Week of Thanksgiving sees incremental gains, more window-dressing

This week of trading is shortened by the Thanksgiving holiday, and we’ve kicked off the week with broad Monday gains across indexes. We can also expect rallies in the retail and consumer discretionary sectors for the short-term, considering the coming series of shopping holidays.

This past Friday, 0.2% dips were seen at the close across all three major indexes: The S&P 500, the Dow and the Nasdaq Composite. Most of this action can be attributed to the sinking realization that market-friendly Trump policies won’t be implemented as easily as thought. Today, however, we see a reversal. The S&P 500 is up 0.60% at 2195.06, the DJIA is up 0.30% at 18926.24, and the Nasdaq is up 0.74% at 5360.90.

The S&P is starting to bounce against the well-known overhead resistance of 2200, so we can expect to see some corrections there. While the market will follow the path of least resistance, the all-time high is a psychological cap and market groupthink should keep the index from breaching that.

With speculation being a driving force behind most movements in the past week, there is a case to be made for more corrections. At the center is the US Dollar- represented by the ICE Dollar Index. Signals from the Fed still point to a December interest-rate hike. This is also adding to the ICE Dollar index, which is now at 100.84. A stronger dollar means less profitable exports for large-cap US corporate stocks.

Chicago Fed Reports on National Economic Activity

The Chicago Fed has just reported on national economic activity from past months, showing a little, if any, improvement in their index. Housing, consumer spending and factory production figures saw improvements. This moved the index’s one-month moving average figure from -0.23 in September to -0.08 in October. However, the index shows their 3-month average figures weakening and most agree this is a better perspective of the situation. Economic activity fell from -0.20 in September to -0.27 in October.   

Federal Reserve Vice Chairman Stanley Fischer has made a speech today centered around fiscal policy as a tool to improve economic outlooks. It is interesting to see different figureheads from the Fed offering a range of opinions on policy matters. It is a clear departure from previous public interaction, which saw one single voice orating the Fed’s thinking.  Here’s an excerpt from Fischer’s statements:

“While there is disagreement about what the most effective policies would be, some combination of improved public infrastructure, better education, more encouragement for private investment, and more effective regulation all likely have a role to play in promoting faster growth of productivity and living standards. By raising equilibrium interest rates, such policies may also reduce the probability that the economy, and the Federal Reserve, will have to contend more than is necessary with the effective lower bound on interest rates.”

Gold

Gold is up 3 points, or 0.25% at $1211.70 currently. We expect gold to remain sensitive to news around Trump’s administration picks and policy previews, as well as fluctuations in US dollar strength. As the ICE Dollar Index increases, investors see the dollar and its proxies as more attractive compared to a non-interest bearing asset. Using SPDR GOLD TRUST (GLD) as a tracker in our Stock Forecast Tool, we see steady declines in the 10-day outlook. It is currently trading at 115.57 with today’s predicted support at 114.20 and predicted resistance at 116.05. The standard deviation today is 0.40 on both ends. Our models show a strong downward vector, dipping 3.46% at its steepest point on Nov. 29 to a predicted close of 111.19.

Volatility

The CBOE Volatility Index (VIX) has dipped and looks complacent for now. It is currently trading at 12.88 and looking steady for intraday outlook. Our 10-day prediction model does, however, show a slight comeback. Resistance is predicted to consistently rise from ~14 to ~15 in that same period, support fluctuates but does not breach 13.

Oil

Crude oil futures have seen gains as most analysts remain optimistic that an agreement to cut production will be made during the November 30 OPEC meeting. Vladimir Putin, who would obviously enjoy higher oil prices, seconded that notion while conveying his willingness to freeze Russian production. West Texas Intermediate is currently trading at $47.25, a 3.4% climb from its open of $45.83.

Looking at USO, a crude oil tracker, our 10-day prediction model shows consistent upward vector, gradually building from ~1% to ~9% within the forecast window. The fund is currently trading at 10.695, up 3.63% from its open. Today’s support is predicated at 10.27 with resistance at 10.49. Standard deviation for both of these figures is 0.06. The predicted resistance gradually rises toward 11.49, and support climbs to 11.07 at the end of the outlook.

In other news

Symantec Corp. (SYMC) will be acquiring LifeLock Inc. (LOCK) for $2.3 billion, including debt. Symantec is well known as the publisher of Norton Anti-Virus software, but is now attempting to integrate more services through a single line of business. LifeLock offers identity-theft protection and has a base of 4.4 million subscribers.

A Utah-based construction materials & products company called Headwaters Inc. (HW) will be acquired for $1.86 billion by Boral Ltd. (BLD.AU), an Australian building materials company. Boral is ostensibly looking to get on-board with Trump’s proposed infrastructure vision. Shares of Headwaters jumped 18% in premarket trading.