Futures look higher but appearances are deceiving. Stocks are actually right where traders left them on Friday after the worst week in years. Frankly, most traders would be happy to call it a year at this point given the eroding support for equities and the assorted nightmares developing overseas. Alas, we still have to work and for some this is a make or break five days. Here's what you need to know heading into the last full trading week of 2014.
The S&P 500 Index (^GSPC) dropped 3.5% last week, closing so poorly on Friday that the bell sounded vaguely like a watermelon getting smashed with a bat. Typically markets don't bottom on Fridays, especially when they close at the lows.
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Technically we've got a battle for the market's soul taking place right here, right now. If the S&P 500 can hold that level we can still get a Santa Claus rally after Christmas. Below 2000 there is not decent support on the charts for about another 100 points. A convincing drop below 2000 and Santa will be replaced by Krampus; a Christmas demon, who according to German folklore, uses his enormous prehensile tongue to drag naughty children into the forest, never to be heard from again.
Two pieces of "Fed" related fundamentals will get a lot of attention this week. Only one matters. The fake Fed news will be from the Federal Reserve which holds its last meeting of the year Tuesday and Wednesday. Expect to hear a lot of talk about whether or not the Fed keeps the phrase "considerable time" in reference to how long it plans to keep interest rates at zero. Please do your best to ignore that chatter. Your financial planning should not be dependent on Fed parsing. I can't overstate that.
The Fed you should pay attention to is FedEx (FDX) which reports earnings Wednesday morning. The coasts are flooded, the malls are empty but consumers are shopping. Perfect. Gas is cheap, at last check the lowest level in five years, according to AAA. That means FedEx costs are low and its customers are desperate. FedEx should be making crazy bank right now. If they aren't; something is really wrong.
Analysts are expecting FedEx to make $2.19 a share on about $12 billion in revenue, according to Yahoo Finance data. The company previously said it expects to move 290 million shipments between Black Friday and Christmas. If you're looking for a Santa Claus rally you want FedEx to beat all those numbers. If the world's best shipper says anything negative, Krampus will be in command and not all the Fed Governors in the world will be able to save your fund managers.
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