Last week began with 3 gap downs which immediately prompted correction buyers to jump in and prevent the prospect of any real negative momentum developing. The number of stocks trading at a new low rose past those trading at new highs, indexes ending in the red, giving bears a little hope price correction movement would be shortly forthcoming. They were in for disappointment yet again, facing a surprise, positive gap on Thursday. Suddenly, all of the negative elements that had seemed so clear over the course of the week, disappeared like smoke and mirrors, markets again taking the lead and zipping by on the racetrack.
The S&P 500 and the Dow Jones ended the week lightly off, cutting its worst 2-week streak since August. In contrast, NASDAQ closed the week up by 0.5% and its 7th winning week in the last 8 trading weeks. All three indexes traded less than 1% off from their all-time highs.
Stocks have a good chance of trading positively this coming week, if a classical “Thanksgiving week pattern” takes over. Some traders believe that there will be better speculative movement this week seeing that some large investors are on holiday, meaning that trading volumes will be smaller.
Historically, the S&P 500 has recorded average gains of 0.6% during Thanksgiving Week, recording gains 75% of the time. In effect, precisely in years in which the stock market has already traded up at least 10% on the year come Thanksgiving, the week tends to be stronger, with average gains of almost 0.8%.
This coming week, investors will continue to focus on tax reform and how things heat up. On Thursday, the House of Representatives passed its version of the tax bill, and are now waiting for the Senate’s approval of its own version to be able to crystallize a synchronized and finalized version. Investors are expected to continue to respond to every headline on the tax front.
This coming week also brings with it “Black Friday,” the opening kick-off to the holiday shopping season immediately on the heels of Thanksgiving this Thursday. On Thursday, markets will be closed. At the same time, it would seem that Black Friday’s impact has already been mitigated with the disruptive effect digital commerce has had on brick and mortar retailers. In effect, what’s more interesting nowadays is “Cyber Monday,” the Monday right afterwards, when people go back to work and immediately get infected by the internet shopping fever. That’s the point at which all them clicks will start racking up on firms’ balance sheets.
Have a great trading week!