Weekly Market Outlook – As Breakouts Go, This Is A Poor One

 

The market was four for five last week, and ended the week at its best close since early November. It also scored the highest intraday high in months on Friday, breaking past a key resistance level in the process. The buyers were hesitant the whole way up though, up to and including Friday's gain. This is anything but a convincing move just yet. The bears still have a good shot at turning the tide in their favor.

This week is going force one camp or the other to take a stand... maybe.

We'll look at how and why the sellers could still up-end the effort this week, after running down last week's economic news and previewing this week's economic data.

Economic Data Analysis

Last week was plenty busy, with the week kicking off with January's retail sales. They were good, but perhaps more important, better than expected. Most important of all, last month's 0.9% improvement (not counting auto sales) largely negates December's surprising stumble. Year-over-year, retail spending grew about 2.5% through most stratifications.

Retail Sales Charts

Source: Thomson Reuters

We'd like to see at least slightly stronger spending, but we may well get back to firmer progress when February's figures are reported.

Inflation also remains firm... not too hot, but not too cold. Rather, it's in that 'just right' zone where the Fed doesn't have to be in a hurry to contain in but rising prices suggest there's decent pricing power stemming from healthy buying power. As of the latest look, the inflation rate stands at 1.5%, and at 2.0% when removing food and energy costs.

Inflation Charts

Source: Thomson Reuters

On Thursday we got January's new-home sales report, to round out the bigger-picture look at the housing market we started to take a week earlier. They were okay at 607,000 units (annualized), but that figure fell well short of estimates of 623,000.

New, Existing Home Sales Charts

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