Market Notebook

PRICE ACTION:
Equity prices, as measured by ticker SPY, and bond prices, as measured by ticker BND, closed higher on the week.

TECHNICAL ANALYSIS:
SPY and BND prices closed above their respective 20-day exponential moving averages. SPY held above the 20-day on strong price action and above the November 3rd “higher low,” suggesting a short-term upward trend has been established.

BND also closed the week above the 20-day exponential moving average. This is the first time it has done so since mid-August. Last week’s close is a possible sign that the long-established downward trend in BND may end.

SENTIMENT:
The week-over-week change in sentiment appeared whiplash-inducing. Inflation data came in cooler than expected, fueling market participants’ appetite for risk assets.

ECONOMY AND FUNDAMENTALS:
Although inflation data came in cooler than expected last week, inflation in the U.S. remains elevated. The Fed will likely remain aggressive in combating inflation. The apparent key to a sustained risk rally is a sustained change in sentiment regarding rate hikes. This dynamic was on display during last week’s trading.

NEXT WEEK:
Technical analysis on a daily timeframe for both SPY and BND suggests the possible establishment of an upward trend. Additionally, recent price declines have improved the price-to-value ratio for many instruments. Next week could be an opportunistic week to pick up specific equity and bond instruments.

All the best during the week ahead!

Disclaimer: Nothing in this discussion should be considered investment advice. The content of this discussion is strictly my personal opinion and subject to change at a moment’s notice. Investment advice can only be provided to you by your investment professional and not by a general market discussion such as this one. If you wish to speak with an investment advisor, contact us. We can probably help.