Market at a Glance - 11/29/2016

By: Christopher Mistal

November 29, 2016

Psychological: Holiday Cheer. DJIA, S&P 500, Russell 1000 and Russell 2000 all advanced every day of Thanksgiving week. Even so, there are still plenty of skeptics out there that believe the rally will not last keeping overall sentiment essentially neutral. Weekly CBOE Put/Call ratio at 0.60 confirms it.

Fundamental: Better, still not great. Third quarter GPD was revised higher to 3.2% while the unemployment rate is holding steady around 5%. Corporate earnings also posted their first year-over-year advance in five quarters. The consumer also appears to be picking up the pace of spending. The economy may not yet be running on all eight cylinders, but it appears to be headed in that direction once again.

Technical: Broken out. For the first time in over a year all major indices, DJIA, S&P 500, NASDAQ and Russell 2000 have broken out to new all-time highs together. The buying spree may be getting a touch stretched suggesting the market may be due a rest, but once rested the market will likely resume its run higher.

Monetary: 0.25-0.50%. Interest rates have moved higher and the Fed appears to be ready and willing to raise the Fed Funds rate this December. Either they do or they don’t. Most expect a rate increase and we will know for sure on December 14. Regardless, rates remain accommodative relative to historical levels.

Seasonal: Bullish. December is the number one S&P 500 month and second best for DJIA since 1950, averaging gains of 1.6% on each index. It’s also the top Russell 2000 (1979) month and second best for NASDAQ (1971) and third best for Russell 1000 (1979). Rarely does the market fall precipitously in December. In election years, average performance does weaken modestly. The “January Effect” of small-cap outperformance starts early in mid-December. Wall Street’s only “Free Lunch” of distressed small- and micro-cap stocks making new 52-week lows on December Triple-Witching Friday will be served before the opening bell on December 19. Santa’s Rally begins on Friday December 23 and lasts until the second trading day of the New Year. S&P has averaged gains of 1.5% since 1969. In years when Santa Claus did not come to Wall Street, bear markets or sizable corrections have often materialized in the coming year.