The afternoon turnaround seems to be more the norm than the exception. Thursday’s stock market action followed the trend. What makes Thursday’s turnaround more pronounced is a possible resumption of the uptrend in equities. But not all stocks are created equal.
A look at the day’s MarketCarpet of the S&P 500 stocks shows an interesting mix. While there was more green than red, some of the heavier-weighted S&P 500 stocks—Microsoft Corp. (MSFT), Apple, Inc. (AAPL), Alphabet, Inc. (GOOGL), Amazon.com, Inc. (AMZN), Meta Platforms, Inc. (META), and Tesla, Inc. (TSLA)—were trading lower. NVIDIA Corp. (NVDA) managed to eke out a slightly higher close despite its sharp drop after reporting earnings after Wednesday’s close. Earnings and revenues beat expectations, but the market may have had higher expectations. NVDA’s 0.53% gain didn’t move the needle much in Thursday’s positive move.
FIGURE 1. MARKETCARPET FOR THURSDAY, NOVEMBER 21. A lot of green, but not from the heavily weighted large-cap stocks.Image source: StockCharts.com. For educational purposes.
An initial glance at the MarketCarpet screams the need to view the chart of the S&P 500 Equal Weighted Index ($SPXEW).
Technical Support Holds
Comparing the chart of $SPX with $SPXEW shows that the latter made a bigger move on Thursday. Regardless, both indexes bounced above their 25-day simple moving averages (SMAs).
FIGURE 2. S&P 500 VS. S&P 500 EQUAL-WEIGHTED INDEX. The S&P 500 rebounded and closed higher toward the top end of the day’s range. Most of the heavily weighted stocks in the index closed lower, so it’s no surprise that the S&P 500 Equal-Weighted Index made a more significant move.Chart source: StockChartsACP. For educational purposes.
The positive slope of both indicates the uptrend is still in play. Both are close to their 52-week highs (see lower panel). The $SPXEW is only 0.54% from its high whereas the $SPX is 0.88% away.
It’s a similar scenario with the Nasdaq Composite ($COMPQ) and Nasdaq 100 Equal-Weighted Index ($NDXE), although Thursday’s upside move was much smaller than that of the S&P 500 (see chart below).
FIGURE 3: NASDAQ COMPOSITE VS. NASDAQ 100 EQUAL-WEIGHTED INDEX. Both indexes are above their 25-day SMAs, which have a positive slope. Both are also close to their all-time highs.Chart source: StockChartsACP. For educational purposes.
$COMPQ and $NDXE are trending higher (their 25-day SMAs are trending higher), but the last bar in $NDXE shows more upside movement. Both indexes are approaching their 52-week highs—$COMPQ is 1.72% away, while $NDXE is 0.99% away.
The Nasdaq Composite chart shows some selling pressure, but it’s trading above its July high. If it maintains that position, going forward, it will be bullish for the index.
Even though the Dow Jones Industrial Average ($INDU) may not be as popular as it once was, it, out of the three major equity indexes, rose the most, closing up by 1.06%. It, too, had a turnaround day, bouncing off its 25-day SMA on Tuesday, and is also approaching an all-time high.
The biggest winners were small and mid-caps. The S&P 400 Mid Cap Index ($MID) and S&P 600 Small Cap Index ($SML) are both above their November lows and approaching their all-time highs (see chart below).
FIGURE 4. MID CAPS VS. SMALL CAPS. Both indexes had significant moves on Thursday. The trend continues to be bullish and both are approaching their all-time highs.Chart source: StockChartsACP. For educational purposes.
The Extended Factors Dashboard panel shows the mid-cap revenue and momentum ETFs were Thursday’s top percentage movers.
FIGURE 5. EXTENDED FACTORS DASHBOARD PANEL. Mid-cap revenue and momentum were the largest percentage winners on Thursday.Image source: StockCharts.com. For educational purposes.
The big-picture view of the equity markets: After the post-election pullback, equities seem to be making a comeback. The big question is whether they will have the momentum to break above their all-time highs.
The Bond Market’s Narrative
While equities are rising, you can’t ignore what’s happening in the bond market. Treasury yields are climbing in tandem with equities. This is mainly due to strong economic growth and concerns of possible inflation with the new administration’s implementation of tariffs and tax cuts. We’ve already heard the CEO of Walmart chime in with his concerns about consumers having to pay more due to tariffs.
As yields rise, bond prices fall. The daily chart of the iShares 20+ Year Treasury Bond ETF (TLT) below shows that since September 17, TLT has fallen over 12%. That was around the time the Federal Reserve announced a 50 basis point interest rate cut.
FIGURE 6. DAILY CHART OF TLT. TLT fell over 12% since September 17, which is around the time the Fed cut interest rates by 50 basis points.Image source: StockCharts.com. For educational purposes.
Closing Bell
While the macroeconomic picture is positive, investors are concerned about the possibility of reinflation, especially if tariffs are implemented. We’re still a few months away from January 20, so it wouldn’t be surprising to see more choppiness in the stock and bond market from now until the end of the year.
Geopolitical tensions could also rise. If the trend in equities continues to be bullish, just stay your course and hold on to your positions. But if there’s any change, such as a negative slope in your preferred moving average or a decline in market breadth, it may be time to unload some of your positions and have some cash sitting on the sidelines.
Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.