Right out of the box let's get something straight. Black Friday is not the infamous 1929 Black Tuesday suffered by the New York Stock Exchange. That unfortunate event is the one most often that jumps to the forefront of thought when someone says Black Friday.
No, Black Friday is instead that first shopping day after our traditional Thanksgiving. It is called Black Friday because it was traditionally the day that most U. S. retail businesses move into the profitable column for the year, hopefully never to look back the rest of the year as Christmas piles profit upon profit, or so they hope.
In reality, most of the retail businesses of today see a different picture than those of 40 to 50 years ago and usually find "profit day" much earlier in the year, most likely due to the changed nature of retailing, ala the Wal-Mart model.
But, the consumer's mood today is really what I want to focus on in this week's column. Their durability and willingness to continue to be major buyers will likely determine the outcome of the current stock market churn.
You already know from last week's column that I believe the resolution of the current churning will be to the upside and not to the down, to the continuation of the growth of the U.S. economy and not to a recession.
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I arrive at this conclusion from analyzing my SUPER CHART formation and how my SUPER CHART KEYLINE is holding up. Thus, if I am so convinced by the charts that we will move to higher ground on the charts, it must be because the 70 to 75 percent of the economy that depends directly on consumer spending continuing at its present level is holding its own, and possibly even accelerating into the Christmas season.
[Editor's Note: Special Report: 5 Ways to Profit From the Housing Bust.]
This column is being written a bit early this week due to the Thanksgiving holiday, so I will not have the benefit of the reports that come this week to do my analysis. However, here are the important reports expected this week:
On Tuesday the FOMC minutes from last meeting were out, but most Fed watchers are looking to the December FOMC meeting, not back at the last one. So, I don't expect more than a very minor ripple from the old minutes.
Also mid-week we got housing starts and building permits, as well as leading economic indicators and the Michigan Consumer Sentiment Index. These four important reports came on a holiday week when one might expect a rather quiet trading scenario. But, they are the more explosive reports of the month, seeing that the mind of investors is focused on housings ups and downs and the sentiment of consumers going into the holiday buying period.
Now, let's go the SUPER CHART for this week. Last week, I showed you my SUPER CHART for the S&P and explained why my current mood it still quite bullish for the economy.
This week, to add a bit to that story via another chart, I am including the chart for the Dow Jones Wilshire 5000 Index. This index is one of the more important, though one of the less talked about indices. It is important because it included just about every stock traded on the major U.S stock exchanges. This being the case, when you look at it you are, (for all practical purposes) seeing the sum total of investor sentiment from every quarter of the economy.
I have included the period of June 20, 2003 until the beginning of this week in the chart, since June 20, 2003 is the beginning date of the current rally. It is quite easy to see that once all the stocks traded on the major U.S. stock exchanges are compiled into one grand chart, a very clear solid up-channel is evident.
Note also that the current KEYLINE and the close Friday, Nov. 16, are the same, meaning that the pullback is to the KEYLINE. Note also that if the KEYLINE were broken to the downside, the lower up-channel line is still a major support at about 14,300.
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And note that the KEYLINE was violated to the downside a bit back in mid-2006 just before the huge rally that began in July of that year. So, if we were perchance to break the KEYLINE a bit here, I would still remain bullish for the moment until we saw what the up-channel line does in the way of supporting the index.
So, how does consumer sentiment impact this chart? Again, the reports of each and every company in the Wilshire 5000 (to repeat, this index contains almost every stock traded on a major U.S. Stock exchange!) is currently available to investors.
Investors are the world's best arbiters of the data flooding the markets every day. By looking at the 5000, we see the TOTAL response to all this news by the actual investors involved in trading these stocks. The result is as clearly seen as our solid up-channel. The bottom line is that investors like what consumers are doing. Here, unvarnished, is what the "market" thinks about economic prospects today and as much as six to eight months down the road.
Can this opinion change? As always, the answer is yes. But, until it does, I would urge you to listen to what the chart is saying today. Today, it is saying it likes this market. Until that changes, the consumer reigns supreme and continues to support a growing economy — and our investing activities.
Well, this week's column will be a bit shorter due to the holiday, but I wanted you to have some additional support, after last week's column, that the consumer is on the bullish side, too. Helps to know what the good guys are doing, doesn't it?
Hope you have a very happy Thanksgiving this week. I will be enjoying the traditional turkey with loved relatives and it doesn't get much better than that. Do hope your coming investing week is a good one. In the meantime, you keep in touch. I do! See you next week.
Editor's note:
Special: Sir John Templeton Was Right. Get His Latest Insight on Housing and Markets.
Special: Find Out Why Housing Prices Will Fall 40 Percent in the Next Few Years.
Free Report: The 5 Five Best ETFs You Can Buy Today.
Commodities Are Still in a Bull Market. Get Our Top 6 Recos for the Coming Year.
