Last week the S&P500 gave back about half a percent. Volume was very light, so there was absolutely no sign of any investor panic. And volatility remained very low; the VIX index stayed in the 13 range, which means that investors were not too worried about the index price drop.
In macro news, it was a quiet week. Core retail sales, housing starts, initial jobless claims and business inventories all disappointed. On the other hand, the Empire State manufacturing index, the housing market index and the Philly Fed survey all beat their respective consensus estimates. Interestingly the Fed’s balance sheet registered one of its biggest weekly declines since the run-off began—it shrank by almost 21 billion dollars. And since the tightening began in October 2017, the total decline of the balance sheet has now reached $122 billion…..with hundreds of billions more to go.
The technical picture remains virtually unchanged from last week. On the daily charts, the S&P500 is in a short-term uptrend…..despite losing half a percent last week. On the weekly charts, the S&P is still struggling to repair the technical damage incurred over the last 2-4 months, so on this resolution, the index is still in a slightly bearish mode.
So we’ll need to wait another week or two to determine if the daily charts (bullish) or the weekly charts (more bearish) will prevail.