Wildcard in

S&P 500 keeps nibbing at 4,040 and while rejected Friday and before, this level would be eventually overcome. Low 4,010s are the support, and the remaining key data of 2022 shouldn‘t force a lasting break. Of course, unless China uncertainty strikes the way it did over the weekend – Asian session understandably took the bulk of the hit but the rush to bonds appears receding for now. Even if S&P 500 buyers would be overpowered right next, the Q4 rally isn‘t over – the headline dust only needs to settle.

Market breadth is improving, VIX is revealing retreating fears, and in general we‘re back to summer bets on less restrictive Fed. Just like back then the negative quarterly GDP print drew focus to the recession now predictions (didn‘t happen), the latest retreat in inflation (with more, lot more to come) is giving rise to similar bets.

Even if the Fed goes only 50bp in Dec (as anticipated long ago) and 25bp in Jan, that‘s still a headwind – it‘ll tip the real economy into recession, no matter how slow they are planning to go now. 5% year end or 5.50% after Mar FOMC – either will do the trick. Yield curve has twice inverted, housing feels that, manufacturing is sputtering, and labor market posture (tightness or hotness, call it whatever you please) will change. Tech layoffs are only a harbinger.

What does it mean for stocks now?

We‘re still moving higher before recession goes after earnings. 4,065 – 4,070 followed by even 4,130, are my key levels to watch in the weeks ahead.

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Let‘s move right into the charts.

S&P 500 and Nasdaq outlook

The real resistance is a bit above the 200-day moving average. The spring is coiled, and ready – it‘ll more probably happen on Wednesday‘s GDP than on Tuesday‘s consumer confidence. Sectors featured Friday will do great.

Credit markets

The retreat in yields and general risk-on posture in bonds will continue – Friday was a welcome reprieve. Loaded and ready to go higher in support of the stock market rally.