The stock market is starting this Thanksgiving trading week with an attitude that continues to climb any and all walls of worry.
There was a lot of noise premarket on Monday morning due to big news from the White House that President Joe Biden is sticking with Jerome Powell as Chair of the Federal Reserve.
U.S. stock futures had an instant knee-jerk reaction, ripping higher. Although, so did interest rates…
I expect bank stocks to lead the market this week, as well as select retailers. I also expect higher interest rate pressure to hit technology stocks, causing a cool-off in the Nasdaq 100.
However, we have a wild card… Germany. Angela Merkel, chancellor of Germany, made ominous comments on the severity of the latest COVID-19 outbreak. I expect hard shutdowns and other news to come out of Germany in the next few days.
Where there’s smoke, there’s fire.
In the meantime, we still got some important economic data coming out on the stock market during this shortened Thanksgiving trading week.
Data and Charts to Watch On the Stock Market During Thanksgiving Week
There is one big number this week — coming out Tuesday at 9:45 a.m. EST — that inflation hawks will be watching closely: the Purchasing Managers Index.
PMI is the leading indicator on the direction of economic trends in the manufacturing and service sectors, and it’s a good way to assess the overall state of the economy.
PMI leads the Consumer Price Index, so we need to see this number soften before we can expect the inflation pain crushing consumers to subside.
The Federal Open Market Committee meeting minutes are also out this week on Wednesday.
The Fed minutes are always a great sneak peek into the internal dialogue within the central bank as chronicled from the last meeting.
And during that Nov. 3 meeting, the Fed announced it intends to begin tapering by paring back bond purchases.
Interest rate hawks will know exactly how shocked Powell and the board were looking at the record-breaking CPI data… And how quickly tightening could occur.
It’s also a big chance to see what indicators the Fed is focused on most. I expect even the most dovish inflation deniers on the Fed will be knocked off that wagon with the latest data.
And this could create a bear move in the market as well as higher interest rates…
Before that happens, though, it’s important for traders to pay attention to this stock market chart over Thanksgiving week.
The S&P 500 Growth Index has been crushing the S&P 500 Value Index over the past month.
As investors bid for big technology winners like NVIDIA Corp. (Nasdaq: NVDA) into the year-end, I expect a major reversal of this in mid-November — followed by a continuation of the pattern into the end of December.
Therefore, traders should look for a 5% to 10% outperformance in lagging value names over the next few weeks.
Let me know your thoughts on what to look out for on the stock market during Thanksgiving week.
And as always, send any trading questions to jeff@joyofthetrade.com and stay ahead of the markets, especially these choppy ones, by subscribing to our YouTube channel.
