Introduction

The major indices, ex-Transports, all set new all time highs in today's session; the transports set a new a new 19 month high and is fast approaching its all time high. Today's move is an extension of the Trump rally, there was no economic data, earnings or other to move the market, but is on light holiday-trading-week volume. Thanksgiving is this week, another year is fast coming to a close, so that means no trading on Thursday, early closure on Friday and low low volume throughout the week. International trading was light as well. Markets in Asia and Europe closed with small gains as rising oil prices helped support them.

Market Statistics

Futures trading indicated a flat to slightly positive open all morning and this held into the opening bell. At the bell traders took the bull by the horns and rode it to up to test current all time highs and then an hour later to new all time highs. Today's rally lasted until about 1:30PM at which time an intraday top was put in, leading to a small pull back to test for support which did not last long. By 2:30 the indices were back at the highs of the day and by 4PM were setting new highs, closing at the highs of the day.

Economic Calendar

The Economy

There is no official economic data on the calendar today but there is quite a bit this week. Because of the holiday most of it comes out on Wednesday, including the weekly jobless claims and the Minutes To The FOMC Meeting. Wednesday could be a little wild due to a combination of low volume and economic overload going into a holiday.

Moody's Survey of Business Confidence fell for the first time in 6 weeks but is still holding near a 7 month high. The index fell by -0.5% to 32.1 and, according to Mr. Zandi, shows a global economy that is expanding at the "high end of its potential", what I interpret to mean near full speed. The takeaway is that sentiment has rebound from summer lows, global businesses have been able to move past events like Brexit, The Turkey Coup, South American political instability and the US election.


Third quarter earnings season is nearly over, 95% of the S&P has reported so far with another 2.5% reporting this week. Of those that have reported 72% have beaten earnings estimates, 55% have beaten revenue estimates with a blended rate of earnings growth (includes estimates for those yet to report) is now 3.0%, at the high end of the expected range. Unless something major changes this number is likely to stand, breaking the 5 quarter earnings recession.


Looking forward earnings growth is expected to continue and expand into the coming quarters. Fourth quarter estimates have fallen once again, shedding a tenth, but remain positive and expansionary at 3.4%. Take into account that the final rate of earnings growth for the quarter is likely to rise by +4% by the end of the reporting season and 4th quarter growth could be as much as 7.5% to 8%. Looking out into next year the first whispers I've heard for 1st quarter growth is +10%, full year 2017 estimates held steady at 11.4%.


The Dollar Index

The Dollar Index took a breather today, not surprising and not unwelcome following the 5.5% run it has undertaken over the past 2 weeks. The index is trading at new long term highs, about 1% above resistance-now-turned-possible-support, and in need of a consolidation or test of support in order for the rally to remain healthy. This action may last for the next few weeks, up to and until the next round of central bank meetings. The next FOMC meeting is December 13-14th, the ECB meeting is the week before. Target for support is $101.50, based on convergence with MACD and strength in stochastic I do expect to see these highs retested again at least. The FOMC meeting is likely to bring a rate hike, and that will be followed up by Trumponomics and expected increases to inflation and more rate hikes.


The Oil Index

Oil prices got a big boost today from renewed expectations that OPEC will reach a deal to cut production. Today's move was aided by support from Russia who says they are in favor and supportive of such a deal. WTI surged nearly 5% intraday, settling up nearly 4%, to trade near $47.50. The meeting is next week so prices may stay high until then but be careful, the cartel will have to deliver and deliver BIG in order to really move the market. Last month's production data has them at a new high, much higher than when the talk of curbing production began, so anything less than the difference leaves supply/demand tilted to supply.

The Oil Index surged to a new 7 month high but remains within the 8 month trading range. The index is supported by rising prices and intense hopes that OPEC will reach agreement, and that the agreement will stick. The index gained 2.5% but fell short of resistance at the 1,195 level. The indicators are on the rise but remain weak and consistent with range bound trading so a break to new highs doesn't look likely, yet. Next week things may change.


The Gold Index

Gold prices rose slightly today as dollar values backed off. Spot gold gained about 0.25% but was not able to hold early gains, settling up only 0.15% and near $1,210. The near and short term trend in gold is down, and with dollar outlook bullish it looks like those trends will continue. Strong support may exist at $1,200 but it has yet to be touched.

The gold miners remain under pressure although they were able to bounce back somewhat today. The Gold Miners ETF GDX gained a little over 2% but the chart does lot look bullish. The ETF appears to be making a bear flag, beneath the 50% retracement level, with a downside target near $16.50. This move may come even without another big drop in gold prices, forward earnings in the sector have been hurt enough as it is.


In The News, Story Stocks and Earnings

Tyson Foods reported before the bell and did not deliver what the market expected. The supplier of delicious chicken reported earnings and revenue well below estimates, lowered full year guidance, the CEO is stepping down further depressing a stock hurting from a class action lawsuit related to manipulation of broiler hen prices. Shares of Tyson fell -15% to trade at a potential support level near $55. Tyson is a good company, (almost) everybody eats chicken, I think this one will recover.


Jack In The Box served up a hit when it reported results after the bell. The hamburger chain beat EPS by a dime, more than 10%, raised full year guidance to be in line with consensus and raised the dividend by 33%. The caveat is that results are driven more by cost savings than improved traffic, trends within the industry are described as sluggish. Shares of the stock fell -2% on the news.


The VIX continues to move lower. Today the index dropped below 12.50 and looks like it will hit long term lows near 10 over the next few weeks.


The Indices

Today was a relatively light day of trading. The indices made a quick move higher at the open, consolidated mid day and then moved back to the highs later in the day and held those levels in to the close. Volume was light but new all time highs were set, just about across the board. Today's leader was the NASDAQ Composite which closed with a gain near 0.89%. The tech heavy index created a medium sized white candle, extending the rally and move up from the short term moving average, and set a new all time high. The indicators are on the rise and support the move so it could very well continue into the near term. The indicators are not yet showing strength but an upside target of 5,500 is not out of the question.


The S&P 500 is runner up today, gaining about 0.75% and breaking out to a new all time high. The broad market created a smallish to medium sized white candle, extending the election bounce and move up from the short term moving average, and is supported by the indicators. Both MACD and stochastic are on the rise, suggesting higher prices are on the way, stochastic confirming the break out by breaking above its upper signal line. This move looks set to continue into the near term, upside target near 2,250.


The Dow Jones Industrial Average came in third in today's session, about 0.47%, but did manage to set a new all time high. The blue chips look like this could be the first move higher from a consolidation band but if so, has yet to show strength. The indicators are bullish and on the rise, in support of the move, so a continuation looks very possible. The caveat is that here, like with the transports, MACD has peaked and may be indicating an end to the rally is near, or at least that momentum is running low during this leg of the rally. The thing to keep in mind about this signal is that now that the market has broken to new highs there may be several bullish MACD peaks within a longer term movement, this may be just the first. Stochastic is showing strength and does not confirm resistance, weakness or impending pullback. It may be considered overbought but this condition could easily persist for a long time during a bull market.


The Dow Jones Transportation Average comes in last today with a gain near 0.46%. The transports did not set a new all time high but it did set a new long term nearly 20 month high and looks set to test the all time high very soon. The indicators are bullish and support rising prices although MACD has peaked. This peak may be an intermediate peak within a longer uptrend but nonetheless raises a red flag. Upside target is the all time high, about 4% above today's close, and may provide significant resistance.


Trading was light but today's action was still important, the indices moved up to new highs. The first forays to such lofty levels may have been tepid but there were not met by resistance. This does not mean the bears are not there, just that they weren't waiting to pounce. If things play out the according to expectations the bears may not come in force for a while yet. The signs are still pointing to a period of long term economic growth, earnings outlook remain positive and the world seems happy about it.

We've yet to see a really strong follow through on the Trump rally but in the end I think a nice, slow, steady follow through may be better. A sharp drive to some crazy high level would be cool, for a while, but likely to come crashing back to reality. A slow build of market pressure will allow stocks to build solid support and prices to rise in a sustainable way. I am still cautious, not quite ready to go all in, but also getting more and more bullish by the day and looking to buy on the dips, and where I see strength.

Maybe, just maybe, next week's dump of data or the next week's FOMC meeting could spark a true Santa Rally, maybe it's already here.

Until then, remember the trend!

Thomas Hughes