The bulls tried, however when all was stated and performed, they simply didn’t make the progress they wanted to make final week.
That doesn’t imply the bears did both. In reality, though the S&P 500 in addition to the NASDAQ Composite each ended up struggling a slight loss final week, each are additionally nonetheless discovering technical assist proper the place they should discover it. Each indexes are clearly exhibiting indicators of battle underneath the load of their latest features although. One or two extra dangerous days may nonetheless crack these technical flooring, opening the door to a a lot larger (and lengthy overdue) corrective transfer. The place it finally ends up stopping – if it finally ends up mattering – continues to be anyone’s guess.
The excellent news is, the bulls’ and bears’ arms are actually each being compelled. We must always have some clear solutions prior to later, and presumably this week.
We’ll dissect all of it in a second. First, let’s run by final week’s most necessary financial bulletins and preview what’s coming this week.
Financial Knowledge Evaluation
Final week’s high information was in fact December’s inflation studies. And, the excellent news is, there’s nonetheless not a lot of it. Apart from the measurable uptick in core producer inflation – once more – to an annualized charge of three.5%, value will increase stay in nominal, focused ranges. This leaves the Fed room to proceed with plans to decrease rates of interest a number of instances this yr, though the FOMC doesn’t precisely want to take action. Issues are just about in verify on this entrance.
Client, Producer Inflation Fee (Annualized) Charts
Supply: Bureau of Labor Statistics, TradeStation
Retail gross sales (throughout the board) additionally continued to make gradual and regular ahead progress. Shoppers are doing their half to maintain issues chugging alongside.
Retail Gross sales Charts
Supply: Census Bureau, TradeStation
We additionally heard a spherical of updates relating to dwelling gross sales final week, with new dwelling gross sales of 737,000 (annualized) for October being reported on Tuesday following Wednesday’s current dwelling gross sales report of 4.35 million for December. And this forces traders to simply accept a difficult-to-believe reality in regards to the complicated housing market proper now. That’s, whereas pricing should still be “off,” there’s no denying we’re at the very least seeing some uptick in complete transactions after a torpid couple of years.
New, Current Residence Gross sales Charts
Supply: Natl. Assn. of Realtors, Census Bureau, TradeStation
Lastly, on Friday we obtained December’s capability utilization and industrial manufacturing knowledge from the Federal Reserve. It was good. As was the case with dwelling gross sales, we’re now seeing clear progress progress with each measures, a lot of which was considerably surprising.
Capability Utilization, Industrial Manufacturing Charts
Supply: Federal Reserve, TradeStation
Don’t dismiss this. Though these numbers have little bearing available on the market’s near-term ebb and circulate, capability utilization and industrial output transfer in shut tandem with earnings in addition to the market’s longer-term, bigger-picture course.
The whole lot else is on the grid.
Financial Knowledge Report Calendar
Supply: Briefing.com, TradeStation
There’s not a complete lot within the lineup for this holiday-shortened week. In reality, the one gadgets of curiosity are Thursday’s take a look at shopper spending and private revenue, adopted by Friday’s third and remaining take a look at the College of Michigan’s sentiment measure. Private revenue and spending performs an enormous position within the Fed’s resolution relating to rates of interest. As for sentiment, forecasts are calling for a slight enchancment, however definitely not sufficient enchancment to shove this financial barometer decisively off of its latest low.
Client Confidence Charts
Supply: College of Michigan, Convention Board, TradeStation
The Convention Board’s comparable shopper confidence determine for January received’t be up to date till Tuesday of subsequent week, though we don’t anticipate any main modifications with it both. Simply don’t learn an excessive amount of into both one. The pessimism does jibe with the truth that each indexes might be near breaking right into a extra critical corrective transfer. However, it’s not essentially a long-lived warning. It might be a contrarian bullish flag, the truth is.
Inventory Market Index Evaluation
Final week we talked about that the NASDAQ Composite was testing a somewhat-established technical ceiling round 23,735. It continued to check it final week, briefly shifting above it Monday and Tuesday, the truth is. It couldn’t muster an in depth above that mark, nevertheless, and when all was stated and performed ended up closing — albeit simply barely — beneath the rising assist line that had been steering the NASDAQ increased since November’s low.
In different phrases, the bulls are buckling, and the bears are successful… kind of. Till the Composite truly breaks underneath its 50-day shifting common line (purple) at 23,269 — and actually now, underneath the 100-day shifting common line (grey) at 22,920 — there stays an opportunity the index may nonetheless discover a method of holding its floor lengthy sufficient to make one other leg increased.
NASDAQ Composite Every day Chart, with Quantity and VXN
Supply: TradeNavigator
Zooming out to a weekly chart of the NASDAQ Composite doesn’t fairly present us something new in regards to the place and form of the chart, though it does supply some extra perspective on the truth that the index could be very, very compressed right into a the tip of an ever-narrowing vary between assist and resistance… one thing that may pressure the bulls of the bears to make a extra significant dedication prior to later. The weekly chart additionally reminds us the bearish MACD crossunder from November isn’t solely nonetheless intact, however appears to be widening.
NASDAQ Composite Weekly Chart, with MACD and VXN
Supply: TradeNavigator
The S&P 500 has some similarities proper now, but in addition, some important variations. It too is being steered into the tip of a converging wedge sample (framed by dashed blue strains), however was truly steered into a brand new report excessive final week. In contrast to the NASDAQ Composite, the S&P 500 continues to be discovering loads of assist in any respect of its most necessary technical assist strains.
S&P 500 Every day Chart, with Quantity and VIX 
Supply: TradeNavigator
And the weekly chart of the S&P 500 just about confirms every little thing the day by day chart is telling us in regards to the assist this index continues to be discovering. Just like the NASDAQ although, the S&P 500’s weekly chart additionally reminds us that the index continues to be underneath the darkish cloud of bearish MACD strains although the trail of least resistance right here stays to the upside… as much as the higher resistance line proper about the place the yellow arrow is pointing.
S&P 500 Weekly Chart, with MACD and VIX
Supply: TradeNavigator
So what’s the decision? We nonetheless contend the market must undergo a big correction to bleed off its steep valuation and overbought situation. Being momentum merchants although, we will’t deny that the undertow continues to be bullish, and that the bears have but to deal any critical blows that might be thought of sufficient to uproot the present rally. There’s a good quantity of wiggle room, the truth is, earlier than both of the indexes danger slipping into an excessive amount of bother to simply dig themselves out of with relative ease.
There’s no denying this can be a very uncomfortable bullishness although, within the shadow of greater than a 40% runup simply since April’s low, nevertheless. We’ll need to pay that paper sooner or later.