Stock Market Outlook entering the Week of January 28th = Uptrend

• ADX Directional Indicators: Uptrend
• Price & Volume Signals: Uptrend

ANALYSIS
The stock market outlook shows an uptrend in place, as U.S. equities continue notching all time highs.

The S&P500 ($SPX) gained 1.1% last week.  The index sits ~4.5% above the 50-day moving average, and ~10.5% above the 200-day moving average.

SPX Price & Volume Chart for the Week of Jan 28 2024

No change in the signals this week:  both ADX and price/volume signals show an uptrend in place.

COMMENTARY
The first estimate of Q4 GDP (i.e. “Advance” estimate) came in at 3.3%, higher than expectations for a 2.0% number.  Government spending continues to outpace consumption and investment.

Meanwhile, PCE was roughly inline with expectations:

• Headline = 2.6% vs 2.6% expected
• Core = 2.9% vs 3.0% expected

This week, financial media is focusing on the FOMC announcement, scheduled for Wednesday afternoon. The Fed is expected to maintain the current level of interest rates, so markets will read between the lines of the post-announcement commentary and dot plot. Given recent economic data (e.g. GDP, PCE, etc.), this week’s meeting is unlikely to derail the current uptrend in U.S. equities.

What IS likely to impact the market is flying below the radar…or was until last year. While all eyes are on the Fed, the U.S. Treasury makes it’s Quarterly Refunding Announcement (QRA) Wednesday morning, which provides details on how the U.S. Treasury will meet it’s financing requirements.

Normally, the QRA is a nothing-burger; but we don’t live in normal times. Without getting too technical, it’s possible for the Treasury can ease overall financial conditions (offset the Fed’s qualitative tightening) by adjusting the mix of long-term and short-term treasuries it sells each quarter. This last occurred on October 30th, and is an underlying reason for the year end rally in stocks.

Best to Your Week!

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Sources: Bloomberg, CNBC, Federal Reserve Bank of St. Louis, Hedgeye, Stockcharts.com, U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics

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