Weekly Market Outlook - Higher Highs Hit, But Higher Hurdles Ahead

What's really in the cards for this week is a rounding out of the real estate picture. That party starts on Tuesday as well with a look home prices. Both the Case-Shiller Index and the FHFA Housing Price Index are projected to keep on rising, jibing with home sales, housing starts, and building permits progress.

Home Price Index Charts

Source: Standard & Poor's, FHFA, TradeStation

Sales of new homes are also expected to rise, reaching an annual pace of 860,000, up a little from 841,000 a month earlier. That's a reasonable outlook. Last week's existing home sales report indicated a pace of 6.76 million, up just a bit from October's pace of 6.71 million.

New and Existing Home Sales Charts

Source: Standard & Poor's, FHFA, TradeStation

Note that we'll also hear Q4's initial GDP growth rate estimates on Thursday. Economists are calling for a 4.4% improvement from Q3's activity, but we're still in rebound mode from the impact of pandemic lockdowns. Even with Q3's 33.4% improvement, we're still not back to normal. Whatever the case, the market could and likely will react to a beat or shortcoming of Q4's GDP growth outlook.

Stock Market Index Analysis

This week's analysis kicks off with a close-up look at the Nasdaq's weekly chart. The noteworthy nuance is the sheer distance the composite has covered since March's low. We're up 104% from that low in just ten months, which is stunningly unusual... even factoring in the big plunge suffered in February and March of last year. The weekly chart is the only way to really put this advance in perspective.

Nasdaq Weekly Chart, with VXN, MACD, and RSI

Source: TradeNavigator

The weekly also gives us a couple of reasons to start preparing for a pullback even if it's too soon to act as is one is nowhere.

One of those red flags is the fact that the RSI line is now well above its overbought threshold at 70, although that's not all that unusual these days. The RSI indicator got and stayed overbought for weeks on end in late 2019 and mid-2020. At worst we saw a little turbulence in those periods, but nothing about those situations was backbreaking (obviously).

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