Economic Concerns Threaten Stock Market Recovery

Economic Data Disappoints

On top of these worrisome signals coming out of the Fed, Thursday also featured disappointing economic data. The Philly Fed Manufacturing Index, a major Fed survey of manufacturers in Philadelphia, hit its lowest level since 2016 at -4.1. Economists had been expecting +14.1. In addition, durable goods orders fell short at 1.2% against previous expectations of 1.6%.

What May Come Next?

Fickle markets respond to a wide variety of forces and influences – earnings, interest rates, politics, wars, natural disasters, and much more. Most of the time, though, economic growth takes center stage. Initial warning signs of a recession or a slowdown in global economic growth can quickly escalate, spreading panic among investors and weighing heavily on stock prices. We’re not saying we’re there yet, or that we’ll get there any time soon. But troubling signs of a faltering global economy have clearly emerged.

Looking ahead, three key economic releases in the week ahead include U.S. consumer confidence on Tuesday, U.S. gross domestic product on Thursday, and U.S. ISM Manufacturing PMI on Friday. (See our Market Events & Earnings Calendar for more.) Ongoing U.S.-China trade negotiations will also continue to play a key role in market sentiment.

The Technicals: S&P 500 Remains in Strong Recovery Mode … For Now

As shown on the chart above, the S&P 500 (SPXSPY) continues to trade in a sharp uptrend from the late December lows. This parabolic rise has seen the benchmark index break out above multiple resistance levels. This includes the key 200-day moving average. According to some technical analysts, this places the S&P 500 in bull market territory. Since the December lows, the index has climbed just over 18% (as of the market close on Thursday, 2/21/2019). This puts it just shy of the 20% rise that other analysts see as the definition of a bull market.

Now that the S&P 500 has cleared its 200-day moving average, this average has now turned into support. It’s currently around the 2747 level. Any breakdown below this support would be a strongly bearish signal for the markets. To the upside, the next major resistance level and bullish target is around 2815 (the highs from late last year). Any strong breakout above that level could open the way for an extended market recovery.

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Disclosure: At the time of this article’s publication, we have no position in any security or trade/investment mentioned, nor do we have any business relationship with any company whose stock ...

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