Stocks enjoyed their 8th consecutive week as the major averages continue to march higher. As we have mentioned several times recently, in the short-term the market is extended and a light volume pullback would do wonders to restore the health of this rally. The market negatively reversed (opened higher and closer) on Friday which could signal the start of a short term pullback. So far, these pullbacks are lasting a matter of days, not weeks or months- which illustrates how strong the bulls are right now. The intermediate and long term outlook remains very bullish as the major averages and a slew of leading stocks continue to act very well. As we have mentioned several times this year, we are in a very strong bull market and pullbacks should be bought, not sold. Every pullback this year has been shallow in both size (% decline) and scope (weeks, not months). The primary catalyst behind this 4.5 year bull market remains easy money from global central banks. We know that the easy money is here to stay (for now). Therefore, barring some unforeseen massive decline, this bull market is alive a well. Eventually the music will end, but as a market practitioner, our only job is to align ourselves with what is actually happening, not what someone thinks will happen.
MONDAY-WEDNESDAY’S ACTION: Nasdaq Tops 4k
Stocks opened higher but ended mixed on Monday after the Nasdaq Composite jumped above 4k mark for the first time since 2000. Sellers showed up and the Nasdaq closed just below that psychologically important level. Over the weekend, Iran reached a deal with several western nations to limit its nuclear program in exchange for easier trade restrictions. Oil and gasoline futures slid on the news. In the US, pending home sales slid -0.6%, missed estimates and marked the fifth straight monthly decline.
THURSDAY & FRIDAY’S ACTION: Thanksgiving & Black Friday
Stocks were closed on Thursday in observance of Thanksgiving. Initial indications suggest sales were higher on Black Friday compared to last year. Only time will tell if that translates into stronger Q4 earnings for retailers and the broader market.
MARKET OUTLOOK: Major Averages Close Above Round Numbers (16k, 1,800 & 4k)
The market is very strong and, in the short-term, remains very extended. The market will pullback and it is just a matter of when, not if. As always, keep your losses small and never argue with the tape.