The Hot List
1. Inflation
The Fed’s preferred inflation gauge, the Personal Consumption Expenditures Price Index (PCE), will be released on Thursday.
2. Economy
The November jobs report will be released on Friday.
3. Interest Rates
Mortgage rates have fallen for the second week in the row as the 10-year has remained below 4%.
4. Geopolitics
Massive protests have erupted in China over its COVID-19 rules.
5. Federal Reserve
The minutes from the most recent Fed meeting showed that members are considering slowing the pace of tightening as recession odds are increasing.
Last Week
Monday: S&P 500 -15.40 (-0.39%) to 3949.94. No major headlines.
Tuesday: S&P 500 +53.64 (+1.36%) to 4003.58. No major headlines.
Wednesday: S&P 500 +23.68 (+0.59%) to 4027.26. November Fed minutes were released.
Thursday: Markets closed for Thanksgiving.
Friday: S&P 500 -1.12 (-0.03%) to 4026.14. Markets only open for a half day.
S&P 500 [S&P] Technical Look
Potential Support: If the index can’t hold 4000, look for support at previous resistance level 3900. If it breaks that look to the 50-day moving average.
Potential Resistance: If the index can hold 4000, look for resistance at the 200-day moving average and just above it at 4100.
Bright Ideas
Tech
Discount Retail
Healthcare
Energy
Materials
My Take
Last week’s move on the S&P may not have seemed like much being only 60 points. But breaking the psychological 4000 level could be a sign that a fourth quarter rally may still be intact. Statistically, this is a good time of year, especially after midterm elections. However, with the gauntlet of data coming in the next two weeks, a big move higher won’t be an easy task.
This week investors will be looking closely at the PCE report on Thursday for any signs of inflation slowing. The last look at inflation was the cooler-than-expected CPI report. It certainly raised expectations with the S&P jumping over 5% when the report came out. Now with expectations more in check, it feels like this report could hold the key to this rally. With another Fed meeting right around the corner, the PCE report will most likely dictate the Fed’s move and rhetoric, which will in turn dictate the direction of the market. Another cooler-than-expected report could really support a Fed “pause”, while a hotter report would probably crush any hope that progress has been made.
The other focus this week will be the November jobs report. Employment is still part of the Fed’s dual mandate but in this report investors will be looking for an increase in unemployment. It’s feels sadistic that we’re rooting for more people to lose their jobs before the holidays but that’s the Fed’s goal here. More people looking for jobs means easing on wage pressures and lower sticky inflation.
From a technical standpoint we need to keep an eye on the 4000 level. If the S&P can hold that level, a “Santa Claus” rally could be intact with a significant push higher into year-end. But if the index can’t hold 4000, I’d expect the screams of a “bear-market rally” to take over with this area remaining as resistance.
If you need help with your yearend strategy or would like me to build your Investing Gameplan™, DreamWork’s proprietary investment management system, contact me today.
Until next time,
Clint Kirby
Chief Financial Strategist
Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.