Weekly Market Outlook – The Bulls Just Aren’t Gonna Let It Go
It was over. The bears dealt their blow. There was no way the already-vulnerable market was going to get back up from that one.
Then it did. With a healthy recovery effort on Thursday followed by another one on Friday, the bulls dragged the market back above a couple of critical lines in the sand. Both of the indices are now back above all of their key indicator lines, meaning the path of least resistance from here is bullish -- not bearish.
And yet, the bigger-picture momentum is still leaning in a bearish direction.
We’ll look at what happened (and what didn’t happen) in a moment. Let’s first run through some of the economic reports that finally got caught up last week.
Economic Data Analysis
Busy week, beginning with Tuesday’s jobs report for November. It comes as no surprise that slower payroll growth coincides with a slight uptick in the unemployment rate. Neither are yet at alarming levels though, particularly given that recent interest rate cuts should help spur economic activity (even if only modestly).
Unemployment Rate, Payroll Growth Charts
Source: Bureau of Labor Statistics, TradeStation
Also on Tuesday we got last month’s retail sales report. It was neither hot nor cold. Rather, it simply extended the shallow uptrends we’ve seen since early 2023… which is good.
Retail Sales Charts
Source: Census Bureau, TradeStation
Then on Thursday we got November’s consumer inflation report (skipping October’s). Encouraging news on this front. Overall inflation fell from an annualized pace of 3.0% to 2.7%, while core inflation slipped from 3.0% to 2.6%. This is back toward target levels, and perhaps more important, says the Federal Reserve had some room to cut the interest rates it cut a week earlier. Moreover, assuming nothing major changes in the meantime, this leaves the Fed some room to make the cuts it says it’s looking to make next year.
Consumer, Producer Inflation Rate Charts
Source: Institute of Supply Management, TradeStation
Then on Friday we heard about last month’s sales of existing homes, although there wasn’t much to hear. The annualized pace came in at 4.1 million again.
New, Existing Home Sales Charts
Source: National Assn. Realtors, Census Bureau, TradeStation
There’s no word yet on when -- or even if -- we’ll get September’s new-home sales from the Census Bureau (although we’re thinking not). Given all that we do know about the impact of the government shutdown as well as the current environment, it increasingly seems likely the August’s surge was a one-off fluke. We anticipate whatever number we get next will be back to fairly modest levels.
Finally, on Friday we also got the third and final update of the University of Michigan’s sentiment index for December. Although this isn’t yet plotted on the chart, it was up from November’s final reading, rolling in at 52.9. That’s still pretty poor though.
Consumer Sentiment Charts
Source: Conference Board, University of Michigan, TradeStation
The Conference Board’s consumer confidence score for this month is coming on Tuesday of the week ahead. It’s expected to tick higher as well.
Everything else is on the grid.
Economic Data Report Calendar
Source: Briefing.com, TradeStation
This holiday-shortened week is going to be pretty light. In fact, the only other items in the lineup besides Tuesday’s look at consumer confidence is the Fed’s report on capacity utilization and industrial production for October and November, due the same day. We should see a little progress, but only a little.
Capacity Utilization, Industrial Production Charts
Source: Federal Reserve, TradeStation
This is no small matter either. There’s a pretty strong correlation between these numbers and corporate earnings and the market’s long-term direction. We really need to see sustained progress here before counting on this already-overvalued market to truly grow into its current prices.
Stock Market Index Analysis
The S&P 500’s 0.1% gain last was so small that it could almost be considered meaningless. And on a net basis, it was. How things took shape in the middle of the week though – with a major bounceback from a troubling intraweek low – has rather bullish implications.
The daily chart below tells the tale. As of Wednesday’s close, the S&P 500 was back under its 20-day (blue) and 50-day (purple) moving average lines. And, having not actually made a high above October’s peak around 6,909 (red, dashed) at a point when the broad market is already facing valuation challenges, this certainly felt like it could be the beginning of an overdue correction.
The bears and bulls changed their mind (again) on Thursday, and as of Friday had kept them changed. The S&P 500 was back above the short-term moving average lines it had just fallen under two days earlier.
S&P 500 Daily Chart, with Volume and VIX 
Source: TradeNavigator
The weekly chart of the S&P 500 below kind of illustrates why this somewhat unlikely recovery effort was able to materialize. As it turns out, Wednesday’s intraday low touched a rising technical support line (blue, dashed) that extends all the way back to April’s low.
S&P 500 Weekly Chart, with MACD and VIX
Source: TradeNavigator
The S&P 500’s weekly chart also reminds us that the index is still ultimately being steered higher by several different lines, all of which are part of a bigger bullish channel that first started to become evident in 2023. More to the point, notice there’s room to keep rising before several of these technical ceilings are tested as resistance. The index could arguably move to roughly 7,600 before hitting the last of these technical ceilings, even if that would drive the broad market to an outrageous valuation.
The NASDAQ Composite’s weekly chart tells the same basic story, by the way. That is, last week’s turnaround was sparked by a mere touch of a support line (blue, dashed) that extends all the way back to April’s low. And, the composite’s longer-term trend remains well framed by support and resistance lines that go all the way back to 2023. The only real difference here is that the NASDAQ is closer to its upper boundary than the S&P 500 is. Indeed, the composite appears to be also finding support at the midline (yellow, dashed) of this trading range.
NASDAQ Composite Weekly Chart, with MACD and VXN
Source: TradeNavigator
The odd part? Both weekly charts above are still showing us a bearish MACD cross that first took shape in late November, and in both cases have technically become more bearish in the meantime.
It’s not quite as a strange as it may seem to be on the surface though. Neither of the indexes have actually made any meaningful net progress since then. The undertow could still be bearish. It’s just that the bears are waiting for the one stumble they can really latch unto and start a self-sustaining wave of profit-taking. We don’t have it yet. But, the lines in the sand that will get that ball rolling are very well defined. They’re just super-tough.