Weekly Briefing 12/19/21 - The Forecast

Weekly Briefing 12/19/21

Weekly Briefing 12/19/21

With headlines concerning Omicron, the Federal Reserve’s increase of tapering, the rate hiking cycle acceleration, and the realization of slower growth for 2022, the average investor would deduce that the stock market is headed to a crash into Q1. However,  big money and Wall Street are forward-looking and much of the headline risk is currently baked into stock prices. We expect larger banks and some hedge funds to distribute many of their holdings into Q1, 2022 as the headlines become positive again in January and retail investors begin to chase price again into a multi-quarter peak in January/February. The rise will be very choppy filled with plenty of volatility, shaking longs out on the way up.  Certain indexes will outperform while others may not make new all-time highs into this next multi-quarter peak which will be covered in our Nightly Briefings along with exact price targets and support levels.
Market Recap:

The main takeaways from last week were the overheated PPI report and the Fed’s policy shift. Treasury yields also finished the week lower, suggesting a risk-off shift in investor sentiment. But Friday’s rally amongst certain market-leading sectors like biotech and semi-conductors suggests markets are forming a choppy bottom in the days ahead. The technical outlook is mixed, with the Nasdaq and small-caps showing signs of weakness, and the S&P 500 is the strongest among the large-cap benchmarks. Apart from the S&P 500, the large-cap benchmarks closed the week below their 50-day moving averages, but the benchmarks are still well clear of their 200-day moving averages. The Russell remained under heavy selling pressure,  severely lagging the SPX, and the index continues to be stuck well below both its moving averages. The Volatility Index hovered the whole week near the 20-level, leaving investors to question the short-term direction of the market. The VIX closed the week marginally higher, just above both its 50 and 200-day moving averages. The last week of the year is showing signs of a potential short squeeze in beaten down indexes

Economic Data from this Past Week:

Retail Sales Data: Missed

Philly Fed Index: Missed

New Jobless Claims: Missed

Manufacturing Index: Beat

Services PMI: Missed

Building permits and housing starts both beat

Upcoming Economic Data:

CB consumer confidence: Monday

Existing Home Sales and Final 3rd Quarter Revised GDP: Wednesday

PCE Price Index: Thursday

Durable Goods: Thursday

Personal Spending: Thursday

New Home Sales: Thursday