Turkey Haze

Turkey haze.  Traders could not muster the energy to rally stocks on Friday’s short session as they pressed the sell button from their couches.  Friday’s abridged session finished off what was the worst Thanksgiving week in years as crude oil plummeted and trade fears rang through the markets.  The result of the selling left already weakened sectors and indexes in difficult technical positions.  The S&P500 is back on the bottom rung of its Fibonacci grid having closed below its key Fib support at 2645 leaving 2600 as its next support level (see chart 4 in my attached daily chartbook).  The Dow Jones Industrial Average fell -0.7% in Friday’s session and it will get support around 24000 and resistance from its 24634 Fibonacci line (see chart 6 in my attached daily chartbook).  I can’t remember the last time I wrote this, but the small cap Russell 2000 was the shining, but dim, light in the equity markets managing a positive close up +0.4%.  With all of the macro and fundamental fears affecting large caps and technology, value seekers were perhaps searching for opportunities in the long forgotten (well not too long, only the last 3 months or so) small caps, which can be a positive sign if the buying continues.  The NASDAQ 100 gave up -0.73% on Friday closing on its low of the session.  The index will get some support from its round 6500 and resistance will come from its 6557 Fibonacci line (see chart 8 in my attached daily chartbook). Sometimes a picture is worth a thousand words and the chart of West Texas Intermediate Crude Oil (chart 11 in my attached daily chartbook) tells a story that requires no numbers or fancy indicators.  Crude oil is under massive pressure from oversupply and lower expected demand.  Supply is coming from many places but primarily from Saudi Arabia and the US (the two largest producers).  Additionally, crude has been in the Presidential crosshairs lately as President Trump seems fixated on lowering crude prices in hopes of staving off inflation and more Fed rate hikes.  The rapid fall in crude is affecting the entire energy market, which typically enjoys a strong Q4.  I say typically because that certainly wasn’t the case in 2015 when crude fell for the entire year, confounding its losses Q4 and adding to a stock selloff.  Many are starting to point to 2015 with crude around $50 a barrel, which is around where it ended that year.  Also notable is the recent further decline of bitcoin, which is struggling to stay above $4000 and fell below it over the weekend.  Though the currency’s level has no significant impact on the economy or the overall markets, it can be viewed as a sentiment indicator (see chart 15 in my attached daily chartbook).

Today we get two regional Fed indicators, which are typically not market movers however significant surprises could certainly have an effect.  The week ahead is jam-packed with releases that will certainly add to the already high volatility.  We have 2 year, 5 year, and 7 year treasury auctions starting today and their results can affect markets as there has been weak demand in recent auctions and yields are at the lower end of their recent range (that means they are at the higher end of the price range).  Refer to the attached weekly economic and earnings release calendars.  Also in the week ahead, we have a number of Fed speakers, including the Chairman, to remind investors that higher interest rates can affect the economy.  Finally on Friday, the President will be in Buenos Aires for the long-awaited G20 summit, which will hopefully yield a truce in the trade war.  There will certainly be tension in the markets this week, which will cause more volatility as we head into the holiday season.  Please call me if you have any questions.

daily chartbook 2018-11-26

earnings releases 11_26

econ numbers 11_26