Market Recap for Monday, November 23, 2015
The Russell 2000 was clearly the big winner on Monday as this small cap index rose .44% on a day when the Dow Jones, S&P 500 and NASDAQ all had fractional losses. The NASDAQ 100 ($NDX) fell .25% to perhaps paint a bit of a short-term negative picture. The NDX has been the big winner throughout much of the recent rally. Off the August lows, we've seen a huge resurgence in the NDX to post all-time highs on solid volume and with a strengthening weekly MACD. Here's the chart:
Alphabet (GOOGL) has been a leader of the NDX as you can see from its weekly chart:
While the weekly chart on GOOGL shows much bullishness and solid momentum, the daily chart tells us to be very careful as a negative divergence has printed and suggests a possible 50 day SMA test ahead. I've highlighted a key support zone below should GOOGL begin to sell off in the coming days:
Their recent breakout was on solid volume so the first clue of more selling ahead would be a close beneath its recent breakout level of 765.25.
Pre-Market Action
World tensions this morning have driven equity markets lower. The Turkish military shot down a Russian warplane and the U.S. has issued a Worldwide Terror Alert. European markets are down 1-2% this morning after bifurcated action overnight in Asia. Retailers are likely to be under pressure after earnings in Tiffany (TIF), Chicos (CHS) and Dollar Tree (DLTR) all fell short of consensus estimates. All three trade lower in pre-market action.
Q3 GDP matched estimates at 2.1%, but the 10 year treasury yield ($TNX) has fallen to 2.22% in response to the increasing global tensions. The Fed is likely monitoring all the developments around the world, along with economic activity here in the U.S., as they formulate their interest rate policy moving forward.
Current Outlook
There are suggestions under the surface of the market that we're heading higher - at least that's my opinion. I know many others differ and that's what makes a market - opinions on both sides of the trade. But even if we do ultimately move higher, we have to respect certain rules within a period of consolidation. First and foremost, expect whipsaw action. After a rough week two weeks ago, we rallied strongly last week. Yesterday, while solid for small caps, was rough on other aggressive areas of the market like technology, industrials and financials - and that led to fractional losses across our major indices. Today, several more weak earnings in retail have the U.S. futures under pressure, not to mention the increased terror alert.
While the news certainly isn't good today, I'll be watching price action to see if any technical damage is inflicted on early selling. On the S&P 500, those recent lows just beneath 2025 need to hold in the short-term. Everything between that support and all-time closing high resistance at 2131 is noise.
Sector/Industry Watch
Semiconductors failed off their first attempt to clear price resistance at 1900. Heavy volume in June accompanied the move below 1900 and that level has proven to be quite difficult for the bulls over the past month. After printing higher highs and higher lows the past several days, we saw hesitation on Monday and a reversal of that uptrend. We certainly could see more whipsaw action and consolidation ahead. Check it out:
Historical Tendencies
During the current bullish period from November 23 through November 30, the Russell 2000 has gained ground on 86 different days since 1988 while falling on 50. That represents a 63% chance that on any given day during this period the Russell 2000 will be higher. So that's not a slam dunk, but rather a bullish tendency.
Key Earnings Reports
(actual vs. estimate):
ADI: vs .83
CHS: .13 vs .20
CPB: .95 vs .76
DLTR: .49 vs .54
DSW: .51 vs .45
TECD: 1.28 vs 1.33
TIF: .70 vs .74
(reports after today's close, estimate provided):
GES: .11
HPQ: .44
Key Economic Reports
Q3 GDP released at 8:30am EST: +2.1% (actual) vs. +2.1% (estimate)
September Case Shiller Home Price Index to be released at 9:00am EST: +0.3% (estimate)
November consumer confidence to be released at 10:00am EST: 99.6 (estimate)
Happy trading!
Tom
