Flat Economic Metrics Prompt Stock Market Weakness

Posted Wednesday, November 25, 2020 by
Shain Vernier • 1 min read

It’s been an active morning on the economic calendar, led by a downward revision in U.S. Q3 GDP. At the midpoint of the Wall Street session, stocks are mixed. The big loser thus far is the DJIA DOW (-175) and the winner is the NASDAQ (+29). At this hour (12:45 PM EST), the S&P 500 SPX (-10) is trading near flat.

Earlier in the week, we previewed today’s pre-Thanksgiving economic events. Here’s a quick look at the actual metrics:

Event                                                               Actual              Projected         Previous

Continuing Jobless Claims (Nov. 13)            6.071M             6.020M             6.370M

Initial Jobless Claims (Nov. 20)                     778K                   730K                748K

Durable Goods Orders (Oct.)                        1.3%                   0.9%                 2.1%

Annualized GDP (Q3)                                      33.1%                33.2%              33.1%

Core Personal Consumption (MoM, Oct.)     0.0%                   0.0%               0.2%

In total, this set of reports disappointed expectations. Unemployment claims are growing and consumer spending is slowing down. Also, the Michigan Consumer Sentiment Index (Nov.) came in at 76.9, beneath expectations (77.0) and the previous release (77.0). Given this morning’s data, it appears that the fall COVID-19 economic recovery is slowing.

NASDAQ Rallies On Modest Economic Data

Despite a collection of so-so economic figures, December E-mini NASDAQ futures are in the green. Values are holding firm above 12,000 as investors gear up for the Thanksgiving break.

December E-mini NASDAQ Futures (NQ), Daily Chart

Here are the key levels to watch for the rest of the week:

  • Resistance(1): All-Time High, 12,444.75
  • Support(1): Bollinger MP, 11,809.25

Bottom Line: If we see the December E-mini NASDAQ pull back from current levels, a buying opportunity may come into play. Until Friday’s closing bell, I’ll have buy orders queued up from 11,811.75. With an initial stop loss at 11,798.75, this trade produces 72 ticks on a standard 1:1 risk vs reward ratio.

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