Weekly Market Outlook – This Uptrend Is Still Too Fragile

 

Though last week's trading action was shortened by the holiday break, the market managed to squeeze a heck of a lot of action - most of it bullish - into just three and a half days. The market didn't end the week on a particularly high note, to be fair, but it still managed to dish out a much-needed winner. The S&P 500 rallied 2.86% last week, at least temporarily stopping the bleeding and serving up a glimmer of hope.

If that rebound effort is to take hold this week, it's going to require some careful, smart navigation by the bulls.

We'll talk about how the needle needs to be threaded below, as always. First, let's run through last week's economic reports and preview this week's new. Between a market rout and subsequent bounce against all the chatter about the end of one year and the beginning of another, many investors have lost sight of the bigger picture.

Economic Data Analysis

It wasn't a terribly busy week last week in terms of economic news, but it was a huge one for the real estate landscape. We rounded out the bigger picture with a look at October's home price date. The S&P Case-Shiller Home Price Index was up 5.0% year-over-year, following September's 5.1% rise. And, the FHFA's home-price measure indicated values were up 0.3% month-to-month. In both cases, the trend has warmed up again after cooling off a bit in the middle of the year.

Home Price Index Charts

Source: Thomson Reuters

As a reminder, we learned a week ago that home sales have also perked up after an alarming lull. Existing home sales have ticked higher a couple months in a row now, and given the data in hand, new home sales will likely turn higher for November once that data is posted next week. (Here's where to see the most recent sales and inventory data.)

Last week we also heard the Conference Board's consumer confidence reading for December. As expected, it fell, though fell more than expected. It's still high, and not in a downtrend. Indeed, the uptrend is still technically intact, though we'd like it to be a little more reliable. Ditto for the Michigan Sentiment Index.

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