Nicely achieved bulls! The market began final week’s buying and selling on the verge of a reasonably severe technical breakdown. After an unsure begin, it discovered a solution to struggle its approach again from the brink, and even ended the week on a excessive observe… with folks shopping for shares headed into the weekend, largely in response to the Supreme Courtroom’s resolution to unwind lots of President Trump’s recently-imposed tariffs.
Simply don’t get too gung-ho simply but. The quantity behind final week’s modest restoration was something however convincing, and shares didn’t precisely cement a agency restoration basis into place. The market might nonetheless slip into quite severe bother after final week’s reprieve. One or two unhealthy days might (nonetheless) do it.
We’ll take a look at the motion intimately in a second. Let’s first dissect final week’s financial information and preview what’s coming this week.
Financial Information Evaluation
For a holiday-shortened week, we really received fairly a bit of reports final week, with a lot of it approaching Tuesday, and most of it fairly good.
Take Tuesday’s take a look at a few months’ price of housing begins and constructing permits, as an example. Though tepidly, we’re beginning to see discernible enhancing tendencies for each… principally. We’d prefer to see just a few extra months of ahead progress right here, however no less than there’s just a little hope via December’s information.
Housing Begins, Constructing Permits Charts
Supply: Census Bureau, TradeStation
Ditto for capability utilization and industrial manufacturing numbers launched on Tuesday. It does appear to be we’re seeing some constructive, constant progress right here, even when it’s a bit anemic. The path of those traces is way extra vital than their absolute ranges.
Industrial Manufacturing, Capability Utilization Charts
Supply: Census Bureau, TradeStation
On Friday we lastly received a two-month replace (November and December) on new dwelling gross sales, rounding out the present dwelling gross sales figures we heard every week earlier. They had been … okay. Though nonetheless in-line with the slight lull seen shortly after August’s sudden surge, there’s no denying the figures are holding on to many of the floor they reclaimed after lingering losses throughout and due to the COVID-19 pandemic. After all, there’s additionally no denying each little bit of this energy for brand new houses gross sales is popping out of would-be demand for present houses.
Dwelling Gross sales Charts
Supply: Census Bureau, Natl. Assn. of Realtors, TradeStation
Or, possibly that’s not fairly it. As of December, stock of present houses for gross sales was again to close a one-year low of 1.22 million, versus July’s 1.55 million. These homes simply don’t exist.
Lastly, although we’re not charting it right here, additionally on Friday we heard final month’s private revenue and expenditures figures, which makes a sizeable impression on the Fed’s choices relating to rates of interest. Pay will increase are nonetheless wholesome with out being overheated, and value will increase accelerated however stay inside tolerable ranges… for now. Nonetheless, the FOMC now has rather less room to proceed with plans to impose a handful of fee cuts this 12 months.
Every little thing else is on the grid.
Financial Information Report Calendar
Supply: Briefing.com, TradeStation
This week’s going to be a quite busy one as effectively, kicking off with Tuesday’s dwelling pricing stories. You’ll recall we’re really seeing a divergence right here, the Normal & Poor’s Case-Shiller determine in decline even because the FHFA’s determine inches increased (maybe suggesting city space’s costs are unwinding whereas rural costs are nonetheless gaining floor).
Dwelling Value Charts
Supply: Normal & Poor’s, FHFA, TradeStation
Additionally on Tuesday we’ll get our one-and-only shopper confidence rating from The Convention Board for February. Economists count on a measurable enchancment from January’s degree, nevertheless it ought to nonetheless be at uncomfortably low ranges.
Shopper Sentiment Charts
Supply: Convention Board, College of Michigan, TradeStation
The College of Michigan’s ultimate shopper sentiment studying shall be posted someday subsequent week. It too is nearly sure to carry at very low ranges. It stays to be seen if this shall be an issue for the economic system or the market although. Loads of individuals are considering and saying one factor but seemingly doing one other.
Final however not least, search for final month’s producer inflation numbers on Friday. You would possibly recall that January’s shopper inflation figures continued to float decrease, however producer inflation charges haven’t precisely been following that pattern. It’s completely doable for them to proceed defying their counterpart’s path, which after all considerably weakens the case for the Federal Reserve to decrease rates of interest.
Shopper, Producer Inflation Fee Charts
Supply: Bureau of Labor Statistics, TradeStation
Inventory Market Index Evaluation
The market had a savior final week… or no less than the S&P 500 did. Because the day by day chart beneath reveals us, regardless of the considerably shaky begin after the earlier week’s rout, the index managed to seek out assist at its 100-day transferring common line (grey) at 6,822 to ultimately push up and off of it to finish the week on a bullish foot. Additionally discover the volatility index (VIX) on the backside of the chart additionally didn’t hurdle what’s turn out to be a key horizontal ceiling round 23. This after all works within the bulls’ favor,
S&P 500 Day by day Chart, with Quantity and VIX 
Supply: TradeNavigator
Let’s not get forward of ourselves right here, although. Discover the S&P 500 additionally didn’t struggle its approach again above the 20-day transferring common line (blue) at 6,917. The truth is, the 20-day common line continues to maneuver towards a convergence with the 50-day line (purple), with each transferring towards the 100-day line. The shorter two traces might nonetheless simply cross beneath the longer-term indicator, serving as a promote set off, and making final week’s modest 1.1% acquire nothing greater than a brief break from the weak spot that’s been making an attempt to develop because the starting of the 12 months, and at last made some measurable progress a pair weeks again.
Right here’s the weekly chart of the S&P 500 for a bit extra perspective. Word that though the index ended up logging a acquire for the shortened-trading week, it nonetheless briefly slipped beneath the rising assist line (pink) that’s been in place since June of final 12 months. The bears ARE testing the waters, and it’s not more likely to be a coincidence that it’s been occurring an increasing number of earnestly after stalling at a horizontal resistance degree at 6,996.
S&P 500 Weekly Chart, with MACD and VIX
Supply: TradeNavigator
Right here’s the day by day chart of the NASDAQ Composite, for what it’s price. It’s clearly in worse form than the S&P 500, by advantage of being effectively beneath most of its key transferring common traces. Certainly, the composite’s 20-day line (blue) fell beneath the 100-day common (grey), and the 50-day transferring common line is about to do the identical. Even when the NASDAQ gained just a little floor final week, these transferring common crossunders in the end level to a bigger-picture shift out of a bullish pattern and towards a bearish one.
NASDAQ Composite Day by day Chart, with Quantity and VXN
Supply: TradeNavigator
And, the weekly chart of the NASDAQ Composite places all of it in perspective. The index didn’t precisely transfer again into the rising buying and selling vary it fell out of two weeks in the past, after bumping into horizontal resistance round 23,820 for just a few weeks. Yet another dropping week may very well be all that’s wanted to essentially begin a promoting avalanche.
NASDAQ Composite Weekly Chart, with MACD and VXN
Supply: TradeNavigator
At this level, let’s say it’s going to take a weekly shut beneath final week’s low of twenty-two,256.76 AND the VXN transferring above its technical ceiling round 28.0 to counsel the market’s not going to have the ability to sidestep a long-overdue correction.
The one potential wrinkle is the composite’s 200-day transferring common line (inexperienced) presently at 21,878.6. Within the occasion of extra severe promoting, it might function assist degree, forcing a bullish turnaround. Additionally observe that that the NASDAQ’s huge November low can be proper round that mark, augmenting its potential as a technical flooring.
If these potential assist traces fail although, there’s little else to stop issues from getting worse from there.
However first issues first.