While tracing out a small yo-yo pattern during the week, the S&P500 ended on Friday almost unchanged from the previous week’s close. Typical of many summer weeks when many traders and active investors take vacations, the volume of shares traded also fell. And in keeping with the sleepy equity market action, S&P volatility also barely moved—it finished the week near the lows of the year.
US economic reports were mixed. PMI manufacturing and construction spending started the week on down notes; both missed expectations. Factory orders also missed. Initial jobless claims and international trade both missed as well. On the bright side, ISM manufacturing and ISM services both beat consensus estimates. And the big number of the week, payrolls, also beat expectations. That said, other parts of the payrolls report were disappointing—the unemployment rate ticked higher and average hourly earnings missed. So all in all, there is still no strong evidence that the US economy is anywhere close to accelerating out of its multi-year anemic rate of growth.
In terms of technical analysis, the daily chart is continuing to show a bearish momentum pattern in the S&P500. And now that prices are hugging the 50 day moving average, it wouldn’t take much of a drop for this key level of support to get broken. If that happens then look for support at the 200 day moving average which is about 100 points lower on the S&P.
So with a typical July week in the books, the risk asset markets in the US behaved as expected—they didn’t move a lot in either direction. While valuations remain extremely stretched to the upside, the markets appear to be looking for catalysts to move them meaningfully in any direction, either up or down.