Thanksgiving week is known for positive seasonality, and this year was no exception. The half-day session on Friday was very slow and flat, but all the indexes finished in positive territory for the week with the Dow leading due largely to Deere (DE) and the Nasdaq 100 lagging due to weakness in big cap technology.
The S&P 500 finished the week under significant overhead resistance at its 200-day simple moving average of 4057. The question is whether the indexes can build on the seasonal momentum as we move into some major economic events.
The bulls' argument is that the market continues to have positive seasonality until the end of the year. The combination of underinvested investors and a desire for some end-of-the-year upside should help the indexes keep running.
The bears argue that this market has been ignoring the Covid shutdown in China, the fact that the Fed is still quite hawkish, and the potential for slowing economic growth. The Fed is still not supportive of the market, although market players expect a 0.5% hike in December. That does not mean that the war against inflation is over.
Jerome Powell speaks next Thursday and the market will likely be nervous about that event. The week after that is the consumer price index report and the December meeting of the Fed.
This year, there has been a pattern of optimism about the Fed and the economy that the facts have not supported. We currently have another example of improving sentiment, but no real factual basis to support that view. That doesn't mean that the market can't keep running, but it sets up a high risk of an abrupt pullback.
Have a great weekend. I'll see you on Monday.
