I love it when the month ends on a Friday, it’s so tidy. And there was plenty of love to go around in markets in November following the US election.

Closing changes:

• S&P 500: +0.6%
• Nasdaq Comp: +0.8%
• DJIA: +0.4%
• Russell 2000: +0.65%
• Toronto TSX Comp: +0.3% (note that the TSX doesn’t close until 4 pm ET)

On the week:

• S&P 500: +1.1%
• Nasdaq Comp: +1.1%
• DJIA: +1.4%
• Russell 2000: +1.5% (finally breaks the 2021 weekly closing high but not the intraday high)
• Toronto TSX Comp: +0.7%

On the month:

• S&P 500: +5.8%
• Nasdaq Comp: +6.2%
• Russell 2000: +11.2%
• Toronto TSX Comp: +6.1%

The big winner for November? Bitcoin, which rose 38%.

As for the Russell 2000, virtually all the gains were made on election day and the day after. Eyes will be on it next week.

This article was written by Adam Button at www.forexlive.com.

The hours of November trading are ticking down but jingle bells are ringing in the distance. That means that December trading is on the way and it’s the most wonderful time of the year for bulls.

Risk assets tend to do well in December but for stocks, the period late in the month (after Christmas) tends to be strongest. That’s particularly true in poor years as tax-loss selling hits in the first 20 days of the month. That’s certainly not the case in 2024 as it’s been a banner year for equities.

Since 1950, December has been the strongest month for the S&P 500, averaging a gain of 1.2%, though that effect has diminished in the last 25 years.

Here are some seasonals to watch:

1) Gold

I have written about gold seasonal strength in December-January for 15 years and it’s rarely let me down. It’s one of the best seasonal trends in any market, anywhere. Gold is finishing November near $2650 in what’s the first negative month since June, when it was down a single dollar. To find any kind of meaningful decline before this month, you need to go all the way back to September 2023. It’s been a remarkable run for gold and the trend is your friend.

2) Dollar weakness

December is the worst month for the dollar this century. The Dollar Index declined in six of the past seven years in December with the lone exception being a tiny decline in 2021. That’s an impressive statistic given the dollar bull market we’ve been in. The recent pullback in the dollar has been a bit of a mystery but part of the solution could be the front-running of year-end repatriation flows. In terms of fundamentals, the focus will be on whether the Fed cuts on December 18 — my bet is they will.

3) Euro strength

This isn’t a surprise given the weakness in the dollar index but it’s worth emphasizing given how hated the euro is right now. I’m sympathetic to the euro bears and a 50 basis point cut in December would certainly give them firepower. That said, the euro is hated so there might be room for a relief rally. If so, anything close to 1.10 would be a tempting spot to sell.

4) Kiwi the winner

December is the best month of the year for the New Zealand dollar as the summer sun shines in the southern hemisphere. The RBNZ this week delivered a less-aggressive rate cut than feared and that might hint at a stronger economy. In any case, there is also some technical backing here as NZD/USD has helped above the 2023 lows.

5) International stocks

It’s worth noting that while the S&P 500 has done well in December, international stocks tend to outperform. It’s a particularly strong month for Chinese stocks, which have struggled to maintain gains since late September. The Japanese Nikkei 225 is also a standout performer.

Note that many of the seasonals trends in December (including stocks) tend to reverse in January so consider taking profits late in the month.

Here is a recap of the November seasonals, which fared well.

This article was written by Adam Button at www.forexlive.com.

The headline from today’s Canadian GDP report is that growth declined on a per-capita basis for the sixth consecutive quarter. In addition, monthly GDP data showed just 0.1% m/m growth in September and October.

CIBC writes:

„While growth in the Canadian economy slowed to a crawl in Q3, that was broadly anticipated and was mainly driven
by inventories and net trade. Domestic demand growth was much more solid and similar to the prior quarter. More
concerning for the Bank of Canada will be the monthly data that showed the quarter ending with a whimper rather
than the expected bang, leaving early tracking for Q4 well below the October MPR projection. Because of that, today’s
data are somewhat supportive of a 50bp cut at the next meeting, rather than a smaller 25bp reduction, although next
week’s employment figures will be just as important in making the final decision.“

RBC continues to see a 50 bps cut but will also be watching Friday’s jobs report closely ahead of the December 11 BOC decision:

„The
GDP numbers should help to reinforce that interest rates are higher than
they need to be to maintain inflation sustainably at a 2% rate. The BoC
will also be watching next week’s labour market data closely, but our own
base-case assumption is for another 50 basis point cut to the overnight
rate in December.“

At the moment, the BOC is projecting 2% GDP growth in Q4 but that’s likely to be scaled down and the central bank may also take a more-cautious approach for 2025, given Canadian government forecasts for a declining population.

This article was written by Adam Button at www.forexlive.com.

The largest 250 trading firms are set to make a total of $32 billion from trading of Group-of-10
rates and $16.7 billion from currencies, according to data collected by
Coalition Greenwich and reported by Bloomberg. Those are declines of 17% and 9% compared to last year, respectively and the lowest since 2021.

I’m surprised by the decline given the volatility in fixed income and the yen.

This article was written by Adam Button at www.forexlive.com.

Fundamental
Overview

The Nasdaq is slowly
crawling back to the all-time high. The market continues to look forward to the
next year with Trump’s policies being a positive driver for growth.

The only bearish reason we
had for the stock market was the rise in Treasury yields. That’s generally
bearish only when the Fed is tightening policy though not when yields rise on
positive growth expectations.

Right now, the Fed’s
reaction function is that a strong economy would warrant an earlier pause in
the easing cycle and not a tightening. That should still be supportive for the
stock market in the bigger picture.

If the Fed’s reaction
function were to change to a potential tightening, then that will likely
trigger a big correction in the stock market on expected economic slowdown. For
now, the pullbacks look as something healthy and opportunities to buy the dips.

Nasdaq
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that the Nasdaq continues to slowly rise towards the all-time high. The
buyers continue to lean on the major trendline to position for new highs. The sellers,
on the other hand, will need to see the price falling below the trendline to
start targeting a correction into the 20K level.

Nasdaq Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see more clearly the rejections from the trendline as the dip-buyers continue
to pile in at every pullback. We have a minor resistance
around the 21050 level. The buyers will want to see the price breaking higher
to increase the bullish bets into a new all-time high. The sellers, on the
other hand, will likely step in around the resistance to position for a break
below the major trendline.

Nasdaq Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we have a minor downward trendline acting as resistance. A break above
it should see the buyers increasing the bullish momentum into the 21050
resistance. The sellers, on the other hand, will likely lean on it to position for
a drop into new lows. The red lines define the average daily range for today.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• There is no trade off between financial stability and growth
• Stress testing will help with competitiveness of financial sector
• Not seeing signs of higher corporate distress in relation to the budget
• Have to watch for how the effects of the budget will pass through
• BOE has sought to deliver financial stability while also supporting the economy (Breeden)
• We do not consider motor finance to be a risk to financial stability (Woods)

For those interested, the full results of the stress testing on the financial system can be found here.

This article was written by Justin Low at www.forexlive.com.

Fundamental
Overview

The S&P 500 is slowly
crawling back to the all-time high. The market continues to look forward to the
next year with Trump’s policies being a positive driver for growth.

The only bearish reason we
had for the stock market was the rise in Treasury yields. That’s generally
bearish only when the Fed is tightening policy though not when yields rise on
positive growth expectations.

Right now, the Fed’s
reaction function is that a strong economy would warrant an earlier pause in
the easing cycle and not a tightening. That should still be supportive for the
stock market in the bigger picture.

If the Fed’s reaction
function were to change to a potential tightening, then that will likely
trigger a big correction in the stock market on expected economic slowdown. For
now, the pullbacks look as something healthy and opportunities to buy the dips.

S&P 500
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that the S&P 500 recovered all the losses and it’s now back near the
all-time high. The buyers will want to see the price breaking higher to
increase the bullish bets into new highs. The sellers, on the other hand, will
likely step in around these levels to position for a drop back into the major trendline
around the 5900 level.

S&P 500 Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have another minor upward trendline defining the current bullish
momentum. The buyers will likely keep on leaning on it to position for new
highs, while the sellers will look for a break lower to increase the bearish
bets into the major trendline.

S&P 500 Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we are having a pretty slow and choppy price action these days due to
the holidays. This could lead to fake breakouts due to the intraday noise. The
sellers will want to see the price falling below the higher low around the 6017
level to start targeting new lows, while the buyers will likely pile in around
these levels to position for a rally into a new all-time high. The red lines
define the average daily range for today.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• Prior +0.9%
• HICP +1.6% vs +1.5% y/y expected
• Prior +1.0%

The nudge higher owes to base effects, similar to the rest of the euro area. However, core annual inflation is also seen marginally higher on the month – up from 1.8% in October to 1.9% in November. That said, it is still holding under 2% so that’s some comfort for the ECB as compared to the likes of Germany.

This article was written by Justin Low at www.forexlive.com.

• Prior +2.0%
• Core CPI +2.7% vs +2.8% y/y expected
• Prior +2.7%

The headline estimate may have nudged higher in November, largely due to base effects, but the core estimate remains steady at 2.7%. If anything, it reaffirms a 25 bps rate cut for next month as the disinflation path remains bumpy in the euro area. Looking at the details, services inflation did come down a little from 4.0% in October to 3.9% in November.

This article was written by Justin Low at www.forexlive.com.

Fundamental
Overview

We continue to see a
pullback in the US Dollar as the market kind of reached the peak in the
repricing of interest rates expectations and it will need stronger reasons to
price out the remaining rate cuts for 2025.

This was signalled by the
lack of US Dollar strength after lots of strong US data with the market’s
pricing remaining largely unchanged around three rate cuts by the end of 2025.
We might see the greenback remaining on the backfoot at least until the US CPI
due in two weeks.

On the NZD side, the RBNZ
this week cut interest rates by 50 bps as expected but overall was less dovish
than the market’s aggressive view. Right now, the market sees a 68% chance of a
25 bps cut in February 2025 and a total of 88 bps of easing by the end of next
year.

NZDUSD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that NZDUSD probed below the key support zone around the 0.5850 level but eventually
rallied back above it. We are now approaching a key resistance around the
0.5912 level.

This is where we can expect
the sellers to step in with a defined risk above the resistance to position for
a drop into new lows. The buyers, on the other hand, will want to see the price
breaking higher to increase the bullish bets into new highs.

NZDUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have also the 50% Fibonacci
retracement level standing around the 0.5912 resistance. This should
technically strengthen the resistance zone. Again, the sellers will look for a
rejection around the resistance, while the buyers will look for a break to the
upside to position for a rally into the 0.6050 level next.

NZDUSD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we have an upward trendline
defining the current pullback into the resistance. If we were to get a pullback
into it, we can expect the buyers to lean on it to position for a break above
the resistance, while the sellers will look for a break below it to increase
the bearish bets into new lows. The red lines define the average daily range for today.

This article was written by Giuseppe Dellamotta at www.forexlive.com.