We hope you’ve had an enjoyable Thanksgiving week, and that it kicks off a happy and healthy holiday season for you and the ones you love.

November closed with the achievement of being one of the strongest Novembers in the last 20+ years, as well as the best-performing month of the year in the S&P 500.

A Month That Sets The Stage For What’s Next

The month’s market action was greatly influenced by the elections, and politics have been setting the stage for what’s next for traders and investors.

While most of our analysis will consider November's action as beginning on its first trading day, readers may also consider many of the trends relative to the election range of Nov. 5-6 (the election day and the reaction day). The chart below illustrates the strength through the day after the election (Nov. 6) in the S&P 500 sectors and indexes.

When measured from the close of Nov. 6 to the follow-through after the initial reaction to the election, the leaders and laggards look quite different.

Sectors trading higher than their Nov 6 close are likely to be leaders going into the end of the year.

The notable standouts on the bullish side are Utilities (XLU), Financials (XLF), and Consumer Discretionary (XLY). The notable laggards are Technology (XLK) and Semiconductors (SMH) -- which isn’t an S&P 500 sector but is so widely followed that it’s worth highlighting regardless.

Also notable is that RSP (S&P 500 equal weight) has outperformed the SPX and QQQ. This suggests a healthy broadening of the market along with sector rotation. Weakness in the SMH and a lagging QQQ can be a warning sign, but this concern is premature until there is serious weakness relative to their respective trends.

The optimistic side of this situation is that the right rally in these weak areas could lead to a significant lift to the whole market.

Equity Investors Should Hope Trump Watches the Bonds

As shown below, the bearish reaction to the election by the bonds (TLT) weighed on all segments of the market, especially the defensive sectors. Then, the stabilization of the TLT’s downtrend and subsequent rally helped all areas rally into the end of the month.

Looking at other asset classes, Bitcoin is literally off the chart. Next, equal-weighted S&P 500 (RSP) led the way, followed by Uranium (URA) and agricultural commodities (DBA). Note that everything, even the laggards in the chart below, bottomed along with the bottom in TLT.

November In Perspective

Bitcoin has had an extraordinary November, but it’s had an equally impressive year, as you’ll see in the chart below.

Another fact in this chart that doesn’t get enough attention is that looking at the performance year-to-date above, silver (SLV), commodities, and gold (GLD) are all leading the stocks, even despite the SPY’s strong November.

With respect to the sectors (as shown below), the year-to-date perspective highlights how SMH has been off its highs for five months, and the market’s leadership has been solidly in the XLC, XLF, XLU, and XLI ETFs. It’s notable that this list represents “risk-on,” “risk-off,” and “cyclical” sectors.

History Rhymes

The market’s path since the election has been slightly different than the 'Trump 1.0' economy from 2016, but as of right now, it’s holding the simple bullish pattern of an election range breakout.

The market’s resemblance to its 2016 trend is interesting, but we’ll be keeping a close eye on the trends in interest rates and leading sectors to anticipate future moves.

AI Influences Black Friday

With the election and earning season in the rear-view mirror, the bulls will be looking for evidence that the economy will remain strong, the Fed will continue to accommodate, inflation will stay calm, and interest rates will cooperate.

The annual question of, “How has online shopping changed Black Friday?” is now morphing into, “How has AI influenced Black Friday?” Initial reports about Black Friday sales suggest that the consumer is not only in the buying mode, but is also enlisting the assistance of AI to improve their shopping experience.

According to reports from Adobe Analytics, Black Friday online sales were up about 12% over 2023 and assisted by an 1,800% increase in AI chatbot related traffic to retail websites. As you can see by the chart below, 2024 sales have been higher this year on each day of the Thanksgiving holiday, and Cyber Monday is expected to be higher, too.

Are You Using AI to Shop?

Surveys by Whoop.com and 40% of shoppers will turn to generative AI tools this Black Friday and holiday shopping season to find deals, search for items, get recommendations, and find alternatives.

AI Will Be Life-Changing in Ways (and Investments) We May Least Expect

While this application of AI isn’t necessarily the ‘life-changing’ impacts that are often touted as the AI revolution, it feels remarkably similar in the way that the progression of the ‘Internet’ and ‘online’ evolved from ‘new’ to ubiquitous.

Apple has been criticized for being behind in AI, and at the same time, one of its supporters in the analyst community, Gene Munster, has been vocal about how Apple will be a leader in the way AI becomes an integral part of our lives. He believes Apple and AI will drive changes in the way we live that will have a bigger impact than that of the iPhone.

Considering this, it’s fitting that Apple's stock should choose Black Friday to break out of its five-month consolidation that has followed its announcement of its AI initiatives. See the chart below.

A December to Remember?

November’s performance would be hard to beat, and December is not historically stronger than November. However, December does have some very bullish stats. One interesting way to look at it is that December is rarely the worst month for the year, as you can see from the chart below.

Ryan Detrick at Carson points out that the worst-performing month this year was April, with a loss of 4%. On a more positive note, you may see on the chart below that during the first year after an election, December has been up 83% of the time with an average gain of 1.3%.

With a much-anticipated employment report and an expected rate cut coming mid-month, there’s plenty to look forward to.

Now, here is Keith Schneider with a quick look at other market factors to take note of. Every week, we review the big picture of the market's technical condition as seen through the lens of our data charts. The bullets below provide a quick summary organized by conditions we see as being risk-on, risk-off, or neutral.

Risk-On

• The S&P and the Dow made new all-time highs this week, indicating further bullish action. Both appear to not be overbought.
• Significant improvement in volume was seen over the last two weeks, with volume action confirming the new all-time highs.
• 12 out of the 14 sectors were positive over the last five trading days, as led by retail and homebuilders, which were helped by the drop in interest rates.
• Alternative energy was the strongest performer over the last five trading days, while fossil fuels actually sold off.
• Market internals, as viewed through the McClellan Oscillator, are positive and have confirmed price action for the NYSE and Nasdaq. Additionally, the cumulative advance/decline line for the NYSE also hit new all-time highs.
• The 52-week new high/new low ratio improved for both the Nasdaq composite and the S&P 500.
• Volatility indexes have been giving up some levels of pessimism. Many have closed on new lows since the massive August spike.
• The number of stocks above their key moving average looks overall positive, with the exception of the S&P, which looks a little more muted.
• Foreign equities still continue to lag U.S. equities by a wide margin. Although, on a positive basis, emerging markets tested their 200-day moving average and bounced.
• Value stocks have continued to outperform growth stocks, as both categories closed on new highs.
• Bitcoin went ballistic this week, highlighting the current speculative condition of the market that could persist.
• Despite the high prices in soft commodities that could impact the consumer, long bonds and interest rates across the yield curve eased, which, under most cases, should be good for equities.
• Regarding seasonal patterns, Bitcoin has been very strong in what is considered its strongest seasonal period, while the dollar could be under pressure from its seasonal trends. The dollar already appears to be overbought.

Neutral

• The percentage of stocks over their key moving averages shows a potential overbought situation that could be subject to mean reversion.
• Risk gauges are weak-neutral due to the relative strength of long bonds outperforming the S&P.
• As we suggested last week, gold was a little oversold. By the end of the week, it closed below its 50-day moving average in a weak warning phase.
• The dollar backed off of extremely overbought conditions. The equities market seems disconnected with the price action seen in the dollar.
• Inflationary pressures have persisted, with soft commodities closing at decade highs.
• The Nasdaq 100 has continued to lag the S&P 500. If the market corrects from here, it should be the first to fail.

More By This Author: