Let’s take a quick recap of November and there are really only 3 things you need to know.
First, Small cap stocks outperformed after being left for dead at the beginning of the Fourth Quarter. The Russell 2000 gained +3% in November while the S&P 500 gained a measly 1 point. That’s not a typo!!! the S&P 500 gained 1 point in November for a 0.05% gain. That’s a “push” at best.
Secondly, The Transports remain in the same sideways trading range they’ve been in for 6 weeks of 8000 to 8300 on the DJ Transports. Actually the DJ Transports have failed to get through the 8300 level on 6 or 8 tries since rallying off the August lows. The DJT did manage a close at 8301 on November 20, but have been in retreat 4 on the last 5 sessions since then.
Monday’s close at 8101 puts the DJT right at its 50 day moving average, below which is the 8000 support level, which the DJT haven’t closed below since October 6. Just too hard to tell if the Transports are building a base after the September low was markedly higher than the August plunge, or if we’re heading for a retest of those lows.
Finally, The S&P 500 was basically unchanged on the month with a 1 point gain, after trading in a 100 point range in November. The significance of this is that November will be a Major Doji Candle on the monthly charts after a 10%+ rally in October. Of course a big Doji candle with sizeable tails in both directions is a yellow flag for a possible reversal of the move that preceded it, and that speaks to the rally of the last 7 years, not just the October rally.
The takeaway from all this, 2 weeks away from what will likely be an initial rate hike at the mid December FOMC meeting is to watch the relative performance of the Russell 2000/S&P 500, and keep a close eye on the DJ Transports for an eventual break from its 8 to 10 week trading range of 8000 to 8300.
Very News Rich Week Starts New Month
We’re starting the Month of December with a Very News Rich Week that will culminate with an OPEC meeting on Thursday that has the potential for some intra-family fireworks.
Friday, of course the November NFP and employment report will likely “make or break” the set of data the FOMC needs to finally start the process of normalizing our short term interest rate structure with an initial rate hike at the mid month FOMC meeting