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Hey it’s Kieran! Another week in the markets is upon us, so here are the key events to be aware of, and the most interesting Macro research coming out of the investment banks. I’ll hopefully speak to you this week in the Traderseed Trading Challenges and as ever, if you have any questions, just leave me a comment below.
The key data release this week is November’s US PPI data on Friday. The economic calendar also includes the ISM services PMI on Monday, along with the University of Michigan’s consumer sentiment index and Thursday’s weekly report of initial jobless claims.
European Central Bank President Christine Lagarde is to make two appearances this week before the start of the ECB’s blackout period ahead of its final policy meeting of the year next week.
December Seasonality. The big part of the seasonality pattern is behind us now. As in previous years, we have seen a big move higher. If the pattern is to continue, we should see one final leg higher in the second half of December. Chart shows S&P 500 seasonality last 20 years.
Overbought Breadth — This multi-week move higher in the S&P 500 has moved the percentage of stocks which are above their 20 day moving average into exuberant territory. Possibly time for some mean reversion?
Bears beware. Despite the recent uptick in equities, the BoFA “Bull & Bear” indicator is still in (strong) BUY territory.
No institutional capitulation yet. Whilst so many market participants are bearish, most have remained fully invested. Rolling 24 month flows into equity funds have remained robust.
Retail Capitulation. With the previous chart in mind, Retail traders/investors look to have very much capitulated. Flows from US retail traders are now historically low.
Presidential cycle melt-up? Zooming out a bit looking at the S&P 500 performance over the average 4 year presidential cycle, shows years 3 & 4 tend to be very good years for equity markets.
Food Inflation has abated. The FAO Food price index fell slightly last month, bringing the year-on-year % change to just +0.3%. Wholesale agri commodity prices remain high, but the inflation wave has ended.
I hope you found this interesting and useful. I write this newsletter every Monday so make sure to follow me! As ever, keep your risk management top of mind, trade safe, and stay nimble out there.
Have a good week!
Kieran
www.traderseed.io
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