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A Maybe for Higher Equity Prices | LPL Financial Market Signals Podcast

December 10, 2018

LPL Financial

This week’s Market Signals Podcast discusses factors that could affect higher equity prices including market technicals, market fundamentals, and the oil market.

The S&P lost 4.6% last week, which was the largest weekly drop since March of this year. This came on the heels of the best weekly gain in 7 years the week before.

- Ryan Detrick - LPL Senior Market Strategist

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In this week’s Market Signals podcast, our LPL Research strategists discuss three topics that could hold the key to higher equity prices during the historically bullish month of December.

The first involves market technicals, which continue to weaken as volatility soared in December. The strategists note that continued small cap weakness, a lack of 20-day new highs, and overall advance/decline lines aren’t quite what they want to see for a major bottom to take place. However, sentiment is flashing levels of fear seen near major market lows, suggesting a low could be near.

The second topic is market fundamentals, which the strategists say continue to impress. Last week, the US showed strong services and manufacturing data, along with continued growth in the jobs market. While the flattening yield curve conversation dominates news headlines, history shows there is still time before a recession and for potential market gains to be had after yield curve inversions.

The usual suspects – oil, the Fed, and trade issues – comprise the third topic for discussion in this week’s podcast, and are all potential risks to the bullish thesis. However, the LPL strategists note they did find clarity in the oil market after OPEC announced it would cut production by 1.2 million barrels a day. The Fed is now expected to lower the number of rate hikes next year, while continued trade discussions with China take place.

Potentially bullish chart for crude oil

With OPEC cutting production by 1.2 million barrels a day, we are impressed that oil found support near the $50 area. This could be the start of a major bottom trying to form.

Listen in to the full Market Signals podcast by LPL Financial to hear more about what our strategists believe could play a role in higher equity prices. And make sure not to miss future podcasts by subscribing to LPL Market Signals on your favorite podcast platform.

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