Market Recap for Wednesday, November 25
Healthcare (XLV) and consumer discretionary (XLY) were the two best performing sectors on Wednesday, leading the U.S. stock market to gains in most of our major indices. The S&P 500 saw a late selloff take that index to a loss of 0.27 points, or 0.01%. The Dow Jones finished with a meager 1 point gain, but the Russell 2000 continued its torrid relative pace of late as it climbed more than 9 points, or 0.77%. It marked the 4th consecutive trading session where small caps outperformed their larger cap counterparts. The level to watch on the Russell 2000, however, is 1200. A break above that level would be bullish for this index as shown below:
Utilities (XLU), materials (XLB) and energy (XLE) were the weakest groups on Wednesday with the latter two continuing to suffer from a strong dollar.
Pre-Market Action
There are no key earnings or economic reports due out today. The China Shanghai Composite ($SSEC) did lose more than 5% of its value overnight as brokerage firms there came under regulatory scrutiny. That weakness has done little to sway European markets as most hover near their flat lines as the U.S. market moves within an hour of its open. U.S. futures are mixed with relative leadership from the NASDAQ thus far this morning.
Current Outlook
Expect a light volume and low volatility trading session. That's generally what we see on the Friday after Thanksgiving as many market participants are away for the weekend. There are bullish historical tendencies, though, that are discussed below in the "Historical Tendencies" section. The Russell 2000 is close to a key technical test in the form of price and gap resistance near the 1200 level. The NASDAQ's next key price resistance resides at 5156. Watch 2110 on the S&P 500 and 17950 on the Dow Jones. Breaking above all these resistance levels would likely lead to more technical buyers arriving from the sidelines.
Sector/Industry Watch
Consumer discretionary continues to perform very well and it again was a solid performer on Wednesday. Business training & employment agencies ($DJUSBE) has been an excellent performing area within the consumer discretionary space, but it became extremely overbought in late October and early November and it hasn't been performing well on a relative basis lately because of it - which is fine technically as overbought oscillators need to unwind occasionally. Recent November price lows and the rising 20 day EMA should be viewed as solid near-term support. Check out the current conditions:
There was a solid downtrend in play throughout much of 2015, but the market seemed to be anticipating a strong surge in jobs over the past month as it broke that downtrend line and now is in what appears to be a bull flag. Korn Ferry (KFY), LinkedIn (LNKD) and On Assignment (ASGN) are three names in this space that look solid technically. I'd expect them to be among the leaders if this industry group breaks out again.
Historical Tendencies
I posted on Wednesday about the bullish tendencies on the S&P 500 the Wednesday before Thanksgiving and we saw mostly positive action once again. The Friday after Thanksgiving carries similar historical tailwinds. Here's the S&P 500 breakdown of up days vs. down days on the Friday after Thanksgiving by decade:
1950s: 8 up, 2 down
1960s: 9 up, 1 down
1970s: 9 up, 1 down
1980s: 7 up, 3 down
1990s: 7 up, 3 down
2000s: 6 up, 4 down
2010s: 1 up, 4 down
The totals are 47 up and 18 down, which is similar to the historical results for the Wednesday before Thanksgiving. There is one difference, however, and that's the fact that this tendency has not been nearly as strong the past decade and a half. I'd still give the historical edge to the bulls today despite the losses the last several years.
Key Earnings Reports
None
Key Economic Reports
None
Happy trading!
Tom
