The market looks higher at the start of trading, but the key has been holding onto gains and what happens when buying stops. We are looking at technology as very oversold, but not forcing the issue.
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Communication Services | Consumer Discretionary | Consumer Staples | Energy | Financials | Health Care |
2 | 2 | 1 | 1 | 1 | 1 |
Industrials | Materials | Real Estate | Technology | Utilities | Cash |
2 | 4 | 0 | 2 | 0 | 4 |
Most high flyers, which are looking up in the pre-open should be beneficiaries of strong online business activity.
According to Adobe Analytics Online Sales:
- Thanksgiving $3.7 billion +28.0%
- Black Friday $6.2 billion +23.6%
- Small Business Saturday $3.0 billion +24.0%
- Cyber Monday $7.8 billion +17.6%
I’m watching retail indices including:
- XLY, which is primarily driven by Amazon, which is more than 20% of the index and potentially lifts earnings to 15.0% from 6.8% without its presence.
- XRT is a pure bricks and mortar index without too much reliance on any given name, although, I would add more and subtract others.
Often, I wonder why the market opens the day after Thanksgiving for just a half-day session. I know it’s unbridgeable greed, but it’s so tedious and in the case of last Friday, it was a real disaster.
In recent years, the day after Thanksgiving has been up sessions. Not only did the equity markets close near the lows of the session, but oil also suffered tremendous damage.
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Blue-chip names took the biggest hits as the breadth on the NYSE was abysmal.
- New 52-week highs 4
- New 52-week lows 172
Declining volume was more than 100% greater than the advancing volume.
The NASDAQ was higher most of the session, but it slumped into the close. Still, the index saw more advancers than decliners, and the up volume was greater than the down volume.
Blue-Chip Blues
The down volume on the Dow Jones Industrial Average underscored the vulnerable nature of the overall market in general; last week, blue-chips in particular.
Last week, each dip began with a surge in volume. There is no doubt it doesn’t take much to spark a stampede of selling, and erasing rally attempts in the blink of an eye.
Thus far, there are more winners than losers in the DJIA in 2018, but the losers are monumental:
- (GS) Goldman Sachs -25.8%
- (IBM) International Business Machines -23.6%
- (CAT) Caterpillar -22.4%
- (DWDP) Dow Dupont -20.8%
- (MMM) 3M -16.4%
Monumental Week Away From Wall Street
Jerome ‘Jay’ Powell, the chairman of the Federal Reserve, is speaking in New York on Wednesday at 11:30. And everyone wants to hear the Fed. He understands their worries that the Fed will overshoot, and he will address them. Of course, Powell would never come straight out and say we are going to slow down, but he should reference the data and the trends:
- Housing Market Weakness
- Strong Dollar Impact on Multinational Corporations
- Bond Yield Curve
- Emerging Market Weakness
In fact, for all the chatter about the trade war with China, I think a bigger worry is how fast China’s economy is slowing. There are so many embedded issues weighing on China’s economy, from a credit crisis, to a mountain of debt and slowing domestic demand.
In the third quarter, China’s Gross Domestic Product (GDP) grew at the slowest rate since 2009.
China Quarterly GDP
Chairman Powell has acknowledged the housing market and admitted the Fed watches the stock market, so he must understand that his comments on October 3rd made things worse.
Moreover, the Fed’s main mission is employment and inflation. There is still no sign the latter is an issue that deserves the urgency of four rate hikes in 2019.
Powell must make the market understand the Fed isn’t on autopilot and will not allowance their arrogance and ham-fisted ways to derail this economy. By the way, this holiday shopping season got off to a strong start, led by a revealing in shopping from lower-income households.
If the Fed continues to blow it, Jay Powell will be the Grinch that stole more than just Christmas.
G-20 Summit
The good news is expectations are low that a deal will emerge from the meeting between President Trump and President Xi - there is a meeting and that’s progress. America is not going to continue to lose this trade war, which has been raging for decades. I’m sure Wall Street globalists will continue to rave along with the media, which fawned over Turkish President Erdogan last week, and they will portray the most unflattering picture of the administration’s efforts as much as possible.
Investing isn’t about short-termism, and neither is the once-in-a-lifetime chance to fix the multiple wrongs in this relationship. However, coming out of the meeting with a framework to a deal would be huge, and I think it’s possible.
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