Wall Street rose for eight consecutive weeks and continued to rise toward the end of the year. What’s even more impressive about this rally to a 52-week high is that it did so despite technical indicators screaming that the market was overbought. What we are tracking is the S&P 500 Short Range Oscillator, which has displayed an overbought reading every day since November 22nd. Just as oversold doesn’t necessarily mean buy, overbought doesn’t necessarily mean sell, but in extremes when markets move we can experience FOMO (fear of missing out). (Fear) We are wary of chasing the rally, and instead strive to downplay some of the stocks that have risen significantly. This is part of our core principles. The bull makes money, the bear makes money, and the pig gets slaughtered. Taking profits when stocks go parabolic was one of the key themes at our December meeting held on Tuesday. That discipline was a big reason why stocks sold part of Broadcom on Monday and edged off Caterpillar to new highs on Wednesday after surging 20% last week. Get updates on all 33 stocks in the portfolio and highlights from our Q&A section. One of the main reasons stocks rose toward the end of the year is that economic indicators continue to support the soft-landing story, with inflationary pressures easing as the economy recovers. This week started with housing and had several different articles. Housing starts were much stronger than expected on Tuesday, a positive result as the housing market desperately needs more supply to bring down home prices, one of the most troubling parts of inflation. . Existing home sales also beat expectations on Wednesday, increasing in November when the consensus had expected a slight decline. However, there was an unexpected downturn on Friday, as new home sales fell below expectations and to their lowest level in a year. View this as a minor setback, as housing demand tends to rekindle as mortgage rates fall. In addition, the third quarter gross domestic product (GDP) forecast was 4.9%, a slight downward revision from the previous forecast of 5.2%. But the most important data point on Friday was the personal consumption expenditures (PCE) price index. This is the Fed’s preferred inflation measure, and it has gone their way. Headline PCE fell 0.1% month-on-month in November, slower than expected as flat. This was an increase of 2.6% compared to the previous year. Core PCE, which excludes food and energy prices, rose 0.1% month-on-month and 3.2% year-on-year. Both annualized numbers show the Fed is moving closer and closer to its 2% target. While it may still be too early to talk about a Fed rate cut in the first quarter of next year, this week’s data reinforced the soft landing theory and the view that central bankers are done raising rates. Here’s what we’re looking forward to in the upcoming holiday-shortened week. The US stock market is closed on Christmas Day, Monday. (We are also closed on New Year’s Day, January 1st.) 1. Can the rally continue next week? Friday marked the beginning of the so-called Santa Claus Rally period, which technically lasts until the last five working days of the year and the first two days of the new year. During this period, the market typically sees more greens than reds, and historically the success rate is close to 80%. Even in the weak December of 2022, Santa was able to squeeze out a profit of about 0.8%. Next week’s rally could see the S&P 500 end 2023 at a new 52-week high, or possibly a new record. It’s still only about 1.5% away. The Dow closed at an all-time high on Tuesday. The Nasdaq is still more than 7% off its all-time high, but there is work to be done. What a big difference a year can make. 2. Will zero-day options create more volatility? As we found out on Wednesday afternoon, the combination of zero-day options trading and a low liquidity environment can wreak havoc on the stock market. Volume should be even lower next week due to the holiday season, and the lack of repeat news creates perfect conditions for an intraday drop. But we’re not going to sweat the program. Zero-day options activity can amplify moves in either direction, but it can also create an opportunity to buy something you’ve been waiting for a pullback. Recall that a few months ago, when zero-day options were growing in popularity, we warned our members to stay away from zero-day options. Below is a complete summary of important domestic data for the coming week: Monday, December 25th U.S. Stock Markets Closed Tuesday, December 26th 8:30 a.m. ET: Chicago Fed National Activity Index 9:00 a.m. (Eastern Standard Time): FHFA Home Price Index and S & P CoreLogic Case Shiller 10:30 a.m. ET: Dallas Fed Manufacturing Activity Wednesday, December 27th 10:00 a.m. ET: Richmond Fed Manufacturing Index 10:30 a.m. ET: Dallas Fed Service Activity Thursday, Dec. 28, 8:30 a.m. ET Unemployment Insurance Claims and Continuing Claims 8:30 a.m. ET: Advanced Goods Trade Balance, Wholesale Inventories, Retail Inventories 10 a.m. ET: Pending Home Sales Number Friday, Dec. 29, 9:45 a.m. ET: Chicago PMI (See here for complete list) Jim Cramer Charitable Trust Stock. ) As a subscriber to Jim Cramer’s CNBC Investment Club, you will receive trade alerts before Jim makes a trade. After Jim sends a trade alert, he waits 45 minutes before buying or selling stocks in a charitable trust’s portfolio. If Jim talks about a stock on his CNBC TV, he will wait 72 hours before executing the trade after issuing a trade alert. The above investment club information is subject to our Terms of Use and Privacy Policy, as well as our disclaimer. No fiduciary duties or obligations exist or arise from your receipt of information provided in connection with the Investment Club. No specific results or benefits are guaranteed.
New York Stock Exchange (NYSE) Wall Street and Broad Street signs and Christmas trees are seen lit in New York City, USA, December 1, 2021.
Teyfan Coskun | Anadolu | Getty Images
Wall Street rose for eight consecutive weeks and continued to rise toward the end of the year. What’s even more impressive about this rally to a 52-week high is that it did so despite technical indicators screaming that the market was overbought. We are tracking the S&P 500 short range oscillator, which has shown an overbought reading every day since November 22nd.
