Bear Market Rally or Bull Trend Resuming

Macroeconomic/ geopolitical developments

• A three-hour meeting in Bali between US President Joe Biden and Chinese President Xi Jinping boosted sentiment.

• Target shares plunged sharply after discretionary spending was seen to fade in recent weeks, but other retailers including Wal-Mart, Foot Locker, and Ross Stores, indicated a more positive picture and better than anticipated results.

• US Retail Sales (excluding the auto sector) rose 1.3% in October, notably above consensus expectations and posted the biggest rise since May.
• In his Autumn Statement, UK Chancellor of the Exchequer, Jeremy Hunt, unveiled tax increases, spending cuts, and new fiscal rules, to repair the UK public finances and restoring credibility in financial markets.

UK inflation accelerated more than anticipated in October to hit a 41-year high of 11.1%, significantly above the 10.1% print in September.

Global financial market developments

• A high-level, robust consolidation for the week by the major US stock averages after the prior weekly surge in the wake of the US CPI release, that saw the S&P 500 post its best day since 2020, up over 5% with the Nasdaq adding over 7%.
• European and Asian equity indices were solid last week too after pushing significantly higher the prior week.
• US 10yr yields pushed lower and staged a modest bounce to higher yields after the prior week’s plunge lower.
• The 2yr-10yr curve segment of the US Treasury yield curve inverted further (historically, a typical indicator of a recession) to its most inverted level in over 40 years
• Similarly, the US Dollar pushed lower and staged a modest bounce after the prior week’s plunge, that saw DXY post its worst day since during the 2009 Great Financial Crisis.
• Gold advanced, then dipped, but again stayed solid after the prior weekly surge from a new multi-month low to a multi-week high
• Oil prices dropped further after a prior multi week high and are setting up more negative.
• Copper sold off to reverse much of the prior weekly surge.

Key this week

• Central Bank Watch: A relatively quiet week for Central Banks, we get the People’s Bank of China (PBoC) interest rate decision on Monday and the same from the Reserve Bank of New Zealand (RBNZ) on Wednesday, as well as the FOMC Minutes later that day.
• Holidays: The US Thanksgiving Holiday is on Thursday, with markets closed, and a partial holiday Friday too, with early closing.
• Macroeconomic data: A light data week, global Flash PMI from S&P Global and US Durable Goods Orders both Wednesday and German GDP Friday are standouts.

Steve Miley (The Market Chartist)

Editor in chief

Steve Miley is the Market Chartist and has 32 years of financial market experience and as a seasoned expert now has many responsibilities. He is the founder, Director and Primary Analyst at The Mar... Continued