Bureau, Natl. Assn. of Realtors, TradeStation
We haven’t but heard January’s producer inflation knowledge; it’s coming in late February. Given what we’ve seen right here, nevertheless, it’s possible producers’ prices are being tamed moderately effectively too.
All the things else is on the grid.
Financial Information Report Calendar
Supply: Briefing.com, TradeStation
Along with new properties gross sales, on Wednesday of this week we’ll hear November’s and December’s housing begins and constructing permits. Forecasts we received’t see a lot change with both, which isn’t encouraging in that the current figures haven’t been all that nice.
Housing Begins, Constructing Permits Charts
Supply: Census Bureau, TradeStation
Additionally on Wednesday search for final month’s industrial manufacturing output and utilization of the nation’s factories’ capability. Economists are calling for a slight enchancment of each, however notably, even a slight enchancment will lengthen progress tendencies for every. The home economic system is firming up right here.
Industrial Manufacturing, Capability Utilization Charts
Supply: Census Bureau, TradeStation
Additionally maintain your eyes and ears open on Friday for December’s private earnings and private spending report, which performs a task within the Fed’s resolution on any rate of interest cuts.
Inventory Market Index Evaluation
We start this week with a take a look at the each day chart of the S&P 500 largely simply for instance that whereas the market is on the verge of a technical breakdown, it’s not previous the purpose of no return fairly but. Though the index just-barely closed underneath a long-term straight-lie assist stage (purple, dashed), the 100-day shifting common line (grey) at 6,818 is clearly offering some extent of assist. Whether or not or not it holds up stays to be seen. However, that is the make-or-break mark for the S&P 500.
S&P 500 Each day Chart, with Quantity and VIX 
Supply: TradeNavigator
Right here’s the weekly chart of the S&P 500 to place final week’s motion in a bit extra perspective. It was the worst week after a number of weeks of stagnation, however there’s clearly some assist round 6,818.
S&P 500 Weekly Chart, with MACD and VIX
Supply: TradeNavigator
Each charts above present us one thing that’s price drawing out right here, significantly in gentle of the truth that the S&P 500 is testing well-established assist. That’s the truth that the volatility index (or VIX) is as soon as once more testing a corresponding technical ceiling proper round 24.0. If-and-when that fails as resistance on the identical time the S&P 500 stops discovering assist at its 100-day shifting common line, it might open the proverbial floodgates.
And for what it’s price, the NASDAQ Composite has already damaged underneath its nearest import flooring, after repeatedly bumping into horizontal resistance round 23,820. Discover the NASDAQ’s volatility index (the VXN) can also be testing a longtime technical ceiling round 28.0.
NASDAQ Composite Weekly Chart, with MACD and VXN
Supply: TradeNavigator
What we actually wish to hone in on with the NASDAQ Composite, nevertheless, is the way in which its 20-day (blue), 50-day (purple), and 100-day (grey) shifting common traces are all about to converge as their bullish divergence first seen early final 12 months unwinds (circled in orange). The 20-day line is already beneath the 50-day line, the truth is, and as one or each of the opposite falls underneath the 100-day shifting common line, it would affirm a sweeping lack of momentum. It should additionally possible set off some bearish algorithm trades, whereas on the identical time merely spook a bunch of merchants who maintain tabs on these kinds of particulars.
NASDAQ Composite Each day Chart, with Quantity and VXN
Supply: TradeNavigator
The bulls clearly nonetheless have a slender path out of extra critical bother right here. Nonetheless, it’s going to take a number of look and a few crystal-clear bullish financial information to sidestep a correction that’s now lengthy overdue. One or two extra unhealthy day ought to be all that’s wanted to get that bearish ball rolling.
We’ll speak draw back targets when-and-if the necessity arises, though it’s price stating now that in each circumstances above the indexes’ close by 200-day shifting common traces (inexperienced) are one of many first checkpoint targets.