(26 November 2023) Stocks extended the rally last week as dip buyers continued to dominate the market given the bullish Thanksgiving holiday seasonality. The S&P 500 gained 1% on the week to 4559 while the Nasdaq-100 finished at 15,982. This bullish outcome was quite unexpected as I thought the Sun-Mars-Saturn alignment might have coincided with some selling. Instead, the apparently bearish Saturn influence merely manifested as diminishing upside as the current rally showed signs of getting overstretched.
Markets are looking forward to the next Fed meeting on December 13 in the hope that Powell will announce a formal pause in rate hikes. With inflation clearly slowing, there is good reason to expect the Fed will shift towards a more dovish stance. And yet recent economic data is still sufficiently mixed that a formal pause may not be forthcoming. Last week’s jobless claims came in lower than expected at 209K and suggested continuing strength in the labor market. Michigan consumer expectations and current economic conditions were both slightly higher than expected and provided more evidence of the resilience of the economy. In other words, these recent data points could force Powell to keep the door open to another hike. Not surprisingly perhaps, the 10-year Treasury yield finished slightly higher on the week at 4.47% as bond buyers demanded more premium to offset ongoing inflation risks. As previously noted, yields remain in a risk zone here above key support at 4.25% as significant move higher would jeopardize the current stock market rally.
The planetary outlook remains bearish for the medium term. While November has been much more bullish than expected, I would suggest that the forecast correction has not been cancelled, but rather delayed. The most pressing question therefore is whether a pullback or correction will occur leading up to the FOMC meeting on Dec 13 or after. There is evidence for both scenarios. In terms of slow-moving 27-day progressions, we are currently in a high-risk time period that began in late October and will remain in place until the end of January…
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