Initial Closing Thoughts

Today looks on the outside to be a pretty typical Thanksgiving week Holiday market, as many retailers are in the red for most of the year until the holiday shopping season. As such traditionally or historically, this week has been a big out-performer on average, however I'm not one for tradition for tradition's sake alone. I've probably shot down more bearish fractal charts showing the market at a certain time in the recent past comparing it to major tops or crashes like 1987 or 1929 and made a case against thinking too much like this as the market may rhyme, but doesn't typically repeat and just as everyone is looking one way, the market moves another which I have also been an advocate , arguing against the October decline as the final bear market break  as you may recall I felt there were simply too many people all saying the same thing at the same time. Bear markets show up when no one expects them.

As I said,  it is not unusual for the lever pullers on the holiday week, wanting to provide as much positive sentiment as possible, especially with a probable nasty Nor-easter storm likely to hit the East coast US mainland on Thanksgiving with the biggest shopping day of the year (Black Friday) being the very next day. On the face of things with the above considered, the market doesn't seem that surprising. However with a slightly closer look, some oddities standout.

First there's much talk about the market making a 27-day record above the 5-day moving average which hasn't been seen since March 1928, for most market history buffs, that time period should stand out and ring some bells. What the financial media is telling us is that the last time such an event occurred, what followed was one of the greatest bear markets in financial market history and the Great Depression. While I don't buy fractals of Hindenburg Omen clusters and some of the other dooms-day fractals that have been put out the last 2 years, I do absolutely subscribe to differences in price ROC and changes in character/changes in trend, after all... the reason certain patterns repeat over and over through market history is because human nature is constant and thus, predictable. A micro version of this macro concept would be the recent BABA big upside price move/Channel Buster followed by a sharp, near -10% correction which we predicted with the actual target two weeks before and the pullback the very day before-THAT'S MASS PSYCHOLOGY WHICH IS QUITE DIFFERENT FROM FRACTALS.

Among other oddities, while I expect lighter volume during a holiday week, especially the day leading up to the holiday and the day after (especially on Thanksgiving when it falls in to a possible 4-5 day weekend), I was surprised just how low volume was on the first day of the week.

One of the stranger events was Index futures behavior on the night and day. The A.M. update shows clearly that the NASDAQ and Russell were in line going in to the open, but the SPX futures were not. In addition, the Dow E-mini futures also were not (negative in to the open)...

 ES/SPX futures were negative going in to the cash open...

 YM/ DOW Industrials E-mini futures were also negative in to the open and remained in line all day much like ES above.

It was the Russell and NASDAQ futures that were in line (confirmation) in to the cash open on upside gains, they remained constant while the SPX and Dow peeled away  even though...

The NQ/NDX 100 futures developed a sharp divegrence during the cash market and TF/R2K developed a much smaller divegrence and then fell back in to line.

The reason I find this odd is the VERY ODD market dislocation today, a little rotation is quite normal, but this....

The Russell 2000 performed 20 times better than the Dow (R2K @ +1.21%) as the Dow came in almost red at +0.04% on the day, that's a huge discrepancy, while the SPX came in at a mellow +.30% vs the Russell's 1.21%, 400% better performance with the NASDAQ 100 in the middle at +0.78 which is not that surprising vs the RUT, but with all of the averages, something is fishy.

Even if you didn't find the Dow's +0.04% performance vs the RUT's +1.21% performance strange, it would be more understandable if it were large caps that were up over 1% like the Dow Industrials or even the SPX-500 as treasuries were up today as well acting defensive, thus I would expect the large caps to be the big gainers in a defensive rotation as the large caps tend to be the defensive plays (just saying because of the move in treasuries and the strong 2 year auction today).


Additionally, almost all of the averages stayed exactly inside Friday's range...

 SPX today inside Friday's range forming a daily "inside" candlestick like this...

Dow Daily with a somewhat similar last two days as the October Bottom. A bullish Hammer with a long lower wick at the October bottom and a small Doji inside the range the next day before the upside move started with a "shooting star Friday with a longer upper wick and a Doji star candle in side Friday's range today.

This in and of itself is not very telling or strange, but when considering the vast difference in performance of the averages from +0.04% to +1.21%, it's odd that they all stay within Friday's range except for the Russell 2000 that just poked out above Friday's range by the smallest bit, while the Russell's ETF, the IWM stayed within the range.

 The Dow the last 2 days within Friday's range at +0.04%, nearly a flat day.

While the much better performing NASDAQ 100 @ +.78% also stays within Friday's range

Only the R2K just peeked out above at the close, however...

The IWM stays right within the range. I didn't note it at the time, but Friday there were some pretty large discrepancies between the averages and their ETFs (at least in one of the averages) of at least a 5th of a percent intraday which I found to be strange, but had no reason to mention it.

I'm starting to get more and more emails mentioning Wilder RSI or Ultimate Oscillator divergences between the averages or Industry Groups such as the IWM above which shows a positive, bullish  Ultimate Oscillator divergence at the October lows and a negative (bearish) U.O. divergence at the recent highs. While I do think this is a useful discovery, you should know that this is part of the change of character that occurs through a reversal process, much like a MACD trend divergence is a change of character of price in a reversal process and often small , seeming breaks to the rules at areas like a Channel Buster are also red flags that traditional Technical Analysis fails to recognize.

 The same Ultimate Oscillator divergences , both bullish and bearish are seen on the SPY/SPX, the Dow Industrials, Dow Transports, the NASDAQ 100/QQQ and the NASDAQ Composite, as well as the RUT/IWM shown above. Changes in character are always important, it's just helpful to understand why as it often helps place you within the stages and thus knowing where you are on the market's map. I'll likely see some myself as I run through the updated data after this.

As mentioned earlier,  defensive Treasuries acted strong today just as the 2 year Treasury auction came off well.

The $USD was weak on Euro strength, two of our macro trends, yet the precious metals complex failed to take advantage with Gold and Silver both down and another big down day for Dr. Copper, -1.20%.

Niether Brent or WTI crude found any relief either from the weakened dollar, both down well over 1% with Thursday and trade in to Thursday being Key for possible oil trades.

Also weak in currencies was the Yen overall, CAD and AUD (AUD part of our macro trend) and EUR strength (also part of our macro trend).

VIX hit 2 month lows at 12.66, yet was stronger on the close interestingly.

I have updated my data/scans so I'm going to take a closer look around at a day that wasn't a screaming oddity, but certainly had its quirks, the most obvious of course being the large divegrence in relative performance between the 4 major averages.

Again, historically this is a strong week for the market, the reason is blatantly political and business oriented as most retailers will either make or break their year from this week until Christmas so you'd think if there were anytime the market would be goosed, now would be it, still the relative performance is odd indeed.