Weekly Market Outlook – Calendar-Driven Bullishness Is Still Bullishness

 

The holiday shortened week ended up being a good one. Pushing through the stagnation that took shape from the week before, the S&P 500 rallied 2.3% last week to end Friday at a record high close (after reaching a record intraday high on the same day). The Nasdaq did the same. Suspiciously though, while the Nasdaq Composite may have logged its best-ever close on Friday, but it's not decisively pushed its way past its technical peal established back in early September and confirmed in early November.

It's not a terribly big surprise. This is a bullish time of year, and Thanksgiving week is generally bullish - albeit modestly - anyway. Though it stalled the week before, stocks have been in a rather bullish mode since early November.

Still, we're seeing a handful of red flags that this rally's getting tired.

We'll take a detailed look at those red flags below, as always. First though, let's review the economic underpinnings of what's ultimately going to make or break the market. This week we'll get a huge one...Friday's jobs report for November.

Economic Data Analysis

As we would have guessed given the prior week's strong real estate data, home prices are firm as well. In fact, home prices are arguably the strongest piece of the real estate puzzle. Economists were calling for another round of solid increases in values, and we got even more price appreciation than was modeled for September.

Home Price Index Charts

Source: Standard & Poor's, FHFA, TradeStation

In this vein, new home sales remained robust in October, coming in at an annual pace of just below one million, versus a figure of just above one million for September. Both are well above average, and well above trend. The stimulative intent of low interest rates is working, as least within housing's sliver of the economy. [We don't have enough existing home sales data to create a meaningful visual plot, though it's historically mirrored the new home sales trend.]

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