After two weeks of growth in a row, the major U.S. stock indexes fell around 3% to 4% in the 49th market week. (S&P 500) closed at 3852 (-82 bp). NASDAQ has an even stronger week closing at 11563 (-456bp).
S&P 500 weekly candles
The rally that began in mid-October stalled last week also, as markets have grown more anxious over the outlook for growth in the year ahead. Let’s say this analysis is backed up by VIX index which seem to change the direction and has grown and closed the week at $22.82
Investors are worried about recently mixed inflation data and that those could challenge the U.S. Federal Reserve’s expectations of slowing the pace of interest-rate increases.
If last week we stated that investors seems to gain more and more confidence, we would not say it this week anymore. The U.S. government bonds body price has fallen this week. US10Y Yield has grown to 3,584%.
| Index | Closed at | Week Change | YTD % |
|---|---|---|---|
| S&P 500 | 3934 | -137 | -17.45% |
| Dow Jones Industrial Average | 33476 | -953 | -7.88% |
| NASDAQ | 11585 | -456 | -29.66% |
| US10Y | 3,584 | 0.1% | 106,75% |
Bullish sentiment
China’s government eased some of COVID-19 rules that have recently weighed on the world’s second-largest economy. Leading up to the announcement, a Chinese stock index rallied for five consecutive weeks in anticipation of the policy changes.
Bearish Indicator
The price of U.S. crude oil fell around 11% for the week to less than $72 per barrel. This is good for the economy in the longer period (if it stays low), but at the moment it’s rather an indicator for recession.
10-year minus the 2-year (10-2 curve) or yield curve
The 10-2 curve has moved into negative territory this year (the famous yield curve inversion), meaning the 2-year US Bonds yield is higher than the 10-year US bonds yield. Bonds investors are concerned about the nearest future and economic growth prospects. These are very reliable recession signals. And the yield curve has never been that low for that long any time before.
Also, the following problems are still here with us:
- Money Supply is declining every month.
- Geopolitical problems
Outlook (The week ahead)
Markets are waiting for Wednesday 14. December for Fed Interest Rate Decision and Jerome Powell’s Press conference. We don’t expect major moves in one direction until then. Markets are waiting for the next Interest Rate increase of 50bp. Should it be less or should the FED announce anything about slowing down interest rates increase, we will see a rally! But the opposite is possible as well. Having a longer perspective and recession in mind we should be ready for a drawdown trend in the market.
Also looking the technical picture is indicating pivoting to the bear market.
Next week to be aware of
| Monday | Tuesday | Wednesday | Thursday | Friday |
|---|---|---|---|---|
| . | Consumer Price Index, U.S. Bureau of Labor Statistics | Fed Interest Rate Decision | US Retail Sales MoM NOV | |
| . | Fed Press Conference |
Interesting tickers
Stocks to watch out for in the next weeks:
| Symbol | price level | Comment |
|---|---|---|
| ZIM | below $18, | Please don’t rush, learn where ZIM finds true support. Also read ZIM detailed review |
| AAP | $145 | Signs of support at this level. |
| DDOG | $67 | Below this becomes attractive. |
| LUMN | $5.3 | Good pricing. Beware of an uncertain future. |
| NET | $40 | Below this becomes attractive. |
| VZ | $36 | Good level for entry or short put strategy |
| GT | $10 | Sign ofsupport, good pricing |
| DIS | $91 | Sing of support. Good pricing below $90. |
| WBD | $10 | below 10 becomes interesting |
| PYPL | $68 | Finally fair pricing. Sign of support |
| SPOT | $69,5 | Beware, Spotify showed negative EPS for several quarters. |
| CFLT | $17 | Interesting startup |
| DOCU | $39,59 | slow but stable. Good pricing |
| TWLO | $42 | signs of support |
Still most economic sectors are overpriced at the moment.
Please keep in mind This is not investment advice!
Stay careful! Happy investments!