Bears Remain In Charge – Weekly Market Outlook

Despite a couple of efforts to shrug it off, the market could never quite snap the downtrend that was put into place by a key reversal bar two Fridays ago. In fact, the fact that Friday’s rally efforts were thwarted at a well-established line in the sand suggests the bulls remain on the defensive.

The flipside: The bears didn’t exactly do any real technical damage when they had a chance to do so Thursday.

We’ll look at both sides of the coin, as always, after a brief run-down of last week’s and this week’s economic numbers.

Economic Data

It was a relatively modest week last week in terms of the numbers of economic news items we got, but three of them were on the important end of the spectrum.

For instance, it was a telling week for real estate. Sales of existing homes fell from a pace of 5.58 million to 5.31 million, while new home sales grew from 522,000 to a multi-year high pace of 552,000. Both are in strong uptrends. Home prices continue to rise as well.

Home Sales Chart

Source: Thomas Reuters

Durable orders, however, were disappointing. They fell 2.0% overall, and were still just flat when taking transportation orders out of the mix. Analysts were looking for at least a little ex-transportation growth.

Finally, the third and final GDP growth reading for the second quarter came in at a whopping 3.9% last week.

GDP Growth Chart

Source: Thomas Reuters

Everything else is on the following grid:

Economic Calendar

Source: Briefing.com

This week will be considerably busier, but with only one real highlight… September’s employment report, due on Friday. Economists expect to see total payroll growth of 205,000, up firmly from August’s disappointing job growth of 173,000. That, however, isn’t expected to be enough to move the unemployment rate dial from 5.1%.

Employment Growth, Unemployment Rate Chart

Source: Thomas Reuters

Stock Market Index Analysis

Last week, the S&P 500 (SPX) (SPY) lost 1.4%, following through on the bearish reversal effort that started to materialize late two weeks ago. And yet, though the trend is bearish, the bulls are holding a crucial line. Things could still go either way, although the bulls have more work cut out for them than the bears do.