The market made bullish progress for the primary full buying and selling week of the brand new yr, reversing the earlier holiday-split week’s pullback. The S&P 500 technically reached a brand new document excessive, in reality, and closed at a record-high shut on Friday as nicely. Spectacular.
Simply don’t learn an excessive amount of into final week’s positive aspects although. The NASDAQ isn’t following go well with, and it’s the one which needs to be main the way in which. Certainly, in some methods the latest form of each index’s charts nonetheless seems like each might be establishing a corrective transfer. They simply want the proper technical set off.
We’ll talk about these setups and their technical triggers in a second. Let’s first run by final week’s financial studies and preview what’s within the lineup for this week. The excellent news is, we’re just about caught up with all of the postponements stemming from October’s shutdown of the federal authorities. The dangerous information is, among the information we’ve been ready on isn’t precisely bullish.
Financial Knowledge Evaluation
The week began out with final month’s numbers from the Institute of Provide Administration. Manufacturing exercise fell only a bit moderately than edging greater, whereas companies exercise jumped fairly a bit moderately than dipping only a hair. Maybe extra telling, the manufacturing barometer remains to be beneath the 50 mark that divides ahead progress and contraction, whereas the companies index stays above the 50 mark. The factor is, in each circumstances the ISM indexes’ knowledge is now trending within the course these ranges recommend.
ISM Manufacturing, Providers Index Charts
Supply: Institute of Provide Administration, TradeStation
On Friday we lastly obtained October’s housing begins and constructing permits. Begins fell, and permits have been flat. On steadiness although, each metrics seem to stay in longer-term downtrends, jibing with different clues of weak point from the true property market (like dwelling gross sales, as an example).
Housing Begins, Constructing Permits Charts
Supply: U.S. Census Bureau, TradeStation
Friday’s massive information after all was December’s jobs report, which regardless of a lot of the rhetoric surrounding tepid payroll development of solely 50,000 jobs, technically confirmed progress within the type of a pullback of the unemployment charge of 4.4% from November’s studying of 4.5%.
Payroll Progress, Unemployment Price Charts
Supply: Bureau of Labor Statistics, TradeStation
The numbers you’re not seeing (that performed a task in creating these numbers) are a slight lower within the dimension of the entire labor drive paired with a comparatively larger lower within the variety of people who find themselves formally unemployed… regardless of what looks like an uptick in layoffs.
All the pieces else is on the grid.
Financial Knowledge Report Calendar
Supply: Briefing.com, TradeStation
This week goes to be one other massive win, starting on Tuesday with a have a look at final month’s shopper inflation determine adopted by producer inflation on Wednesday. Economists are kind of on the lookout for extra of the identical this time round, and that “identical” is kind of in-line with goal ranges. Nonetheless, at the very least on the patron facet of the desk it seems like inflation is drifting downward. There might be some room for one more charge reduce or two.
Client, Producer Inflation Price (Annualized) Charts
Supply: Bureau of Labor Statistics, TradeStation
Additionally preserve your eyes out for November’s retail gross sales numbers on Wednesday. Forecasts name for an honest reacceleration of October’s stagnation.
Retail Gross sales Charts
Supply: Census Bureau, TradeStation
We’ll additionally get final month’s present dwelling gross sales replace on Wednesday, though December’s new dwelling gross sales received’t be posted till later this month. Economists imagine we’ll really see some enchancment in gross sales of present houses, however nonetheless not sufficient to say it’s out of the funk it’s been in since 2023. As for brand new dwelling gross sales, we’ll nonetheless simply have to attend and see if August’s surge was a one-off error or the start of one thing extra.
Dwelling Gross sales Charts
Supply: Natl. Assn. of Realtors, Census Bureau, TradeStation
Lastly, on Friday we’ll hear about December’s capability utilization and industrial manufacturing. The outlook is for continued flatlining of each measures, though manufacturing is at the very least flattening at comparatively wholesome ranges. The one downside is, we actually have to see each metrics making positive aspects for this to be a truly-bullish cue.
Capability Utilization, Industrial Manufacturing Charts
Supply: Federal Reserve, TradeStation
Inventory Market Index Evaluation
The market logged positive aspects final week, reversing the earlier week’s slight setback. Nonetheless, as has been the case so usually for some time now, the bears made their stands at well-established technical resistance.
Nowhere is that this extra evident than with the every day chart of the NASDAQ Composite. Wednesday’s and Friday’s highs close to 23,750 merely matched the index’s early December peak, kind of lining up with its late-December excessive. There’s clearly one thing about this stage.
NASDAQ Composite Each day Chart, with Quantity and VXN
Supply: TradeNavigator
Additionally word that the NASDAQ’s rising straight-line assist (blue, dashed) continues to steer the index greater with greater lows. And sure, there’s little room left between assist and resistance to proceed touring round inside from right here. Both the bulls or the bears are going to must make a dedication, and shortly. As soon as they do, it might begin a protracted transfer that’s now considerably overdue.
Zooming out to a weekly chart of the composite places issues in additional perspective. Specifically, it reminds us that regardless of how technically overbought the NASDAQ could also be right here, the trail of least resistance remains to be to the upside. The composite is simply now pushing up and off of a few long-term assist traces proper now, in reality, certainly one of which is the decrease boundary of a bullish channel (yellow, dashed) that extends again to 2024. Certainly, there’s a path for the composite to advance all the way in which to the 27,000 space (yellow arrow), as loopy as that will appear at the moment.
NASDAQ Composite Weekly Chart, with MACD and VXN
Supply: TradeNavigator
In fact, we can also’t ignore the truth that the bearish MACD crossunder from November remains to be intact.
Right here’s the every day chart of the S&P 500, which is analogous to the NASDAQ Composite’s however not equivalent. Just like the NASDAQ, it logged a achieve final week. In contrast to the NASDAQ, it managed to make new highs within the course of. Nonetheless, it’s seemingly caught beneath a short-term technical resistance line.
S&P 500 Each day Chart, with Quantity and VIX 
Supply: TradeNavigator
And the form of the near-term assist and resistance traces (blue, dashed) is doubtlessly vital. Though it’s superficially and directionally bullish, this rising converging wedge sample following such an enormous runup from April’s low additionally has an opportunity of being the proverbial final hurrah…. the ultimate step earlier than a stumble off the cliff, so to talk.
In fact, the bears have had loads of technical alternative to start out an overdue wave of profit-taking over the course of the previous a number of weeks. They’ve not been capable of capitalize on any of them. Certainly, because the weekly chart of the S&P 500 exhibits us, just like the NASDAQ, there’s a reasonably clear path as much as the higher boundary of a very long-term bullish channel (yellow arrow).
S&P 500 Weekly Chart, with MACD and VIX
Supply: TradeNavigator
So what’s the decision? As momentum merchants (initially), we’ve to proceed leaning in a bullish course. It might be recklessly, naïve, nevertheless, to disregard the chance right here. We simply have to see each indexes decisively break beneath the aforementioned technical assist earlier than entertaining that prospect, although we all know we’re due for this form of transfer earlier than later. Don’t attempt to apply an excessive amount of cause within the meantime.