Weekly Trader's Outlook

If you read last week's blog you might recall that my forecast for this week was "breakout", which I defined as a 1.5% or greater move in the SPX, either higher or lower, from last Friday's close. At the time that I was finishing up the blog the SPX was flirting with potential support at its 50-day Simple Moving Average (SMA) and ultimately closed above it. The index then staged a ~2% bounce from Monday-Wednesday of this week but rolled back over following mid-week hawkish commentary from several Fed members regarding a potential December rate cut (more on this in the "Economic Data, Rates & the Fed" section below). While the government shutdown ended on Wednesday, it's going to take some time to get the economic data compiled and released, and the lack of visibility into the data contributed to some of the rate cut hesitancy from some Fed officials. Also pressuring stocks this week was a social media post from "Big Short" investor Michael Burry, who questioned the massive spending from hyperscalers and depreciation schedule for datacenter equipment like GPUs and servers. Last week Burry criticized lofty valuations in AI stocks and said he had taken a significant short position in AI-data analytics firm Palantir Technologies. His critical stance has generated much discussion in the investing community and resulted in profit taking in AI-related stocks over the past two weeks. The relative weakness in the technology space led to some rotation this week as sectors like healthcare, consumer staples, materials and energy lead weekly gains. Whether the recent tumult around the AI space turns out to be another "Deepseek moment" or not remains to be seen, but investors should have a better feel after Nvidia reports earnings next Wednesday.

At the time of this writing (2:35 PM ET), stocks are mixed but off the lows of the day (DJI - 176, SPX + 20, COMPX + 115). Today appears to be important technically speaking as several indices are challenging support at their respective 50-day Simple Moving Averages. It's not just the S&P 500 (SPX), but also the Nasdaq Composite (COMP), the Nasdaq 100 (NDX), and the PHLX Semiconductor Index (SOX). Fortunately for the bulls, all these indices are currently trading above this indicator after trading below it earlier in today's session, so it appears that technical support is holding up. This could set stocks up for a recovery next week, but I'm a little perplexed by the Cboe Volatility Index (VIX), which is flat on the day (despite the bounce in the SPX) and at a relatively elevated level of 20. Also worth pointing out is the bullish seasonality that accompanies November/December and the potential for performance chasing by fund managers, especially since stocks have pulled back recently. Then there's Nvidia's earnings report next Wednesday, which has the potential to reignite the "AI bull trade" or add fuel to recent concerns around high valuation and over investment. I don't know how investors will react to Nvidia results/guidance, but I do feel that the potential for stocks to move higher in the first three days of next week leading into Nvidia's report is above average given the bullish technical set-up (of course, assuming the indices referenced above close above their 50-day SMA). Therefore, my forecast for next week is "moderately bullish". What could challenge my forecast? The elevated VIX could be a bearish harbinger, suggesting more downside is needed, or Nvidia could issue disappointing results/guidance, which would likely result in a down week for stocks.

• Monday (11/17): Empire State Manufacturing
• Tuesday (11/18): Capacity Utilization, Export Prices, Import Prices, Industrial Production, NAHB Housing Market Index, Net Long-Term TIC Flows
• Wednesday (11/19): Building Permits, EIA Crude Oil Inventories, Housing Starts, MBA Mortgage Applications Index
• Thursday (11/20): Continuing Claims, EIA Natural Gas Inventories, Existing Home Sales, Initial Claims, Leading Indicators, Philadelphia Fed Index
• Friday (11/21): University of Michigan Consumer Sentiment - Final

• Monday (11/17): Aramark (ARMK), Brady Corp. (BRC), Full Truck Alliance Co. (YMM), H World Group Inc. (HTHT), Helmerich and Payne Inc. (HP), Li Auto Inc. (LI), Trip.com Group Ltd. (TCOM), XP Inc. (XP), Xpeng Inc. (XPEV)
• Tuesday (11/18): AECOM (ACM), Baidu Inc. (BIDU), Dolby Laboratories Inc. (DLB), Elbit Systems Ltd. (ESLT), Futu Holdings Ltd. (FUTU), Home Depot Inc. (HD), Medtronic PLC (MDT), PDD Holdings Inc. (PDD), Sociedad Quimica y Minera de Chile SA (SQM)
• Wednesday (11/19): Bullish (BLSH), Copa Holdings SA (CPA), Dycom Industries Inc. (DY), Lowe's Companies Inc. (LOW), NIO Inc. (NIO), Nvidia Corp. (NVDA), Palo Alto Networks Inc. (PANW), Target Companies (TGT), TJX Companies Inc. (TJX), Viking Holdings Ltd. (VIK)
• Thursday (11/20): Copart Inc. (CPRT), Elastic NV (ESTC), ESCO Technologies Inc. (ESE), Gap Inc. (GAP), Jacob Solutions Inc. (J), Intuit Inc. (INTU), NetEase Inc. (NTES), Ross Stores Inc. (ROST), Veeva Systems Inc. (VEEV), Walmart Inc. (WMT)
• Friday (11/21): Alibaba Group Holding Ltd. (BABA), BJ's Wholesale Club Holdings Inc. (BJ), IES Holdings Inc. (IESC), VinFast Auto Ltd. (VFS)

The government shutdown ended on Wednesday, but more time is needed to compile the data before economic reports can be released. Perhaps this week's most important development for markets was the significant drop in expectations for a December rate cut following commentary from multiple Fed officials. San Francisco Fed President Mary Daly said that it's "premature" to determine whether a December rate cut is justified due to "still stubborn" inflation. This represents a deviation from Daly's stance back in September when she stated that further rate cuts are likely needed. Atlanta Fed President Raphael Bostic said that "clearer and urgent risk is still price stability" despite labor market softness. And Boston Fed President Susan Collins said she is in favor of holding rates steady "for some time to balance the inflation and employment risk in a highly uncertain environment". The Bloomberg probability of a December rate cut currently sits at 41%, down from 66% last Friday. Here's the breakdown from this week's reports:

• NFIB Small Business Optimism: 98.2 vs. 98.5 est.
• Consumer Price Index (CPI): The Bureau of Labor Statistics said that more time is needed to compile the October CPI data (early to mid-December is the expected release timeframe), but the FactSet estimates point to a +0.2% gain over the month, which would equate to a 3.0% year-over-year (YoY) gain. If the monthly gain comes in as expected, it would represent a 0.1% decline from the prior month but match September's 3.0% YoY gain. According to the Federal Reserve Bank of Cleveland's inflation nowcast the core CPI is forecasted to have increased 0.3%.
• Producer Price Index (PPI): October's PPI is expected to show a 0.2% monthly gain versus the -0.1% reported in September.
• Initial Jobless Claims: Haver Analytics estimates that initial claims dipped to 227,543 for the week ended November 8th from 228,889 in the prior week. The Labor Department is expected to resume publishing this report starting next Thursday.
• EIA Crude Oil Inventories: +6.41M barrels
• EIA Natural Gas Inventories: +45 bcf
• The Atlanta Fed's GDPNow "nowcast" for Q3 GDP is unchanged from last Friday at +4.0%.

U.S. Treasury yields rose across the board this week following the more hawkish "Fed speak" referenced above. Compared to last Friday, 2-year Treasury yields are down over 7 basis points (3.604% vs. 3.557%), 10-year yields are down ~3 basis points (4.133% vs. 4.093%) and 30-year yields are higher by a little over 1 basis points (4.736% vs. 4.701%).

As referenced above, the Bloomberg probability of a December rate cut from the Fed fell from 66% last Friday to 41% this week. However, the total number of 25 bps cuts between now and the end of 2026 remains at 3.

When I was writing this blog last Friday the S&P 500 index (SPX) was testing support at its 50-day Simple Moving Average (SMA) and it held up by the end of the trading session. The SPX staged a subsequent ~2% bounce by Wednesday of this week but then reversed course and was back below the 50-day SMA earlier in today's trading session. Once again, dip buyers have stepped in today and we'll have to wait and see whether the index can close above this moving average for the second Friday in a row. Should support hold up once again, this would be a technical victory for the bulls, but I'm not convinced that this necessarily suggests an "all clear" sign. First, when there is a bounce off a key support level in an uptrend, ideally (for the bulls), the underlying (the SPX in this case) sets a fresh high in the uptrend, like the SPX did on the October 10th bounce off the 50-day SMA. However, last Friday's bounce off the 50-day SMA did not lead to a new high but rather rolled over and is re-testing its 50-day SMA today. I'm not saying this is necessarily bearish, but often when there are multiple tests/re-tests on a support (or resistance) level there can be an eventual break. We'll have a better sense of where things stand technically next week, but for now the near-term technical snapshot is bullish, assuming the SPX closes above its 50-day SMA today.

Near-term technical translation: cautiously bullish

Last week I noted that the Russell 2000 Index (RUT) looked the weakest out of all the majors, technically speaking, and the index hit the lowest levels since September 2nd earlier in today's trading session. On a positive note, the index appears to have found some bid support right around its 100-day Simple Moving Average. Assuming this support holds up, this is near-term bullish, but support was lost at the 50-day SMA this week and over a longer-term lens (i.e. the past three weeks) the RUT appears to be in a downtrend. From a near-term perspective, at least today's bounce gives investors a line in the sand to reference next week – bullish above the 100-day SMA, bearish if the index drops below this indicator.

Technical translation: near-term bullish, but needs to reclaim 50-day SMA for intermediate-term bullish assessment

Even though JPMorgan CEO Jamie Dimon has held a skeptical stance on cryptocurrency in the past, his company doesn't appear to be wasting any time making blockchain-based products and services available to its clients. On Wednesday JPM announced that it has officially completed the proof-of-concept for its USD-denominated deposit token, JPM Coin (JPMD), for its institutional clients. The token is available 24/7 with near-instant settlement, allowing institutional clients to send and receive the token on Base, which is an Ethereum Layer 2 (L2) blockchain network. Several major financial players, such as Coinbase and Mastercard, have already completed test transactions using JPMD.

The Bloomberg chart below shows the current % of members within the S&P 500 (SPX), Nasdaq Composite (CCMP) & Russell 2000 (RTY) that are trading above their respective 200-day Simple Moving Averages (SMA). Stocks are on track for weekly losses, but market breadth improved slightly across the board, driven by rotation into underperforming sectors such as healthcare, staples and energy. On a week-over-week basis, the SPX (white line) breadth rose up to 54.86% from 53.09%, the CCMP (blue line) ticked up to 45.92% from 45.30%, and the RTY (red line) expanded to 54.86% from 53.24%.

Market breadth attempts to capture individual stock participation within an overall index, which can help convey underlying strength or weakness of a move or trend. Typically, broader participation suggests healthy investor sentiment and supportive technicals. There are many data points to help convey market breadth, such as advancing vs. declining issues, % of stocks within an index that are above or below a longer-term moving average or new highs vs. new lows.

This Week's Notable 52-week Highs (28 today): Amgen Inc. (AMGN - $2.79 to $333.21), CBOE Global Markets Inc. Inc. (CBOE + $2.01 to $261.97), Datadog Inc. (DDOG - $2.71 to $183.26), Eli Lilly & Co. (LLY + $6.72 to $1,028.09), Gulfport Energy Corp. (GPOR - $4.74 to $206.50), Valero Energy Corp. (VLO + $3.30 to $179.08)

This Week's Notable 52-week Lows (252 today): Charter Communications Inc. (CHTR - $2.86 to $201.94), Chipotle Mexican Grill Inc. (CMG - $0.09 to $31.29), Clorox Company (CLX + $0.23 to $104.50), Marriot Vacations Worldwide Inc. (VAC + $0.37 to $46.42), Owens Corning Inc. (OC - $1.39 to $101.30), Westlake Corp. (WLK - $2.13 to $62.78)