Traders work the floor of the New York Stock Exchange.
The November strong rally may have stolen some thunder from a year-end rally.
Promising Vaccine News made a major rotation in cyclical stocks in November, such as industry and financials – stocks that would do well in the economic recovery.
The S&P 500 is up over 11% for the month so far.
CFRA Chief Investment Strategist Sam Stowal said, “If it is more than 10%, it will be only the third time since World War II, so much so in November.” “Such a strong November has a tendency to steal from Santa.”
But he said he still expects the market to exceed its current level at the end of the year, even if there is a small so-called Santa Claus rally, and there should be a profit for December. In the Second World War, the average S&P 500 increased by 1.5% in December.
Back to FANG?
After a strong November gain, with the Dow breaking the 30,000 and S&P highs, there is speculation that the market may fall into a pullback phase as it gains.
But Katie Stockton, chief technical strategist at Fairlead Strategies, said it is more likely that the market will instead gain momentum from stocks that are dragging on.
“I’m calling for a rotation in FANG. Of course it can help the key indices stay stable or make a little bit higher here,” she said. “I think FANG stocks can contribute upside before the pullback. I don’t think you should wait for the pullback because it could come from higher levels.”
He said that from a contradictory point of view, readings of sentimentality and greed are at a high level and can be seen as a sign of pullback.
“People are talking about it,” she said, adding that there are also a high number of stocks that are moving on the decliner. “I will accept that as a risk. You see these extremes registering ahead of the pullback with a lead anywhere from two to six weeks.”
Stockton said there are signs of oversold FAG shares – Facebook, Amazon, Netflix and Google‘s parent Alphabet – as well as Apple and Microsoft. Those stocks were mostly on Wednesday with Amazon up 2% and Apple up 0.8%.
Stowal said that he carried Fang to market weight several weeks ago. “We believe they are going to keep pace with the market,” he said. But yet in November, he has not held.
Some members of FANG and big techs like Microsoft and Apple weakened the broader market in November. For example, Tech Darling Apple is only 6.5% and Amazon has grown by just 4.7%.
The S&P 500 was lower on Wednesday, but the Nasdaq raised by Tech was up by 0.4%.
“FANG stock can help take the floor when names that are too overbought pull back,” Stockton said.
He pointed to Apple, and said its benefits could help the overall market. “[Apple] SPX has ~ 6% footprint and NASDAQ-100 index has ~ 12% footprint. If he wants to pull out of the triangle that has been building since September, there will probably be additional vicissitudes for the major indices, despite greed, which is a market feature right now, “he wrote in a note. Apple traded at around $ 116 on Monday And Stockton Notes resistance at $ 120, while support was near $ 110 per share.
Scott Redler of T3Live.com, which follows short-term technology, said Apple is acting better now. “Apple was under pressure earlier this week, and it set its foot at $ 112.50,” he said.
Tech is up 33% from the beginning of the year, but only 4.3% since the beginning of October. Since that time, financials are up 18% and industry 15%.
Strategists expect the technology with its more cyclic semiconductor names to also move higher, but perhaps not as quickly as it was hit. FANG names are also so-called “stay-at-home” stocks and can do better because the virus spreads continuously and injures painful activity.
Oppenheimer technical analyst Ari Wald said 87% of the New York Stock Exchange shares are above their 200-day average, the highest count since October 2009. This was when the market had fallen sharply for a few months during the financial crisis, and was considered a sign of the all-clear, Wald said.
He said, when there are more participants in the market, then the market is better and it is good to participate in such stocks in large numbers.