Markets Close Higher — Happy Thanksgiving!

The market remained in a Thanksgiving mode of drifting higher on Wednesday. The tradition of this week is for the markets move in a positive direction and prepare for the holiday trading period. Of course the Santa Rally is the next stage of this process and that starts next week with the Black Friday sales results. The indexes held in positive territory and tomorrow we relax, eat, enjoy friends and family, and Friday trade half a day and go shopping. Sounds like fun.

Wednesday was all about the data as the economic news was interpreted as positive. The jobless claims were lower than expected at 316k, durable goods fell less than expected? (guess that was a negative-positive), Chicago PMI was lower, but also above the lower expectations (another negative-positive), Consumer Sentiment rose to 75.1 and improved more than expected and the Treasury Action produced less activity than expected, injecting some worry in to the bond market. There was plenty of data to chew on, but most seen as positive.

Hewlett Packard beat earnings and jumped 9.7%, Bonds sold off on the Treasury Auction and rates rose (bounced back some), crude oil inventories rose more than expected pushing oil prices below $92, before closing at $92.23, the dollar rose against the yen, and US Air was approved to merge with American Airlines. Busy day overall.

I want to wish Everyone a Happy Thanksgiving! We will See You on Monday!

Trend of the Market:

The trend of the market remain on the upside both short term and long term. The micro term (13 weeks or less) is where investors remain focused currently and the break above the resistance levels two weeks ago leaves the micro trend on the upside as well. The media and analyst continue to feed the concerns about the current valuation of the market overall versus buyers appetite for risk. The VIX index shows the worry factor at record lows currently with not much worry to speak of. We have all voiced our concerns about the movement of the market near term, but we have to let it play out versus speculating on direction.

Dow Industrial Index (DIA) – up0.2% on the trading day and pushed to the 16,100 level and hold the momentum on the upside. Today IBM and MMM gained more than 1% and were the leaders on the day. The index remains the leader of the major indexes on the upside with the 10 DMA is the level to watch short term.

S&P 500 Index (SPY) – Index gained 0.2% on the day closing at 1807. The index gave up the majority of the gains during lunch today, but managed to move back near the highs in the afternoon. No real changes in the index overall and the leadership remains in the financials, healthcare and industrials. The REITs (IYR) bounced off support today to gain 1%. Utilities continue to struggle losing 0.3% on the day and Energy was off 0.7% as crude fell. The broader index remains in a positive trend.

NASDAQ Index (QQQ) –  The index managed to close above the 4000 level on Tuesday and followed through today closing at 4042.  Micron Technology was up 4%, CheckPoint Software gained 2.1% and CafePress was up 3.2% today providing the upside leadership on the day. Biotech (IBB) has been the key leader of late, but was flat the last two days. The technology stocks helped again today with the internet stocks breaking through some resistance and adding 0.7% on the upside.

Russell 2000 Small Cap Index (IWM) –  Held above the 1120 level and moved to 1140 to show some leadership again on the upside. Are we starting the end of year rally or January effect from the sector going forward? The move has started with the key question, will it continue? Watch for the short term upside opportunities in the position taken last week.

Sectors of Interest:

Financials (XLF) was one of the four leaders we were watching this week for leadership. They have held thus far and we continue to look for the next leg higher to accelerate.

Consumer Discretionary (XLY) is another of the leaders coming into the week. Retail remains a positive influence for the sector and the leaders are worth trading and trading going forward.

Healthcare (XLV) is another of the leaders and they tested the last two days. Watching and managing our risk as the move determines if it wants to trend higher.

Treasury Bonds (TLT) – The yield spike last week pushed the bonds lower, but they are holding steady with the calming impact of interest rates. The risk is in the Fed cutting stimulus sooner rather than later. The market is attempting to price in the impact of that happening. You can see the sensitivity in the bonds based on today’s reaction to the auction news.

Moves of Note Today: 

Crude Oil (OIL) fell below support on the day and could be setting up for more downside going forward. The supply and demand issue moved front and center with the rise in inventory. This is something to watch as we move forward. Further increase would impact prices further on the downside.

NASDAQ 100 Index (QQQ) the push higher in the index is showing a resurgence in the large cap stocks. Apple was up 2% today, Amazon 1.2% gain, Micron Technology up 4.1% and Netflix up 2%. Makes this an index watch in terms of leadership moving forward.

Utilities (XLU) were down again today and fell below support at $38.30? Watching to see how much of a test develops in the sector short term. Still like the outlook longer term and the 4% dividend.

Energy (XLE) produced the third down day in a row? Demand for crude is slipping for better or worse it is something to watch going forward. Question if natural gas, distillates or other components of the sector can offset the potential losses from crude oil.

China (FXI) moved higher today after a couple of days on the sell side. Watch to see if the break higher holds up longer term.

Germany (EWG) moved higher and is setting the upside pace in Europe. IEV, Europe ETF made a move back towards the previous high as well today.

What to Watch Tomorrow:

Trading Notes tomorrow morning to set the tone for the trading day. Don’t get them? Send and email to don@jimsnotes.com to find out how to try them free.