This Thanksgiving market participants will be digesting a load of economic data as well as turkey dinners.

Introduction

Trading was quiet today. There was not much in the way of global news, earnings and no economic data. The only thing impacting early morning action was last weeks news and the international markets. Asian and European markets were still swooning from unexpected central bank and government policy action.

The positive vibe coming from Europe and Asia helped our markets to start the day off on a positive note. Futures trading was up from the very earliest and stayed that way up until the opening bell. At that time the indices moved into the green where and stayed there, for the most part. Techs led today, the NASDAQ Composite gained about 0.90%, while the blue chips lagged, barely closing in positive territory.

Market Statistics

There are several special factors impacting trading this weeek. First up is the Thanksgiving Holiday. The market will be closed on Thursday, and only open until 1PM on Friday. On top of that the OPEC meeting is also on Thursday and will likely fuel heavy speculation in oil. There is also quite a lot of economic data due out, including 3rd quarter GDP 2nd estimate.

Because of the holiday all of this weeks data will be coming out over the next two days. GDP I think will be most important but there are many important data points on the schedule. These include new home sales, pending home sales, Case-Shiller 20 city index, 3rd quarter GDP, ISM Index, durable goods, Michigan Sentiment and others. Not to mention that December 1st is next Monday which means there will be a new round of ADP, NFP and Unemployment figures.

Economic Calendar

The Economy

Moody's Survey of Business Confidence continues to indicate optimism and growth in the economy. This week's summary by Mark Zandi states that “U.S. business sentiment has been upbeat all year, consistent with an economy that is expanding above its potential. Hiring is robust and investment spending is strong. Expectations regarding the economy’s prospects through next spring are optimistic.” Which is contrasted by sentiment in South America and Europe which “remains in a funk”. The US portion of the survey is consistent with all the data and pointing to increasing momentum in the economy. I am very very curious to see the new GDP numbers. Current expectation is for GDP between 3.0% and 3.2%. I would not be surprised to see it higher.

The Oil Index

Oil prices continue to shuffle around while we wait to see what OPEC is going to do. The highly anticipated November meeting starts this Friday and could produce some fireworks, if the apparent division between members is not resolved. One one hand Iran and other members are calling for cuts, up to a million barrels per day, while the Saudis seem unwilling to give up market share. This afternoon WTI and Brent both fell after testing resistance earlier in the day. WTI lost more than -1.25% to fall below $76 while Brent lost about -1%, falling below $80. Today's mover most likely the extension of talks with Iran over its nuclear program along with the greater OPEC situation.

The Oil Index fell today as well, shedding about -0.75%. The index fell from a previous resistance and the 38.2% retracement of the October correction. At this time the index is still trapped within a post-correction consolidation zone but looks like it could break to the upside, provided oil prices move higher. The indicators are not strong, but momentum is bullish and on the rise while stochastic is making a weak bullish crossover. I think it more likely the index will remain trapped inside this range until after the OPEC meeting, at which time oil prices will be the main indicator of direction. Currently resistance is around 1,485 with support around 1,430.


The Gold Index

Gold traded in a tight range just below $1200, held in check by dollar strength. The long term down trend in gold may have bottomed, but a new up trend has not yet begun. Long term outlook for rising interest rates and rising inflation may be supporting gold, but near term outlook for stronger dollar is weighing it down and I think it will take a little more time for that combination of factors to play out. Until then economic data and central bank news could create volatility.

The Gold Index traded lower today, falling down to near $70. The index appears to have bounced back above the 100% retracement line, and to be finding support above that line, but I am still not convinced of a bottom. The indicators are bullish, and price action suggests a move up to $80 could happen, but with gold prices in question I have a hard time seeing the index following through. Current support is between $66.50 and $70 with potential resistance at or above the current level.


In The News, Story Stocks and Earnings

FactSet reports that 97% (487) of S&P 500 companies have reported so far. Of those, 77% have reported earnings above the average estimate of S&P companies while 59% have reported sales above the average estimate. As a whole, the S&P 500 has reported earnings growth of 7.9% for the quarter, well above the consensus estimates at the beginning of the reporting season. On a year-over-year basis 3rd quarter earnings growth is 4%, just ahead of the expected 3.8%. No S&P companies reported today.

Nuance Communications reported after the bell. The communications technology provider reported earnings and revenue above expectations. The results were driven by an increase in bookings which is expected to carry over into next year, and help the company return to growth. Shares of the stock traded higher during the day, by about a half percent, and then skyrocketed after the release, adding another 4% to today's closing price.


Workday also reported after the bell. The cloud solutions provider reported a smaller than expected but failed to spark a rally. The company reported earnings growth of over 68% from the comparable period last year, but only 54% growth is expected for the full year. The news was not what the market wanted to hear and sent the stock lower in after hours trading. Shares of WDAY lost more than -5.5% after the news.


Apple was one of today's top movers, driven by expectations for record sales of iPhones this Christmas. Shares of the stock gained over $2 today, extending the latest rally by 1.85%. The indicators are bullish and showing a late rally buy signal. MACD is ticking up after a dip and stochastic is firing a trend following bullish crossover; my only caution is that it is a holiday week and volume was very low.


Lions Gate Entertainment fell today after opening weekend results for MockingJay were released. The movie set a record as we could have expected but not as good a record as early Monday traders would have liked. The stock dropped in the premarket session but was able to reclaim most of the losses by the end of the day.


The Indices

Today's action was very light but the indices were able to set new highs, if barely. The Dow Jones Industrial Average barely squeaked above break even after a day spent in the red, closing with a gain of only 0.04%. The blue chips traded created the smallest candle as well as the smallest gain. The indicators remain bullish, but momentum is very low and stochastic is weakening within the upper signal range. This could be a warning but while the index is making new highs still a positive indication of consolidation, not reversal. Should the index fall back to support the first target is 17,500.


The S&P 500 gained only 0.29%, setting a new closing high, and nearly a new intraday high as well. The index is trending up, as is the Dow Jones Industrials, with indicators that are slightly better. MACD momentum is still weak, but flat and could easily rollover and increase, while stochastic is showing a weak bullish crossover. For now, it appears as if the index is drifting higher following a two week consolidation, although the consolidation is not well defined. Near term support, on a pullback, looks to be around 2,050 with 2,000 looking like firmer, longer term support.


The Dow Jones Transports gained 0.80% today, setting a new all time closing and intraday high. This index completed a more defined consolidation following the October/November rally and is now breaking out. The trannies are in an up trend and accompanied by indicators supportive of a continuation and in line with a trend following signal. MACD dipped into the red during the consolidation and is now making a bullish crossover as is stochastic. Current targets for this index are 9,250 and 9,500.


The NASDAQ Composite Index made today's largest gain, aided by the rally in Apple. The tech's rose 0.89% and also set a new high, although not an all time high as it is still under the shadow of the Tech Bubble. However, talking about today, the NASDAQ is moving higher and perhaps will be the market leader over the next few weeks. the indicators are bullish and creating a trend following signal. MACD is ticking higher and stochastic is firing a bullish crossover, both following a consolidation during a strong uptrend.


The market is moving higher and looks like it will continue doing so into the near term. There are of course reasons to be wary. There is quite a lot of economic data to be released this week and all at once, not to mention volume could be light all week because of the holiday, and the OPEC meeting.

The most important release may be the GDP numbers tomorrow, and since it is a holiday week market reaction could be amplified, and hard to predict. I think the data will be good, all the current trends are pointing to increasing momentum, but how good is the question. Will they be the same Goldilocks numbers we have been getting and spur on the rally, or so good they inspire fear of the Fed? In either event, the next month, and on into 2015 are still looking pretty good with no signs of change as yet.

Until then, remember the trend!

Thomas Hughes