Stock Market Outlook entering the Week of March 17th = Uptrend
- ADX Directional Indicators: Uptrend
- Price & Volume Signals: Uptrend
- On Balance Volume Indicator: Uptrend
ANALYSIS
The stock market outlook shows an uptrend in place. Although the signals stayed the same, weakness crept onto the scene last week and suggests a consolidation period is at hand.
The S&P500 ($SPX) lost 0.1% last week, and closed just below the rally’s trendline. The index sits ~3% above the 50-day moving average, and 12% above the 200-day moving average (still historically elevated).
All three signals show an uptrend in place, but the equity market probably tests those levels in the days ahead. The index picked up a couple of distribution days last week, but option expiration masks the nature of Friday’s move. Still, the count is elevated at 5, with 4 occurring over the past 10 trading sessions. On Balance Volume remains above the 3 month average, but definitely weakened last week.
The energy sector ($XLE) outperformed the broader index again last week, rising 3.8%, thanks in part to a bounce in the price of oil. Real estate ($XLRE) had a tough week; the sector sold off as long-term interest rates popped higher, in response to higher PPI data.
**Note: $SPY performance in the table above isn’t adjusted for last week’s dividend (gain of ~0.3%).
COMMENTARY
The odds of rate cuts before June have fallen dramatically over the past 2 months, as data shows inflation remains “sticky”.
February CPI was slightly higher than expected, for both core and headline figures, although core was down from last month.
CPI(y/y) | Actual | Prior | Expected |
Headline | +3.2% | +3.1% | +3.1% |
Core | +3.8% | +3.9% | +3.7% |
February PPI, like CPI, was higher than expected, and also registered a jump in headline data.
PPI(y/y) | Actual | Prior | Expected |
Headline | +1.6% | +1.0% | +1.1% |
Core | +2.0% | +2.0% | +1.9% |
In the absence of new PCE data (next release is March 29), higher than expected CPI/PPI data does not bode well for those still hoping the Fed cuts rates this Wednesday. Even a June rate cut, which was a certainty a few weeks ago, looks closer to a 50/50 proposition at this point.
Best to Your Week!
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