Strong Seasonality And Other Key Themes To Watch This Week

It was a slow week last week in the markets with a short week in the US. There were still plenty of potential trades early in the week, but as Thanksgiving approached volume slowed down and the markets became whippy with no stabilizing forces.

We are back to a full week this week and there are plenty of things to watch as we begin the wee trading in November and end the week trading in December. Seasonality could come into play if that is something you trade with, but there are also plenty of news releases this upcoming week!

Here are 5 themes to watch in the market this week:

Seasonality

December is fast upon us and for some, that means it's time for the “Santa Claus Rally”. This is the supposed phenomenon that markets rise into the end of the year as Santa gets ready to make his rounds. There are a lot of potential detractors of this: record spending on debt, huge inflation numbers, and an economy that appears to be starting to cool. But there have always been reasons to doubt the Santa Claus rally and in many years it delivers. This is just something to keep an eye on, seasonality could be pointing to a bullish move.

Consumer Confidence

The first big hitter we have this week is on Tuesday at 10 am Eastern Time, consumer confidence will be released. Historically this has been hit or miss in terms of a market-moving event, however in the recent regime of news that moves the market this has been a solid tradable event. It has been generally trending down over the past several releases. This has a potential impact because it is a leading indicator of potential consumer spending in the coming months. If this continues to trend down it could signal that demand is starting to cool in the US and that the market may be in for softer earnings as people send less.

Non-Farm Employment Changes

There are a few non-farm payroll releases this week. The first two are on Wednesday with ADP non-farm employment change and the JOLTS job openings. Both of these come in advance of the official governmental figure on Friday but are just as important. JOLTS shows the number of open nonfarming-related jobs and is an advanced indicator of the strength of the job market in the coming months. ADP non-farm employment changes show how robust or weak the job market is for the prior month. Finally, the Non-Farm payrolls put out by the government, which also shows the change in non-farming-related payrolls for the prior month. A beat will be good for the market and shows a strong economy, a miss usually signals the opposite. But with the Fed actively trying to slow the market to cool inflation a weaker-than-desired print on any of these may signal that the Fed plan is working.

Core PCE

Thursday we also have a plethora of news releases, but potentially the largest market moved will be Core PCE. This is a measure of prices paid for goods and services by the consumers only. It will show whether or not inflation is cooling or rising to the end user as these are actual prices paid by them. For this think of what you pay in Walmart or the grocery store, that's what this measures the change of. If the PCE comes in weaker than expected it could be inferred that inflation is coming down and that the Feds plan is working. This has the potential to be good for the markets.

Unemployment Claims

Finally, on this week of big news, we have the US unemployment claims. This will show whether last month there was an expansion or contraction of people on government benefits. This could be a really conflicting release for the markets, on one hand, if lower than expected it means the economy is robust. This is typically great for the market but would show Fed policy is not working. On the other hand, if more people are filing claims it would show that the economy is cooling down but would mean the Feds policy is working. This release could produce some wild swings as the market participants try and make sense of what it all means.

Best of luck this week and don’t forget to check out my daily options article.

• Here’s One Hot Stock That Could Fundamentally Rise Even Higher
• Stocks Settle Mixed in Holiday-Shortened Session
• Bear Markets Rarely Move In Straight Lines
• High Inflation May Reduce Holiday Retail Sales