Dow Clears 45,000

by Knowledge Resources | 12/02/2024, 08:00

The stock market closed higher during Friday’s shortened session after setting record highs throughout the week while taking Thursday off for the holiday. The bulls wrapped up a solid month after holding key support as volatility once again closed right at a key level of support.

The Nasdaq tagged a high of 19,245 before ending at 19,218 (+0.8%). Lower resistance at 19,250-19,400 was challenged and held. Support is at 19,000-18,850.

The S&P 500 went out at 6,032 (0.6%) with the intraday all-time peak reaching 6,044. Key resistance at 6,000 was reclaimed. Support is at 5,950-5,900.

The Dow hit another record high of 45,071 while settling at 44,910 (+0.4%). Key resistance at 45,000 was topped but held. New support is at 44,750-44,500.

Earnings and Economic News

Before the open: Hub Cyber Security (HUBC), Imperial Petroleum (IMPP)

After the close: Credo Technology Group (CRDO), Zscaler (ZS)

Economic News

PMI Manufacturing Index – 9:45am

Construction Spending – 10:00am

ISM Manufacturing Index – 10:00am

Technical Outlook and Market Thoughts

We mentioned coming into last week the technical setup for the major indexes had improved dramatically after the bulls held key support levels the prior week. The Dow, S&P, and the Russell set another round of record highs on Monday and throughout the week with the Nasdaq the only index failing to join the party.

November tends to be the most bullish month in election years and last month’s results were impressive. In fact, it was the best month of the year for the major indexes. The Nasdaq rallied 6.2%; the S&P jumped 5.7%, the Dow surged 7.5%; and the Russell zoomed over 10%.

The first trading day of December is typically bullish, as well as the month in an election year. Also adding to possible bullish sentiment would be the “Santa Clause rally” and the “January Effect”.

The Santa Clause rally, if there is one, takes place the last five trading days of the year and the first two in January. The average gain has been about 1.5% since the late 1960’s. If there is a pullback in the market over this time frame, it could be a slightly bearish signal for January as history has shown.

As for the January Effect, history also has shown the small-caps typically outperforming the big caps in January. In typical bullish years, the major indexes tend to outperform the Russell until October and when they start to wake up. In more recent years, the January Effect seems to be occurring in mid-December, and when the small-caps start to rise at a faster rate into next month.

Year-end dividends, payouts, and bonuses could be a reason for the outperformance of the small-caps. In any event, the breakout to all-time highs is already underway.

For the second-straight week, the Russell (up 1.5%) outpaced the other major indexes after soaring 4% the prior week and holding key support at 2,300. The current and recently adjusted uptrend channel shows ongoing strength towards 2,475-2,500 with the latter representing our 25% higher Price Target from February 23rd with the index at 2,016. Fresh support is at 2,425-2,400 with the middle of the channel at 2,375.

The Nasdaq remains in an uptrend channel with a close below 18,800 likely leading to a retest to 18,600. A close below this level and the 50-day moving average at 18,541 would be a bearish signal. Continued closes above 19,400 and the November 11th lifetime high at 19,366 would be a renewed bullish development with upside potential to 20,000 and our February 23rd Price Target when the Nasdaq was at 15,996.

The S&P traded above 6,000 eight times in November and has closed above this level three times, including Friday. We would like to see this act as a floor of support to start December with higher highs this week. The current action is in the middle of the uptrend channel with the top showing breakout potential towards 6,200. Our February price target for yearend was penciled-in at 6,500 when the index was at 5,088. This was slightly higher at 28% with 6,350 representing a 25% run. A close below 5,850 and the bottom of the uptrend channel would be a cautious development with the 50-day moving average at 5,838.

The Dow pushed the top of its uptrend channel throughout all of last week with the pop above 45,000 on Friday keeping us super bullish on the index. A readjustment to the top of the uptrend channel off the July peak pushes the near-term top to 46,000 with our February Price Target at 50,000. There are several layers of key support starting at 44,000; 43,250; and 42,500.

The Volatility Index (VIX) closed below 15 to start last week, a bullish signal. Friday’s low at 13.49 cracked, but didn’t hold, the second wave of crucial support at 13.50. This level held in mid-November with the intraday low at 13.59. The 13.50 area was also resistance in mid-July and there hasn’t been a close below this level since then. If so, it would be an ongoing bullish signal for the market with weakness towards 12.75-11.50. There is no need to lighten up on bullish positions until the VIX clears 17.50 or closes above 20.