BigTrends.com Weekly Market Outlook 

Talk about a 180-degree turnaround! Traders were bullish leading up to last Wednesday’s big news, and remained a little bullish for the last part of that session. With a night to sleep on it though, they changed their minds. Thursday as bearish and Friday was even more so, turning what started out as a great rebound effort into a weekly loss as well as a break below several key support levels.

If a Santa Claus rally is in the cards, the bulls are going to have to start with a lot of damage control.

We’ll poke and prod the rekindled downtrend below, after a quick examination of last week’s and this week’s biggest economic news.

Economic Data

The week was plenty loaded with economic news, though the highlight of it all was the least surprising… the Federal Reserve (after months of warning investors) pumped up the Fed Funds Rate from 0.25% to 0.5%. It’s a sign that the economy can finally withstand higher rates, and that the economy may finally be solid enough to begin driving inflation.

Investors initially agreed with the Fed’s enthusiasm from Wednesday, though by Thursday the tide has turned for the worst, turning a bullish week back into a bearish one. It’s anyone’s guess as to how investors will feel when trading resumes this week.

Other big – and related – news is November’s inflation report. On a core (ex-food and energy) basis, it was up 0.2%, and flat overall. On an annualized basis, the overall inflation rate stands at 0.5%, and is up 2.0%. That’s in line with the Fed’s target, and a reason to start quelling rampant economic growth before inflation ramped out of control.

Consumer Price Inflation Chart

Source: Thomas Reuters

November was also a good… no, great month for real estate. Housing starts jumped from a pace of 1.062 million to 1.173 million, while permits grew from a pace of 1.161 million to 1.289 million. Both are near multi-year highs again, and it’s possible they could have been even stronger were there more inventory available.