Weekly Briefing 11/21/21 - The Forecast

Weekly Briefing 11/21/21

Weekly Briefing 11/21/21

Expect Thanksgiving week to set off a surge in equity prices into December 1st. We continue to look for all-time highs into December and potentially Q1, 2022. Exact price targets will continue to be covered for Gold Members in our Nightly Briefings. We expect large moves in many different asset classes into year end.

Market Recap:

The Nasdaq hit a record high last week with the Dow struggling as tech saw money inflow from fear of European COVID trends. Meanwhile, a surging dollar and mounting inflation worries weighed on the SPX, but the bullish retail earnings and economic releases provided ample support for the market. The progress towards passing the President’s $1.75 trillion social infrastructure package was another positive catalyst, but the uncertainty regarding the global economy may provide headwinds in the coming weeks.

The week’s key economic releases were bullish, and while the state of the global economy remains uncertain, domestic growth seems to be back on track. In addition to the phenomenal retail sales report, industrial production, the Housing Market Index, building permits, the Philly Fed Index, and the Empire State Manufacturing Index were also better-than-expected. On a negative note, housing starts missed for the second straight month, import prices outpaced the consensus estimate, and the weekly number of new jobless claims ticked higher unexpectedly as well.

While stocks remained under short-term pressure due to the overbought momentum readings, the technical picture is still clearly bullish in all time-frames ahead of one of the most favorable periods of the year according to seasonal trends. The S&P 500, the Dow, and the Nasdaq are all still above their rising 50-day moving averages, and the benchmarks remain safely above their 200-day moving averages as well. Small-caps lagged the broader market throughout the week with the Russell 2000 dropping to its lowest level since the first days of the month. However, the index still closed the week above both of its moving averages. The Volatility Index (VIX) stayed below the key 20 level and its highs from last week as well, despite the mixed price action, and the VIX’s relatively low reading is great news for bulls for the remainder of the year.

The first three days of the holiday-shortened week will be packed with crucial economic releases, and we might get hints regarding the Fed’s strategy from Wednesday’s FOMC meeting minutes as well. Existing home sales will be out on Monday, the Markit manufacturing and services PMI’s will highlight Tuesday’s session, while the durable goods report, the Core PCE Price Index, personal spending, and new home sales will all come out on Wednesday. The Fed’s favorite inflation measure, the PCE Index, will likely have the most significant impact on stocks ahead of the start of the holiday season, and all signs point to a significant increase in prices.

We covered low float momentum stocks in last weekend’s briefing and would like to point out a caveat for those participating in said stocks in the coming week. We have seen an uptick recently in algorithmic shorting and trading in these smaller float stocks (under 10 million), and banks and hedge funds program trading have stalled or capped many rallies in the past 10 days in small cap names with great news. This is a new development in the space and something to be cautious about. We would be selective and stick to stocks with overwhelming great news, strong cash positions, and low debt.