The big event (FOMC) of the last week left investors a little puzzled,….“Although, U.S eco’ has solidified since the beginning of the year, the FED doesn’t seem to believe it too much”. This question was answered by Friday’s GDP#, which fell below expectations and echoed Bernanke’s ‘retail sales” concern and a big jump in inventory. It seems someone has a crystal ball!. A big week of eco’ data is ahead with Global January PMI’s/ISM kicking things off mid –week. ‘Good news’ is likely priced in by the market, so the only reaction left may be sell any better than expected numbers next week.
Luckily for the market, bad news was good news as the QE trade offset a sombre economic message and the broad market finished with another week of gains, but off its highs. As noted Thursday, the market may have hit a rally top at SP1333, which is a monthly down trend-line from Oct. ’07. Although, the rotation trade of ’12 was back on Friday, it is more a consequence of ‘window dressing ‘in effect. In this view, a pullback is underway with only QE and month end shenanigans keeping it in check so far.(SP 1316). The pullback size depends on how SP1306 is defended.
Another 20% of the SP reports, a flurry of small caps reports to focus on while market digests the rally.