Weekly Market Outlook – Slowing Down as the Next Test Nears
The market managed to dial back any doubt about its bigger-picture rally following the small setback from a couple weeks ago. Last week the S&P 500 advanced nearly 1.1%, making another record high in the process. The NASDAQ Composite, meanwhile, was up a little more than 1.3%, also touching a new all-time high. No real surprises there. As we noted in last week’s Weekly Market Outlook, even bad weeks were bullish in some ways, leaving the bullish undertow intact.
Still, there’s no denying the gain seems to be losing steam. Breadth is weakening, and technically, so is momentum.
Maybe it’s just a temporary headwind; there’s certainly some resistance immediately above for some of the indexes. Regardless, the overall trend is still bullish simply because both indexes remain above all of their moving average lines and above most of their straight-line support levels.
We’ll show what this looks like in a moment. Let’s first look at the small amount of economic news that was actually posted last week.
Economic Data Analysis
Yes, the government shutdown is delaying the release of economic data from its agencies. The big one we didn’t get last week was Friday’s jobs report from the Department of Labor. We’ll share those numbers once we get them. In the meantime we still heard several key reports from non-government organizations…
…like Standard & Poor’s Case-Shiller Index of home prices on Tuesday (although we did hear the FHFA’s measure of home prices as well that day). Both pieces of data were from July, so it’s a bit dated already. In both cases though, we’re seeing weakness firm up.
Home Price Index Charts
Source: FHFA, National Assn. of Realtors, TradeStation
It’s unsurprising though, given that we’re also seeing subpar starts and permits as well as tepid real estate sales transactions remain tepid (save last month’s surprise surge in new home sales, which isn’t apt to last).
We also got the one-and-only reading on consumer confidence from the Conference Board on Tuesday, rounding out the University of Michigan’s third and final sentiment score for September reported last week. In both cases they fell from August’s levels, extending bigger-picture downtrends. Consumers are clearly tiring of constant tariff worries, and more recently, a weakening jobs market.
Consumer Sentiment Charts
Source: Conference Board, University of Michigan, TradeStation
Just remember that this weak confidence will eventually be interpreted as a contrarian bullish signal. We’re just not quite there yet… probably.
The only other numbers we heard last week was the Institute of Supply Management’s measures of services as well as manufacturing activity. Manufacturing edged a little higher, but remains below 50. Services, meanwhile, it still above 50, but the data is in a clear downtrend that should drag the index below 50 soon enough.
ISM Service, Manufacturing Index Charts
Source: Conference Board, University of Michigan, TradeStation
Everything else is on the grid.
Economic Data Report Calendar
Source: Briefing.com, TradeStation
This week was already going to be a bit light in terms of economic reports. As long as the government shutdown persists tough, it’s going to be even lighter. The only thing of interest that will be posted regardless is Wednesday’s release of last month’s FOMC meeting’s minutes. Listen for any subtle changes to the language, although it’s unlikely we’ll hear anything contrary to the Fed’s plans to cut interest rates a few more times into next year.
That being said, should the shutdown end, we’ll likely hear September’s jobs report shortly thereafter. Just keep your ears open and your eyes peeled.
Stock Market Index Analysis
Perhaps the best thing about the rally that’s been underway since April is that it’s never been allowed to go unchecked or uninterrupted for long enough to stumble into a setback that could evolve into something more. That’s what the daily chart of the S&P 500 below tells us anyway. It’s not rallied more than about seven days at a time without some sort of measurable dip… just enough to keep the advance from overheating, allowing it to last as long as it has. Notice that the index hasn’t been below the straight-line support (red, dashed) that’s been in place since May; the yellow arrows mark every key instance where that line served as a floor.
S&P 500 Daily Chart, with Volume and VIX 
Source: TradeNavigator
Now take a step back and look at the bigger picture, via a weekly chart of the S&P 500. From this vantage point we can see the slightly-jagged but generally-steady uptrend from April’s low. It’s never really “gone parabolic.” Rather, it’s just chugged along at a sustainable pace. Also notice that the index just inched its way back into the narrow trading range that first formed back in 2023 (framed by dashed lines). There’s much more room for it to keep moving higher before bumping into either of the upper boundaries (blue, and red).
S&P 500 Weekly Chart, with MACD and VIX 
Source: TradeNavigator
There are a couple of slightly concerning detail to highlight on the weekly chart though. The first of these is, although it’s not easy to see with the chart of the S&P 500 itself, the MACD lines do suggest that the rally is losing steam. And the second? It seems like the Volatility Index (or VIX) is starting to form a bowl shape and curve its way back into an uptrend. If this is the case, eventually it will weigh on stock prices. The question is, how much and how long will it weigh on them?
The NASDAQ Composite’s daily chart looks pretty similar, but with one noteworthy exception. That is, rather than straight-line support, the composite is capped by straight-line resistance (yellow, dashed). That being said, the NASDAQ is also pretty well supported too.
NASDAQ Composite Daily Chart, with Volume and VXN
Source: TradeNavigator
A more serious ceiling is in play on the weekly chart… the one that extends all the way back to 2023 (red, dashed). And, you can also see the NASDAQ’s momentum is fading while at approaches this long-term resistance line. The composite’s volatility index (VXN) seems to be trying to inch its way upward again as well, like the S&P 500’s VIX. This sets the stage for bearishness, but as was the case with the S&P 500, the trend here is still bullish. There’s also plenty of technical support below, any and all of which could prevent a small selloff from becoming a bigger one.
NASDAQ Composite Weekly Chart, with MACD and VXN
Source: TradeNavigator
This is a frustratingly unusual situation. The market is overdue for a true correction. But, the bulls just aren’t letting it happen. They will sooner or later though, and likely sooner than later. However, it’s been dangerous to predict a pullback that requires you to fight the tape. Let’s assume this bullish momentum is going to remain in place until it’s crystal clear that we can’t. That will take the failure of several technical floors, and a clear upward thrust from both of the volatility indexes. The hard part is waiting, not knowing when that’s finally going to happen, or when and where it might end.
We’ll talk more about that when it actually matters. Just don’t dig in too deep in the meantime.