Markets on a Tear. What’s Next?

A couple of quick thoughts… Last week certainly did provide for a dramatic trade higher and in the process allowed for the Nasdaq to finally eclipse the 12K level with conviction. That trade also fueled record closes for the Nasdaq, S&P 500, and Russell 2K. In the case of the Dow Industrials, as clearly illustrated below, the 30K level has emerged as the level to watch this week.

We did see a close above 30K for the Dow Industrials on Wednesday and intraday trading above 30K on Tuesday and Friday. We would ideally like to see a trade above the 30K level with conviction sooner rather than later. The calendar this week flips into December.
Given the performance posted by the major market indices in November, odds are that we run into some stiff headwinds before yearend. As renowned strategist Sam Stovall puts it in last Wednesday’s note to investors:

Also, history suggests that this November’s surge may end up “stealing from Santa”. Whenever the S&P 500 was up by 5%+ in November, the market posted a sub-par average rise and frequency of gain in December.

Simply put, markets are on a tear. Corporate results and expectations for a massive rebound in economic performance both continue to provide a rising floor for equities. Selling into a market that has all four major equity market indices at closing record highs or within 1% of that is simply a fool’s errand – at least as we are set up for trading as we close out November. Additional support for a continued trade higher comes from the calendar, Q4, “January Effect” et al.

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Flickr photo: by Scott McLeod