1. Moving the Markets

It was a tale of two markets with the Dow still pushing into record territory while the Nasdaq tanked and closed below the unchanged line joined by the S&P 500. The Dow’s support came from the banking and energy sector, the latter which was powered by continued strength in oil prices (+2.97%) as the recent OPEC agreement apparently has not been reneged on—yet.

In economic headlines, the initial jobless claims took front and center. In the two weeks since the election they have soared over 35,000 (or 15%) to five month highs, the biggest two week rise since December 2014. As the ZH succinctly noted, “this is entirely against the exuberant narrative being spun by the US equity markets.”

On the interest rate front, the bloodbath continued with yields soaring worldwide as the 10-year US bond gained some 6 basis points to close at 2.45%. There will a moment in time when that relentless increase in yields will severely affect US stocks. As I mentioned yesterday in the Trend Tracking section:

It’s important to note that our Domestic TTI has not rallied in its usual fashion, a sign that rising bond yields have generated some headwind, which will play a much bigger (negative) role in regards to equity prices should yields continue to ratchet higher.

I think we are getting closer as our Domestic TTI has now moved within striking distance of a potential “Sell” signal with that oddity occurring in the face of the Dow making new lifetime highs. See section 3 below for today’s closing numbers.

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1. Moving the Markets

Thanks to the Trump post-election rally, the month of November ended up being a positive one, an amazing feat when considering that on election night the futures were way down with the Dow at point being in the negative by almost 900 points.

Today, all the glory went to the energy complex (+4.8%) propelled by oil prices which rocketed higher by over 8% and within striking distance of the $50/bbl milestone. The cause of this rally was an alleged OPEC agreement curtailing production. Sure, we’ve seen this movie many times before, so it remains to be seen if this is a deal that is truly nailed down. I have my doubts.

While November was quite a month for the indexes, it’s interesting to note, that widely diversified portfolios with international exposure were left in the dust as the Trump rally was concentrated primarily in domestic equities. ZH posted this spot-on chart:

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1. Moving the Markets

News-wise, it was a mixed bag as health insurers offered an upbeat outlook while a sharp drop in oil prices (-3.87%) pulled down energy shares. The major indexes got off to a good start, faded in the end but managed to close above the unchanged line by a small margin.

The steam of the Trump rally appears to have slowed down some, which makes sense, as none of what ails this country has been resolved. The focus has simply been shifted to the possible economic expectations associated with a Trump presidency, and it remains to be seen if those good intentions can actually be turned into reality.

Hope vs. reality, the theme of the stock market over the past year, during which hope has been the clear winner, but what about next year? How do 2017 GDP growth expectations line up with the current level of the major indexes? ZH presented the following chart:

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1. Moving the Markets

The smooth three week post-election ride of the major indexes hit a speed bump today with equities notching their worst performance in almost a month. However, that’s sounds worse than it actually was as the S&P 500 and the Nasdaq gave back only around 0.5%, which is hardly earth shaking.

The main culprits for the pullback were the consumer discretionary and financial sectors, which have been among the best performers since the election; gold bucked the trend and gained the most in a month (+1.30%). The US dollar, which had been on a tear ever since bond yields spiked, had its biggest drop in a month.

Oil rallied and ended higher but not before giving back half of its gains after the OPEC session ended as usual in no certifiable agreement. This stock market rally may not be all it’s cracked up to be as volume was notably absent as ZH reports. The chart below clearly shows that equity trading volume collapsed while bond trading volume exploded to five year highs:

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