In the early going the indices are doing a decent job of shrugging off some negative news. Trade tensions with China erupted again at the pan-Pacific summit and made it clear that a trade deal will be no easy feat. Presidents Trump and Xi are meeting in Argentina at the end of the month and the market is hoping for some signs of progress.
Another factor weighing on the market here on Monday morning is news that Apple Inc. (AAPL) is cutting production orders for all three of its new iPhone models. Demand has been less than expected and the creation of new models is causing headaches for suppliers.
Apple is trading down about 2% in the premarket. The chart has looked terrible recently, but with the anticipated bad news now out there the stock may be able to find support. It is still trading above recent lows and technicians will be looking for that level to hold.
The good news is that it is Thanksgiving week. Not only is the market closed Thursday and half the day Friday, but it generally produces a positive market mood. According to QuantifiableEdges.com, if you bought the S&P 500 at the close on Tuesday of Thanksgiving week and sold at the close on Friday in the 58 years since 1960 you would have had a profit in 49 of those years, or 84.5% of the time. The average profit for the trade during the positive years was 0.88%
That is a very good batting average, but besides that track record there is often some strong speculative trading in small-caps. Many traders have fond memories of some crazy action in small-caps back in 1999-2000, when stocks such as Books-a-Million and K-Tel Records made big moves around the Thanksgiving holiday.
While the major indices are in poor shape technically, the market has shown a desire to bounce. Twice last week there were rallies on news about some progress on China trade, although in both cases the news was very questionable at best.
This market is ready to move big on any positive news about trade in China and is even shrugging off some contentious developments over the weekend.
Another factor that may help the market is some apparent softening in the hawkishness of Federal Reserve Chairman Jerome Powell. In a speech on last Thursday Powell acknowledged that economic softness around the world was a factor that the Fed had to consider.
This is like what happened in January 2016, when the Fed's then chairwoman, Janet Yellen, had ramped up her hawkishness. But when the market fell sharply as economies around the world struggled, she backed off and there was coordinated central bank action that sent the market back up.
There are some tough technical conditions out there, but we have positive seasonality of Thanksgiving week, a market looking for a reason to be optimistic about trade with China and many oversold stocks that are in position from a bounce. The bad news from Apple may help the market find better support.