Markets Remain in an Upward Drift

The market is in a Thanksgiving mode of drifting higher on lighter volume. The tradition of this week is for the markets move in a positive direction and prepare for the holiday trading period. The major indexes all moved higher with some doing better than others. My conclusion on today is start cooking your Turkey dinner and relax, nothing is on the horizon currently that will disrupt the current activity. Next week when the results of Black Friday/Gravy Thursday shopping results are posted, then we will see some activity in the broad markets.

Yesterday we mentioned the major winter storm that is heading to the east coast and the question is what impact will it have, if any, relative to markets now and going forward? The hope is air travel will still proceed smoothly for travelers as the worst of the storm should be over tomorrow followed by a blast of cold air. Maybe we should be looking at heating oil and natural gas investments on rising demand?

Consumer confidence data posted today was lower than expected for November at 70.4 versus 72.4. This is not a big surprise if you think about the current job situation across the country relative to the quality of jobs being added. Building permits were higher and the home price index rose again in October. Overall the economic data continues to lukewarm at best.

Interesting to look at the intraday charts and the selling into the close the last couple of days. Today it took place in the last 15-20 minutes of the day. This remains an issues as program trading the last hour has been noticeable of late.

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) – Flat on the trading day, but held the 16,000 level as it attempts to climb near the 16,100 mark. Disney up 2% and Boeing up 1.3% 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) – Was flat on the day at 1803. The index gave up the majority of the gains in the last 20 minutes of trading. No real changes in the index overall and the leadership remains in the financials, healthcare and industrials. Utilities and telecom continue to be the drag on the index with both closing lower today. The pressure from rising interest rates gets most of the credit and we will watch going forward. The broader index remains in a positive trend.

NASDAQ Index (QQQ) –  The index managed to close above the 4000 level on the day at 4018. Bidu up 4%, Monster Beverage gained 2.7% and Facebook up 2.4% today provided the upside leadership on the day. Biotech (IBB) has been the key leader of late, but was flat on the day. The technology stocks helped today with the semiconductors breaking through some resistance and adding 0.8% on the upside.

Russell 2000 Small Cap Index (IWM) –  Held above the 1120 level and moved to 1132 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?

Sectors of Interest:

Financials (XLF) was one of the four leaders we were watching this week for leadership. The banks have been leading the way the last two weeks, but closed flat on the day. The breakout impact is still in play for the upside move short term. REITs were the upside leader on the day in the sector. However, IYR is barely holding onto the support at $63. Property and casualty companies have been the leader the last two days in the sector.

Consumer Discretionary (XLY) is another of the leaders coming into the week. The sector started the week flat, but picked up some momentum today as XRT was again moving higher. JC Penny’s gained 5.7% the last two days, Macy’s was up 3.2% as well. Retail continues to push the upside in the sector and worth filtering through for opportunities heading into the holidays. Tiffany’s popped 8.7% on the day.

Healthcare (XLV) is another of the leaders and they tested off 0.3% today. The biotech and pharma sub-sectors have been key movers for the sector short term. The index continues to accelerate to the upside following the break above the $53.40 level. Watching for the continued move in the sector short term.

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. That said, TLT has moved up from $102.50 to $104.58 the last four days showing a lowering in rates? Support at $102 and resistance near the $106 level. Unless it break from that range it should be calm for now.

Moves of Note Today: 

Telecom (XTL) up 1% on the day. Palo Alto Networks was the leading component up 7.3%. Sprint continued it’s trek higher up 4.2% and  Cogent Communications broke higher gaining 2.7%.

Semiconductors (SOXX) were up 0.9% today and in position to break from the consolidation pattern. The resistance at 510 on the index is the level to watch. Flipping through the stocks there are plenty of moves within consolidation patterns or reversals off recent lows. If the move is to continue higher look for the leaders.

Bonds (BND) will either complete the double bottom pattern and move higher or the potential head and shoulder pattern will break lower. It is all up to interest rates and with the Fed being rumored to start cutting stimulus in December or January, the upside in rates is the bet. That would negate the recent bounce and put pressure on the downside again.

Utilities (XLU) were down nearly 1% on the day and pushed back near support at $38. A break lower would be a negative short term from my view short term.

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.