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S&P 500 monthly chart with 3 and 10 month moving averagesThe S&P 500 opened the month of December at 3,143.9 and proceeded to sell off hard, to 3,110.8 before closing the first day at 3,113.9 – a loss of almost 1% on the day. The next day, the index gapped-down to 3,087.4 and reached its low for the month, at 3,070.3 before attracting buyers and closing higher, at 3,093.2. It was all uphill from there, with the S&P 500 peaking at 3,247.9 on December 27th – a gain of 5.8% from the December 3rd low. On a closing basis the S&P 500 gained 2.9% in December, from the previous month’s 3,141.0 close. In all, this was the S&P 500’s best December in recent history, besting 2016 by a full percentage point.

Looking back at 2019, the S&P 500 opened the year at 2,477 on January 2nd which was just a bit off of 2018’s close, at 2,506.9. From that 2018 close, the index gained a total of 28.9% in 2019 (close-to-close). The S&P 500 lost 6.2% in 2018.

Looking forward to January, it has been a good month for the past two years. Last year, the S&P 500 gained 7.9% after the big pullback in December. In 2017 the index gained 1.8%. In 2016, though, the S&P 500 lost 5.1%. The 3-month moving average is currently 3,136.4 which is 2.9% below December’s close. The index is trading 5.4% above the 10-month moving average of 2,976.7. The moving averages have not been inverted since February of 2019.

The ISM manufacturing index will be released on Friday (though Thursday’s Markit manufacturing PMI will give the market a hint) and the street is looking for a resumption of October’s growth, after November’s slight disappointment (that the market shook-off just fine). I do not think the market will be so forgiving this time, if the manufacturing number misses the estimate (48.4%). I hope everyone had a safe and enjoyable New Year’s!

-- Scrib

Unprecedented central bank action has dominated economic stimulus since the global crisis and suppressed yields around the world. The skew may now be shifting more toward fiscal expansion that could pressure rates higher. Austerity is on the wane in Europe, spending packages are landing in Asia, and U.S. borrowing is on track for even bigger records in the next couple of years.
-- Emily Barrett , Chikako Mogi , and James Hirai, Bloomberg

iShares TIPS monthly chart
iShares TIPS bond ETF monthly chart showing a recent multi-year breakout, followed by consolidation

"Air cargo’s peak season is off to a disappointing start, with demand down 3.5% in October," said Alexandre de Juniac, director general and chief executive of IATA. "Demand is set to decline in 2019 overall – the weakest annual outcome since the global financial crisis. It has been a very tough year for the air cargo industry."
-- Rachelle Harry, Aircargo News

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The Commerce Department said the trade deficit tumbled 7.6% to $47.2 billion, the smallest since May 2018, as both imports and exports of goods declined. It was the second straight monthly fall in the trade bill and the percent drop was the biggest since January.
-- Lucia Mutikani, Reuters

ISM uses five components, each weighted evenly at 20% — new orders, production, employment, supplier deliveries and inventories.

IHS uses a weighted average that gives greater importance to new orders (30%), output (25%) and employment (20%), and lower weighting to suppliers’ delivery times (15%) and stocks of purchases (10%).
-- Dion Rabouin, Axios

I don't know that comparing ISM to IHS ("Markit") is all that useful. Yes, Markit appears to lead ISM, recently (perhaps now, and certainly during May and June of 2018), but the S&P 500 has shown itself to be little-affected in the near term, by the transition in trend, in either ISM or Markit.

S&P 500 Monthly Chart with PMII track manufacturing ISM against the S&P 500 for a "big macro picture" data point, but as you can see from this monthly chart, the two do not move in lock-step. That being said, I like to be aggressive in the S&P 500 when the manufacturing ISM is rising, and not-so-aggressive when it is falling. If Markit is truly leading the ISM data, we should see a corresponding rise in the ISM, for December (which will be released in January). Does that seem likely, though? It does not to me, but let's let the data do the talking.

-- Scrib

S&P 500 Monthly Chart with 3 and 10 Month Moving AveragesThe month of November began with a bang, as the market gapped-up to open at 3,050.7 on the first trading day of the month, closing the session at 3,066.9 for a gain of 1% over October’s 3,037.6 close. The S&P 500 continued nearly unabated, to an intraday high of 3,127.6 on 19 November, before pulling-back nearly 1% to close at 3,103.5 on 21 November. The index would proceed to close November at 3,141.0 after hitting 3,154.3 on 27 November. For the month, the S&P 500 gained 3.4% which equaled its 2016 November performance. Quite a month!

Recent history has not been nearly as kind to the S&P 500 in December, as it has been in November. The index gained 1.8% in 2016, 0.9% in 2017 and -9.2% last year. The 10-month moving average currently sits at 2,932.1 or 7% below November’s close, while the 3-month moving average is 2.9% below November’s close at 3,051.8. Both moving averages are rising.

We will get the manufacturing PMI on Monday. The market really wants to see another increase, so anything over October’s 48.3 number is going to be good news. We have not seen two consecutive months of manufacturing PMI increases since May and June of 2018 (and three consecutive increases since 2017!).

We start all over again on Monday, so enjoy your Black Friday and have a fantastic weekend!

-- Scrib