EB Weekly Market Report - Monday, December 2, 2024

Tom Bowley - December 02, 2024

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ChartLists Updated

The following ChartLists were updated over the weekend and will be available for viewing/downloading on our website tomorrow morning:

Strong Earnings (SECL)
Strong Future Earnings (SFECL)

Weekly Market Recap

Major Indices

Sectors

Top 10 Industries Last Week

Bottom 10 Industries Last Week

Top 10 Stocks - S&P 500/NASDAQ 100

Bottom 10 Stocks - S&P 500/NASDAQ 100

Big Picture

Holding long and strong is difficult, because the media is always trying to paint the market in a negative light, providing a reason (or four) why stocks can't go any higher. It's hard to battle through all of that, but staying the course and understanding your long-term goals and using long-term perspective helps to stay the course

Rotation/Intermarket Analysis

Here's the latest look at our key intraday ratios as we follow where the money is traveling on an INTRADAY basis (ignoring gaps):

QQQ:SPY

This ratio is simply grinding back and forth. It's telling us that we definitely do NOT have the all-clear signal that the high-growth QQQ is ready to resume its leadership role. I still like prices going higher, but value stocks remain in charge for now.

IWM:QQQ

Including gaps, it's very obvious that the small cap IWM is leading the way vs. the large cap QQQ. It fully supports the IWM's breakout into all-time high territory and is a sign that the current IWM strength is very likely sustainable in the longer run.

XLY:XLP

This is my favorite intermarket relationship and it's rising. Any time that the S&P 500 is climbing and this XLY:XLP ratio is climbing simultaneously, I believe the current trend is sustainable and that we should expect higher prices. We certainly could have pullbacks along the way, but I fully believe we'll see higher prices ahead in December and into 2025.

Sentiment

5-day SMA ($CPCE)

Sentiment indicators are contrarian indicators. When they show extreme bullishness, we need to be a bit cautious and when they show extreme pessimism, it could be time to become much more aggressive. Major market bottoms are carved out when pessimism is at its absolute highest level.

Readings on the 5-day SMA of the CPCE below .56 or so tell us that options traders are growing quite positive and complacent and these are marked with red arrows in the top panel. Red arrows in the bottom panel tell us where the S&P 500 was at the time of such complacency. While we don't look at this short-term sentiment indicator and expect it to mark major long-term market tops, you can see many short-term tops do coincide with these bullish readings. We have another short-term topping signal right now, but remember, sometimes all it takes is a little selling. I'm not talking about a correction, or even 3-5%. Perhaps we see a bit of sideways consolidation. I definitely would NOT short the stock market. Personally, I'm remaining long, but have exited leveraged products.

253-day SMA ($CPCE)

This is the long-term sentiment signal from the CPCE. It's telling me that the current freefall in bearish sentiment is pointing to higher U.S. equity prices, just as it's done in prior years.

Long-Term Trade Setup

Since beginning this Weekly Market Report in September 2023, I've discussed the long-term trade candidates below that I really like. Generally, these stocks have excellent long-term track records and many pay nice dividends that mostly grow every year. Only in very specific cases (exceptions) would I consider a long-term entry into a stock that has a poor or limited long-term track record and/or pays no dividends. Below is a quick recap of how I view their current long-term technical conditions:

JPM - pulling back from slightly overbought condition; also, weekly negative divergence could play a role
BA - rallying of late, but failed at 160 price resistance and 20-week EMA resistance; need to clear 160
FFIV - has reached new all-time highs; overbought, but still climbing
MA - strength continues here as well
GS - certainly benefiting from strength in financials
FDX - 310 is the clear resistance level now
AAPL - has broken out to another all-time high
CHRW - climbed to 110-115 level to test August 2022 high; pulling back and unwinding overbought conditions
JBHT - bounced beautifully off 150 price support; transports are hot and helping many stocks like JBHT
STX - remaining above the rising 50-week SMA
HSY - to resume strength, needs to clear both price resistance at 180 and the declining 20-week EMA at 183
DIS - rising, but now approaching critical overhead price resistance from 120-125
MSCI - rising and getting closer to 2021 price resistance just above 650
SBUX - uptrend is intact and 110 price resistance from July 2021 awaits
KRE - been awesome since July 2023 and likely heading for key price resistance test at 72.50
ED - held key price support at 95 and is now trending back towards resistance near 107 - that's the range
AJG - steady strength continues
NSC - transports aiding here and NSC faces a huge price resistance test at 280 from late-2021 high
RHI - now trending higher, keep an eye on rising 20-week EMA, currently at 69
ADM - continues its rebound off 50
BG - still remains beneath its declining 20-week EMA; 75-80 is BG's key price support range
CVS - in a significant downtrend, but 44-45 is an extremely important price support level
IPG - moving through 32 would be bullish; until then, watch 26-32 range
HRL - 28-29 is key support, while a move through 36 resistance is ultimately what shareholders want to see

Keep in mind that our Weekly Market Reports favor those who are more interested in the long-term market picture. Therefore, the list of stocks above are stocks that we believe are safer (but nothing is ever 100% safe) to own with the long-term in mind. Nearly everything else we do at EarningsBeats.com favors short-term momentum trading, so I wanted to provide an explanation of what we're doing with this list and why it's different.

Also, please keep in mind that I'm not a Registered Investment Advisor (and neither is EarningsBeats.com nor any of its employees) and am only providing (mostly) what I believe to be solid dividend-paying stocks for the long-term. Companies periodically go through adjustments, new competition, restructuring, management changes, etc. that can have detrimental long-term impacts. The stock price nor the dividend is ever guaranteed. I simply point out interesting stock candidates for longer-term investors. Do your own due diligence and please consult with your financial advisor before making any purchases or sales of securities.

Looking Ahead

Upcoming Earnings

Q3 earnings season has, for the most part, ended. We still have a number of software stocks and retailers, but the overwhelming majority of market-moving earnings reports are behind us. The following list of companies is NOT a list of all companies scheduled to report quarterly earnings, however, just key reports, so please be sure to check for earnings dates of any companies that you own. Any company in BOLD represents a stock in one of our portfolios and the amount in parenthesis represents the market capitalization of each company listed:

Monday: ZS ($31 billion)
Tuesday: CRM ($316 billion), MRVL ($80 billion)
Wednesday: RY ($177 billion), SNPS ($84 billion)
Thursday: TD ($99 billion), KR ($44 billion), LULU ($39 billion), VEEV ($37 billion)
Friday: None

Key Economic Reports

Monday: November PMI manufacturing, November ISM manufacturing, October construction spending
Tuesday: October JOLTS
Wednesday: November ADP employment report, November PMI composite, October factory orders, November ISM services, beige book
Thursday: Initial jobless claims
Friday: November nonfarm payrolls, private payrolls, unemployment rate, average hourly earnings, December consumer sentiment

Historical Data

I'm a true stock market historian. I am absolutely PASSIONATE about studying stock market history to provide us more clues about likely stock market direction and potential sectors/industries/stocks to trade. While I don't use history as a primary indicator, I'm always very aware of it as a secondary indicator. I love it when history lines up with my technical signals, providing me much more confidence to make particular trades.

Below you'll find the next two weeks of historical data and tendencies across the 3 key indices that I follow most closely:

S&P 500 (since 1950)

Dec 2: +20.80%
Dec 3: -37.54%
Dec 4: +34.45%
Dec 5: +36.61%
Dec 6: +44.90%
Dec 7: +22.82%
Dec 8: +16.37%
Dec 9: -7.56%
Dec 10: +9.26%
Dec 11: -41.19%
Dec 12: +2.75%
Dec 13: -0.12%
Dec 14: -62.95%
Dec 15: -17.54%

NASDAQ (since 1971)

Dec 2: +39.30%
Dec 3: -54.04%
Dec 4: +22.34%
Dec 5: +99.62%
Dec 6: +13.03%
Dec 7: +1.36%
Dec 8: +53.51%
Dec 9: -69.02%
Dec 10: +53.82%
Dec 11: -86.19%
Dec 12: -14.96%
Dec 13: -61.84%
Dec 14: -109.19%
Dec 15: -29.80%

Russell 2000 (since 1987)

Dec 2: +121.88%
Dec 3: -26.06%
Dec 4: +32.13%
Dec 5: +136.88%
Dec 6: +48.07%
Dec 7: -26.09%
Dec 8: +93.55%
Dec 9: -90.45%
Dec 10: -18.96%
Dec 11: -104.36%
Dec 12: +16.47%
Dec 13: -38.62%
Dec 14: -87.43%
Dec 15: -36.23%

The S&P 500 data dates back to 1950, while the NASDAQ and Russell 2000 information date back to 1971 and 1987, respectively.

Final Thoughts

Last week was a holiday-shortened week and we saw our major indices continue to push higher. It seems we find leadership somewhere almost every day. This is what I'm thinking about as we look at the week ahead.

December Jobs. The monthly nonfarm payrolls report is similar to individual company's quarterly earnings results. Jobs always provide us a very important signal about the economy and they also provide us a clue about the Fed's interest rate policy. I'd like to see a goldilocks report, not too hot and not too cold. Current expectations are for around 200,000 jobs. We'll find out on Friday.
Economic Reports. Outside of the ADP, initial jobless, and nonfarm payrolls reports, there's not going to be much in the way of economic reports to drive the action this week.
Volatility ($VIX). The VIX ended last week near 13.50. It wasn't too long ago that we saw the VIX at 23. The much lower VIX sends us a clear bullish signal from market makers, who expect little volatility. That nearly always results in higher prices.
History. We've now entered December, exiting the very bullish month of November. While I expect to see higher prices this month, we definitely need to be aware of the bearish tendencies that next week brings. I'd suggest you check out the daily annualized returns on the major indices above. The December 9th to 15th period can be a short-term problem, so just be aware. This knowledge tells me to avoid the leveraged ETFs. I'll personally stick with non-levered ETFs.

Feedback

If you'd like to share your thoughts on our Weekly Market Report, positive or negative, you can reach us at "[email protected]".

Happy trading!

Tom