Week-In-Review: Santa Comes Early To Wall Street
The bulls are clearly in control as the market refuses to pullback in a meaningful fashion. The market opened lower last week but closed higher after the bulls showed up and, once again, bought the latest dip. The fundamental backdrop remains bullish as the Fed and other central banks continued to flood the system with liquidity. Technically, the action remains very strong as the market refuses to pullback. The bulls remain in clear control as long as the market stays above the 50 DMA line.
On Monday, the market fell over 200 points after a key manufacturing report contracted last month. The ISM said manufacturing activity in the U.S. continued to contract last month, which caused the market to experience its largest single-day decline in two months. The ISM Manufacturing PMI fell to 48.1 in November, missing estimates 49.4 and came in below the boom/bust level of 50. The market fell hard on Tuesday after President Donald Trump suggested he may want to delay a trade deal with China until after the 2020 presidential election. Stocks rallied on Wednesday and snapped a three day losing streak after optimism returned regarding phase one of a US-China trade deal. President Donald Trump also said Wednesday that he believed trade talks with Beijing were going “very well.”
Thursday & Friday Action:
On Thursday, stocks were quiet as investors waited for more clarity regarding the ongoing US-China trade drama. Separately, jobless claims slid 203,000 last week, missing estimates for 215,000. The U.S. trade deficit fell to 7.6% to $47.2 billion in October, a 1½-year low as imports dropped by $4.3 billion. Stocks rallied sharply on Friday after the government said U.S. employers added +266,000 new jobs in November, beating estimates for a gain of +187,000. The unemployment rate fell to +3.5%, matching its lowest level since 1969.
Market Outlook: Easy Money Is Back
Once again, global central banks are back on the easy money bandwagon after the Fed and the ECB both announced more easy money measures directly aimed at stimulating global markets. The market has soared all year based on two key points: optimism that a trade deal will be reached between the U.S. and China and more easy money from global central banks. Earlier this year, the Federal Reserve reversed its stance and moved back into the easy money camp. Then, other central banks followed suit and that means easy money is back to being front and center for the market. Separately, the trade talks are moving in the right direction which is another positive. As always, keep your losses small and never argue with the tape.