US Market Technicals Ahead (1 November – 5 November 2021)

SP:SPX   S&P 500 Index
With major U.S. indices S&P 500 $SPX , NASDAQ Composite $NDX, and Dow Jones Industrial Average $DJI – all at all-time high closes, market optimism will be tested from all sides this week, as a slew of corporate earnings , non-farm payrolls, and a Fed meeting that is expected to signal the start of QE tapering.

Here’s what you need to know to start your week.

The benchmark index $SPX have established a fresh new high with a further gain of +1.33% (+60.48 points), closing the week at 4,605 level. The new high was printed only in the final ten minutes of Friday’s trading session, as market was trading within its high and low range from Monday to Thursday.
It is worth to note that the % of stocks that are participating in the 2021 market rally has been in decline. There are currently 50.59% stocks trading above their 200-Day Moving Average (down from 85%); and 53.12% of stocks trading above their 50-Day Moving Average (down from 84%).
The immediate support to watch for $SPX this week is at 4,545 level, a resistance turned support level from September 2021’s peak.

Earnings Season Rolls On

Earnings continue to be the main story in stock markets around the world. While many of the biggest names have already reported, with Microsoft $MSFT and Alphabet $GOOGL being top performers last week and Apple $AAPL , Amazon $AMZN, and Facebook $FB – soon to be Meta – lagging, a much wider swath of companies will update on Q3 this quarter.

Supply chain issues and inflation will of course be on investors’ minds as they watch these reports, as well as how much the Q3 U.S. growth slowdown hit these companies, and what that means for their respective outlooks. As companies lap pandemic affected quarters, figuring out what is the new normal for companies that are either recovering or were big 2020 winners will also be on the docket.

Non-farm payrolls

After October’s disappointing jobs report and the muted GDP number, November’s nonfarm payrolls report will test the strength of the U.S. economic recovery. Expectations are for 385K new jobs, after the NFP missed expectations in each of the last two months.

Whether that lull was temporary and due to either the summer delta variant surge or supply chain issues remains to be seen. The report may weigh on the speed of Fed tapering, and might also give added impetus to Democrats in Congress on their budget package negotiations.

Fed Meeting

The Fed Open Market Committee (FOMC) report will be released on Wednesday after a two-day meeting. Fed chair Jerome Powell has said in recent weeks that the plan to start tapering in November is still on, so the question is whether that will bear out.

Also to watch in Powell’s comments and the press conference that follows is what his current view on inflation is, after the debates over whether it is transitory or persistent, and what that means for the pace of interest rate hikes in the months (years?) to come. Of note, the US Dollar popped on Friday after trading lower much of the month, and will be in focus if there are any surprises.

Manufacturing PMI reports

As we enter the holiday season to finish the year, the supply chain snarls and various growth slowdowns will be in the spotlight. A number of PMI reports come out this week. China already kicked off with a disappointing 49.2, marking reduced activity. The U.S., U.K., Germany and other Euro Zone countries will all report. Expectations are for expansion across the board – numbers above 50 on the index – and will give an additional indicator on how the global economy sets up to finish the year, and perhaps how long consumers will have to purchase their holiday presents in advance.

Crypto: Another Bitcoin ETF , And Monetary Tightening

Two weeks ago it was Bitcoin , and last week it was ETH/USD as a leading cryptocurrency to set a new all-time high. Meanwhile, smaller and less grounded coins such as Shiba Inu continue to grab headlines.

There are two headline stories to watch for crypto impact this week. First, a third bitcoin ETF is expected to start trading, as the VanEck Bitcoin Strategy ETF $XBTF is expected to list by Wednesday. Excitement over the first ETF , ProShares Bitcoin Strategy ETF $BITO, may have propelled bitcoin to all-time highs, but the response to the second, Valkyrie Bitcoin Strategy ETF $BTF, was more muted.

It’s also worth watching how the crypto complex reacts to a tightening environment. Much of the investment thesis for crypto is tied to inflation and the value of money; an increase in the cost of capital via central bank tightening could make traditional currencies and assets relatively more attractive. While in large part a coincidence, the tightening cycle in 2018 and the simultaneous off year in crypto may be worth keeping in mind even as optimism in the sector remains high.