'Making Progress': Stock Market Update For The Week Ahead

The Past Week, In A Nutshell

What Happened: Despite a volatile week, U.S. index futures managed to establish new all-time highs.

Remember This: “In the longer term, the good news is that vaccines are now rolling out increasingly quickly,” said Brad McMillan, chief investment officer at Commonwealth Financial Network. “Despite the headlines we are seeing today and the real risks, we are making progress. We will get there—but it will just take a bit longer.”

Pictured: Profile overlays on a 65-minute candlestick chart of the Micro E-mini S&P 500 Futures

Technical

Amid last Friday’s selling, responsive buyers surfaced at $3,680.00, a low-volume area that denotes directional conviction.

Given that the higher-timeframe breakout remains intact and selling appears measured, participants must monitor whether the S&P 500 holds above the $3,680.00 low-volume area. Auctioning below that reference would denote a change in conviction. Participants would then look for a response at the high-volume area near $3,667.75. Initiating below that area would likely portend rotation, further balancing.

Fundamental

After Bitcoin breached $20,000, Scott Minerd of Guggenheim Investments suggested the digital asset could auction much higher.

It’s based on the scarcity and relative valuation such as things like gold as a percentage of GDP. So you know, Bitcoin actually has a lot of the attributes of gold and at the same time has an unusual value in terms of transactions.

Simply put, Bitcoin’s scarcity, combined with easy monetary policy, should push the currency as high as $400,000, Minerd believes.

Key Events

• Monday: Chicago Fed National Activity Index.
• Tuesday: GDP Growth Rate, Core PCE Prices, Corporate Profits, GDP Price Index, PCE Prices, CB Consumer Confidence, Existing Home Sales.
• Wednesday: MBA Mortgage Applications, Core PCE Price Index, PCE Price Index, Personal Income, Personal Spending, House Price Index, Michigan Consumer Sentiment, Michigan 5-Year Inflation Expectations, New Home Sales, EIA Cushing Crude Oil Stocks Change, EIA Distillate Stocks Change.
• Thursday: Durable Good Orders, Continuing Jobless Claims, Initial Jobless Claims, Jobless Claims 4-Week Average.

Recent News

• Fed’s Daly suggests new stimulus bill will be ‘unequivocally beneficial’ to Americans.
• Financial markets have largely priced-in 2021’s positive outlook, economic recovery.
• Unpacking the driving force behind high-quality cyclicals in this stage of the recovery.
• Weaker debt issuers would be most at risk in the event of a severe global lockdown.
• Anticipate benign inflation longer term due to higher rate of technological innovation.
• Italy has a patient with a new COVID coronavirus strain; nations banning UK flights.
• In 2021, collateral quality will continue to decline while structures adapt to downturn.
• ‘Extraordinarily Easy’: U.S. final conditions are very accommodative, per Bloomberg.
• 2021 Outlook: The speed and extent of recovery will vary by asset class and region.
• Infrastructure could be the catalyst the global economy needs to regenerate growth.
• China on track to become the world’s biggest refiner with 20 mil b/d capacity by 2025.
• IEA Coal 2020 report displays recent global and regional trends in demand and trade.
• IEA Energy Efficiency 2020 report displays global developments in energy efficiency.
• The U.S. Congress finalizing a $900 billion COVID-19 aid package, but votes not set.
• Leverage debt issuers will continue to stabilize from virus, but default rates may rise.
• Globally systemically important banks’ growth may herald growing risks, Fitch says.
• FDA authorization of Pfizer Inc’s PFE vaccine is a credit positive for the firm.
• Walt Disney Co DIS updated subscription guidance for its Disney+ higher.
• With collateral still weak, CLOs will incorporate flexibility for managing stressed assets.
• First-day IPO pops leave billions on the table, raising questions about pricing methods.
• The U.S. has added dozens of Chinese companies including SMIC, DJI to a blacklist.
• Canada and Britain closing in on a deal to address post-Brexit tariffs, disagreements.

Key Metrics

• Sentiment: 43.4% Bullish, 30.3% Neutral, 26.3% Bearish as of 12/16/2020.
• Gamma Exposure: (Trending Neutral) 4,436,633,610 as of 12/18/2020.
• Dark Pool Index: (Trending Higher) 45.1% as of 12/18/2020.

Photo by Artem Podrez from Pexels.