Tapering talk is once again weighing on the markets and this has translated a worse sell off for the S&P 500 since November. Speculation is something which has always affected the markets, and so far every major news and event has fuelled this tapering speculation ,which is why we can clearly see that how the US futures, even today are still under punishing selling pressure.
The question which stands in this Stella rally’s way is, if this time next week Fed will trigger the button which they mentioned seven months ago in May. The economic data released so far certainly warrant for it, however, the US bond market is perhaps not this much sanguine about this, as the bond yield post payroll data is still well below the 2.93% mark.
Having said that, this could change very rapidly, because we do have retail sales data due today at 13:30, and this data could be the main focus for the Fed which could skew their tapering decision. If the final number for this retail data does blow past the expectations, then the scale for the December taper could tilt further. But, an important thing to notice will be US consumer confidence, we have seen few consecutive readings which showing not too much optimism about this, and this is due the government shutdown and US political conglomerate.
Thanksgiving break is one of the event which has increased the odds that we may see the retail sales number stronger as most retailers have reported stronger footfall and increased web shopping. However, like I said, if this increases the odds for December taper, then we may see the S&P500 breaking below the 1775 level, which has been acting as a level of support. As for now, the Santa rally is stuck on ice, and given the astonishing gains which we have seen so far this year for the equity market, this may trigger further profit taking.