The last week of November finishes with a bang as the S&P 500 finished the week up 1.53%. Although the S&P 500 didn’t finish on it’s high of the week, it was still pretty impressive. Each time the index takes the slightest in dips, the bulls come right back in to push the index higher. Nobody knows when the advance will end, but a market that continues to make new highs and lows is not the sign of a ‘quitting’ market.
The All World (ex-USA) index is still outpacing the S&P 500 on a 12-month rolling basis. This relationship has started to change, but not enough to warrant any changes. The S&P 500 was up over 1.5% for the week, the All World Index was down .91%. If this continues, we will certainly want to switch the focus from international markets to more US related markets.
The breadth of the S&P 500 is very interesting. We look at breadth to confirm the health of the market as it lets us know if a majority of the stocks are participating in the advances and/or declines. Like almost all oscillators, it tends to work better when looked at in the direction of the trend. For example, in a trending higher market, you look for the buy signals and NOT the sell signals of the oscillator as the sell signals tend to be short lived. We have now gotten sell signals in a trending higher market. So, if the market does in fact roll or correct in any meaningful way, it could be a sign of a trend change. We are not there yet, but it is certainly something to watch.
As far as economic data, the big economic news this week are the employment numbers to be released on Friday at 7:30 CST. When we look at the overall progression of US GDP, Housing Starts, Unemployment & Consumer Price Index, they all seem to have positive trajectories when viewing on a monthly basis. The one that could be off is the S&P 500 GAAP Earnings. It is not as high as it was back in 2015 while the index certainly is. Of course, tax code could have a positive impact on this number and more than likely the markets have priced the S&P 500 accordingly. The question is, “How much is priced in?”
The trend of the S&P 500 is up on the longer and shorter-term. We don’t have any buys scheduled for this week and almost all second purchase prices or stops are relatively far away. Should be an interesting week. Hope you make a great one!
by Adam Straseske, CMT