From the Trading Desk

Constructive Consolidation Continues; Stocks Close near Session Highs

Once again, we saw the market pull back only to find buyers pushing the market to the highs of the session. Volume was higher on the NYSE while NASDAQ volume inched lower. Losses were small on the S&P 500 and Dow as Distribution was avoided on the NASDAQ. We would love to see this constructive action continue heading into Thanksgiving week. The more we have proper consolidation the better chances we’ll have in seeing this market hit even higher all-time highs. Continue to stay the course here and continue to execute the plan. Discipline will serve you well in this market.

More than a few years ago economic data used to matter. Our commentary would often cover releases, but now they really do not matter. Did they ever matter? Depends, but for our purposes they do not. Our interests lie solely in the price action from the market. Yes, economic data impacts how stocks react and certainly is a part of price. However, we are no in the business guessing which way the market moves. Leave the guess work to the gamblers. We would rather stick to our time-tested process. Our longevity proves what we do works and works well. Come join us.

Yesterday we wrote about XLU hitting all-time highs and XLF hanging tough at its 50-day moving average. A potential scenario where a big negative for banks would be an inverted yield curve. If lower rates push higher than long-term interest rates lending would become impossible. You are not going to lend money and receive less than what you must pay your depositors. We are not going to guarantee or predict a yield curve inversion. We’ll follow price. Right now, XLU is kicking butt and XLF is trying to hang on to its 50-day moving average.

Is it a coincidence last week we highlighted ICE was introducing FANG stock futures and it being the “jumping the shark” moment and we have not hit another new high? We wouldn’t take credit for something like that and right now we still see positive action from this market. We do have the Fed in a few weeks, but for now the stock market is acting well and we are still seeing good risk/reward setups. OF course, if the data changes we have our stops and will adjust. Adapt or die.

Perhaps one more negative sign is the struggles we are seeing with HYG and JNK. Canaries in the coal mine are not looking well. Keep an eye on the high yield market as they tend to foreshadow future gains for the stock market.

We hope you have a great trading day today and wish you the best of luck!

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