Last Week:

The roller coaster continues. Let’s review the movement last week. Markets were up dramatically in the final 10 minutes of trading on Monday to close out last year (it felt really artificial). We had the New Year’s holiday on Tuesday. Markets went up slightly on Wednesday. They were down severely on Thursday over Apple and ISM manufacturing data concerns. But markets were up, way up, on the December jobs number. The day-to-day movement doesn’t have any consistency. And when I think back to my favorite roller-coaster ride (Millennium Force), even with all the ups and downs you end up at the same place you started. So last week markets were up a touch, but a number of highs and lows in-between.

My model’s status: It’s all down. Markets have gone up over the last two weeks, with what seemed like artificial upward pushes on 12/26 and even more so on 12/31. But Speeds 1, 2, 3, 4 and 5 are all negative. If you look at the charts, the direction of the Market since early October is clearly down. From 10/3 – 12/24 the S&P500 is down -19.6%; from 10/3 – 1/4 it’s still down 13.4%. We’ve seen four mini-rallies within this timeframe. Will this latest mini-rally continue? We’ll see.

The December jobs number just rocked. The November number disappointed at 176,000. December expectations were for 180,000 new jobs. The number came in at 312,000.

The U3 unemployment number rose to 3.9%. The number has been at 3.7% for several months. Expectations were for it to either remain at 3.7% or drop a touch to 3.6%. Even though it went up two ticks, it’s still a great number.

The ISM manufacturing number dropped significantly from 59.3 to 54.1. Expectations were for 57. Some have said it might have been artificially high. Regardless, a number over 50 means “expansion” for our economy. Hopefully this is just a one-off and we see a higher number next month.

This Week:

The economic focus of the week: The minutes from the latest Fed meeting in Mid-December come out Wednesday at 2pm. In October Fed Chair Powell sounded hawkish (their interest rate not close to neutral). But now they sound dovish. Will the details from the last meeting give us any further clue about the direction they will be taking?

Earnings season begins in earnest next week. Major financial companies will start reporting the week of 1/14: Citigroup, Goldman Sachs, JPMorgan, KeyCorp, PNC, and Wells Fargo. We’ll also get the numbers from Netflix.

Indicator focus:  December’s ISM non-manufacturing index, November factor orders (Mon); November’s international trade, December’s NFIB small-business index (Tue); Minutes from the December Fed meeting (Wed); November’s wholesale inventories (Thu); and December’s consumer price index (Fri).

Have a great week.


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