Not surprising for a holiday shortened week, the S&P500 finished the week virtually unchanged from the prior week’s close. The Thanksgiving holiday removed almost a day and a half of trading time from the week. So associated with this was a severe reduction in trading volume. Volatility dipped, but again, given the light volumes and negligible change in index price level, this also didn’t hold a lot of meaning.
Economic news, on the other hand, was plentiful. The week kicked off on a down note—the Chicago Fed National Activity Index fell again. Then the PMI manufacturing flash index fell a lot more than expected. Existing home sales also disappointed. The Case Shiller home price index (non seasonally adjusted) fell. Consumer confidence absolutely crashed. And the Richmond Fed manufacturing index missed badly. New home sales also missed. Personal spending fell way short of expectations and consumer sentiment dropped. On the positive side, durable goods orders beat consensus estimates. Initial jobless claims were also better than expected. And PMI flash services beat consensus estimates. So overall, mostly bad news, with some positive surprises mixed in.
The technical picture for the S&P is still somewhat unclear. On the bearish side, the 50 day moving average is below the 200 day moving average; in other words, the death cross is still in effect. Also, all the breadth signals are very concerning—the vast majority of stocks in the S&P are under performing the handful of super strong leaders which all by themselves are pulling the overall index upwards. On the bullish side, the index prices are holding above the 200 day moving average and the average itself is no longer sloping downwards.
So we’ll need another week or two in early December, which is usually a somewhat strong month for stocks, to decide if the multi-year bull run has room for yet another push higher……or if the year-long topping formation that we’ve already noted is the start of a more serious move down.