OVERVIEW
Historical Trend Supporting The Bulls

Today’s market session is a half-day due to the Thanksgiving weekend, so we can expect lower-than-usual trading volume. With fewer participants in the market, price movements may be less volatile, and liquidity could be thinner, making it harder to execute larger trades without impacting prices. It's a typical scenario for holiday-shortened sessions, where the market tends to be quieter and more subdued.

With this, we want to highlight a key historical trend: strength often leads to more strength in markets. Since 1985, when the S&P 500 has gained over 20% heading into December, it has continued to rise in 9 out of 10 instances. More recently, since 2000, the index has risen every December following a strong rally earlier in the year.

This pattern can be attributed to several factors. The holiday season plays a role, with the surge in consumer activity leading to stronger-than-expected retail sales. This positive momentum often spills over into the stock market, especially for sectors like retail and e-commerce, which benefit from the increase in shopping. Additionally, investors tend to be more optimistic as they approach year-end, and this positive sentiment often fuels further buying activity.

There are also certain year-end trading behaviors that contribute to the market’s strength in December. For example, tax-loss selling and "window dressing" — where fund managers purchase top-performing stocks to make their portfolios look stronger — can create upward pressure on stock prices.

One important observation is the increase in money flow into the market during this bull run since early 2023, with a recent surge well above normal levels from the past few years. It’s important to note that this is measured over a long timeframe (yearly), meaning the data has a low resolution. This makes it harder to pinpoint short-term market movements, as it reflects broader trends rather than daily or weekly shifts. However, such extreme surges are often unsustainable, suggesting that flows may cool off in the coming months. If this happens, it could temporarily slow the market’s upward momentum or lead to a period of consolidation as institutional level investors reassess their positions.

Nasdaq

The Nasdaq continues to face challenges, with Wednesday’s session showing a rejection at the declining resistance level of $508.60, followed by a sharp intraday pullback to the rising daily 20-EMA. However, aggressive buyers stepped in to push the QQQ back up, closing the session above the 10-EMA. This suggests that demand is still present in the market, providing some hope for further upside.

As a reminder, the QQQ is a capitalization-weighted Nasdaq ETF that tracks large and megacap tech stocks. When comparing its performance to the QQQE, an equally-weighted Nasdaq ETF, we see a notable difference: the QQQE is significantly outperforming the QQQ. This indicates that there is a rotation away from the biggest names in the Nasdaq, such as Nvidia and Google, which have been dragging down the capitalization-weighted QQQ.

However, it's important to note that this is not a broad-based weakness in the tech sector. In fact, there is still underlying strength in many other large tech stocks, suggesting that the drag on the QQQ is concentrated in just a few of the mega-cap names

S&P Midcap 400

The midcaps continue to show an upward trend, although Wednesday’s session saw very low volume, with the MDY pulling back after a rejection at $625 and its prior supply zone. This rejection resulted in some profit-taking from the highs of November 25th. Currently, the MDY is hovering above its daily 10-EMA, and while the extension level is relatively high, we expect some consolidation and a likely short-term pullback. This would allow the indices to catch up and ideally set up for another move higher.

Looking at the Visible Range Volume Profile (VRVP), there’s a dense level of volume trading between $614 and $620, with a bullish bias in the volume, which suggests that we could hold up around this range without experiencing a sharp markdown. However, there’s also an unfilled gap and volume pocket between $615 and $610, which is likely to be filled in the near future.

Russell 2000

The small caps are positioning themselves for a short-term pullback, as Wednesday’s session saw low volume and a weak close. The Russell 2000 encountered rejection around $244, signaling potential weakness. Currently, the Point of Control (POC), which represents the highest traded volume zone, aligns with the rising daily 10-EMA.

This sets up a scenario where we could see a retracement to fill the low volume pocket down to $238, as well as test the rising 10-EMA at the POC. If this level holds, it could provide support and set up a potential rebound.

DAILY FOCUS
Enjoy Your Thanksgiving – Markets Can Wait

As we head into the Thanksgiving holiday, let’s take a moment to reflect on the current market conditions. Today’s session will be a half-day, with lower-than-usual volume expected due to the holiday-shortened schedule. As a result, we may not see significant price action, and the market could be less volatile than usual. This makes it a good time to step back and assess your positions with a clear mind, knowing that the market will still be there when you return.

Historically, half-day sessions, particularly around Thanksgiving, tend to see muted trading volumes, often leading to sideways movement or minimal price changes. However, the markets have also shown a tendency to finish the week strong, especially after a few days of quiet trading. With a short holiday session ahead, it’s a good idea to avoid making hasty moves, as the lack of liquidity could amplify risk and cause erratic price action. For this very reason, we will be risk off for today managing our open positions and waiting for a more liquid Monday open to potentially reposition and deploy our cash.

While it’s important to stay informed, this is also a great time to pause, enjoy the long weekend, and reflect on the things you are grateful for. Whether it’s your personal journey, your achievements in the markets, or the support from loved ones, taking a break can help you return to trading with renewed focus and energy.

We want to take a moment to thank you for being part of the Swingly community. Your support, trust, and dedication are what make our dreams come true every day. We are incredibly grateful to be on this journey with you, helping you achieve your trading goals while pursuing our own. Here's to the continued growth and success we will share together. Wishing you all a restful holiday filled with gratitude and joy. Thank you for making Swingly what it is today! 🙏

Enjoy your weekend, and we’ll see you back on Monday, stronger than ever!