US Stock Market Analysis:, Commentary and Stock Picks - Nov22

Stocks Rally shows resilience, ignores West-Russia tensions …

The stock market ended the final week before Thanksgiving on a positive note showing the resilience of the ongoing stocks rally. Upcoming events include new inflation data and the latest minutes from the Federal Reserve which will set the direction in the shortened trading week.

On Friday, the Nasdaq Composite flirted with negative territory but rallied to close 0.2% up. This gain allowed the tech-heavy index to secure a weekly increase of 1.7% and move back above its 21-day exponential moving average. The Nasdaq has climbed in two of the past three weeks and has risen 26.6% so far in 2024.

The S&P 500 performed slightly better on Friday but also managed a weekly gain of 1.7%. It sits comfortably above its short-term moving averages and is nearly 3% above the 50-day line. The benchmark index is now up 25.1% for the year.

The Dow Jones Industrial Average led the major indexes, closing at record highs after rising 1% on Friday. Boeing (BA) and Nike (NKE) were the top performers, while artificial intelligence stock Nvidia (NVDA) lagged as investors continued to digest its earnings report.

Highlighting market breadth, the Invesco S&P 500 Equal Weight ETF (RSP) and the Nasdaq 100 Equal Weighted ETF (QQQE) each rose 0.8%, outperforming their market-cap-weighted counterparts by a significant margin.

On the other hand, the recent outperformance of small-cap and mid-cap stocks suggests a broadening of market participation beyond the "Magnificent Seven" large-cap technology stocks. This diversification indicates that investors are seeking opportunities in smaller companies, which may offer attractive valuations and growth prospects.

· Small-Cap Stocks: The Russell 2000 Index, representing small-cap companies, surged 1.85% on Friday, contributing to a weekly gain of 4.5%. This performance brings its year-to-date increase to 20.01%.

· Mid-Cap Stocks: The S&P Midcaps 400 Index rose 1.7% on Friday, achieving a weekly gain of 4.9%. This index has also shown robust performance, reflecting growing investor interest in mid-sized companies.

The recent momentum in small-cap and mid-cap stocks highlights the importance of a diversified investment approach. By expanding focus beyond large-cap technology stocks, investors may identify promising opportunities in the broader market landscape.

The weekly market performance of the different indices is summarized as follows:

Index Friday (11/22) Weekly YTD 1 Year

S&P 500: +0.35% +1.68% +25.15% +31.00%

Dow Jones Industrial: +0.97% +1.96% +17.53% +25.58%

Nasdaq 100: +0.17% +1.87% +23.48% +29.84%

Nasdaq Composite: +0.16% +1.73% +26.60% +33.21%

Russell 2000: +1.85% +4.50% +20.01% +35.71%

The performance of individual S&P 500 sectors for the last week and since the US elections is as follows:

Sector Weekly Performance

Materials, XLB: +3.08%

Utilities, XLU: +2.78%

Energy, XLE: +2.68%

Real Estate, XLRE: +2.58%

Industrial, XLI: +2.54%

Staples, XLP: +2.35%

Discretionary, XLY: +2.18%

Technology, XLK: +2.14%

Communications, XLC: +1.82%

Financials, XLF: +1.72%

Health Care, XLV: +1.64%

Materials, Energy and Utilities were the winner last week as recent Russia-West tensions took the center stage in geopolitics, however, riskier segments like Discretionary, Technology and Communications also shrugged off the world political headlines pointing towards the strong nature of ongoing market rally.

Important Events next week:

Next week will be a shortened week due to Thanksgiving holiday on Thursday.

Tuesday (11/26): New Home Sales, Consumer Confidence. FOMC Meeting Minutes

Wednesday (11/27): Durable Goods orders, GDP, Initial Jobless Claims, Core Price Index (CPI), Crude Oil Inventories

Thursday (11/28): US Holiday – Thanksgiving Day

Friday (11/29): US Holiday – Thanksgiving Day, early close at 1 PM EST

Important Earnings this week:

Some important Q3 earnings results in the upcoming week:

Monday (11/25): Zoom (ZM)

Tuesday (11/26): Abercrombie & Fitch (ANF), Best Buy (BBY), Burlington Stores (BURL), CrowdStrike (CRWD), Dell Technologies (DELL), Dick’s (DKS), Urban Outfitters (URBN)

Long-Term Stocks:

Our long-term stocks are those in which we have the conviction that they have strong business fundamentals and enjoy moats in their respective industries; hence the chances of long-term appreciation are high.

MSFT:

Microsoft has been somewhat struggling for the last 4-5 months but we still see this as a consolidation in a narrow range. We continue to think that this could be an opportunity to load up the shares for the long term with a stop loss below 384 while targeting the upper range of 487.

NVDA:

Although Nvidia beat Q3 estimates and its EPS (Earnings per Share) jumped 103%, its Q4 guidance is slightly above consensus causing a lukewarm response from investors. For the week it was flat, but it reversed from a high of 152 to a close of 141.95. Being the most valuable company in the world, this effect trickled Nasdaq as well. However, the AI leader said that its next-generation AI chip Blackwell is in full production and expects higher sales than earlier estimates.

Given the recent history of Nvidia, any pullback to key moving averages (like 20-days or 50-days EMA) will likely find support unless major surprises to its future guidance. We maintain a long-term buy and hold stance on Nvidia.

AAPL:

Apple is perhaps waiting to see the proposed Trump tariff impact on its iPhone sales. Perhaps, being a long-term leader, aggressive investors could add to their positions at the current range with a tight stop loss below 219 otherwise wait for a break beyond 233.09.

COST:

Costco finally broke out to new highs after a brief consolidation. We mentioned during the last few weeks that any pullback is an opportunity for investors who like this long-term leader. At this point, any further pullback to its moving averages around 900-920 will provide another opportunity to add positions with a stop loss below 867.

Medium- and Short-Term Picks:

META:

Meta remains a favorite in the medium and long terms, but it is trading in a downwards channel after its recent earnings. It could provide another entry if the stock moves back above 565 with a tight stop loss below 550. For the time being let’s observe its price action for a few more days or weeks(s).

AMZN:

Amazon broke the 200 level and closed the week at 2.71% loss. Nevertheless, we still see Amazon favorably and going back to new highs amid the holidays season buying.

PLTR:

Although PLTR gained 4.87% but it ended the week in the red. We think aggressive investors are just trying to accumulate here and an entry could be made at current levels with a stop loss around 20-day EMA at 56.36.

As suggested earlier, this seem to be another AI winner and for the time being market favorite.

Interesting New Picks:

ANET

Investors did not like the last results of this leading provider of cloud and AI networking services; however, it enjoys steady revenue increases and growing net income over the years and has regained its key moving averages. Looks like it is set to test its all-time high at 107.99 and hence the stock seems to be actionable at current levels (suggest the normal stop loss of 7-8%)

ANF

Abercrombie & Fitch is a small cap Apparel Retailers. Although stock showed tremendous growth in the first half of 2024, and for the last 3 months it has been consolidating before making a jump of 7% on Friday. Its Q3 results are due on Tuesday and given the price action and good expectations from Street (a 27% growth in EPS over a year), we expect it to move towards its prior highs around 197. Caution: Earnings period could be volatile and any subpar future guidance could easily push the stock downwards. Suggest a Stop loss around 134.5 being the 200-day EMA line.

ALAB

Astera Labs is a 2024 IPO but seems to be another AI chip stock leader. The firm has shown huge revenue growth during the last year and has leapt beyond 100 (IPO price: 36) in a short period of time. A small position (50% at max) could be taken at current prices by aggressive investors who want to ride on this AI player. Caution: IPOs have normally a much bigger range and hence higher risk and larger stop losses are suggested. Sharp pullbacks are frequent and hence proper risk management strategies should be in place.

Stocks Picked earlier:

AVGO:

Broadcom has become a laggard in the last two weeks, nevertheless the stock seems to be trading in a tight range, and an entry could be made by aggressive investors (suggest a 50% position). Nevertheless, the current weakness could be another chance for aggressive investors to make an entry into this solid performer with a stop loss beneath 150. Broadcom is influenced by Nvidia price action and any bounce back in Nvidia will also support a move upwards for this large cap.

CMG:

CMG finally cleared its 4 months consolidation and broke out. The stock is still actionable at current prices with a target to clear its previous high of 69.26 while maintaining a stop loss around 55.67.

VRT:

VRT gained 16% last week after finding support at its 20-day EMA (119). It is in a strong uptrend and currently seem extended. Let’s keep it in the watchlist for a better entry in the range of 118-125.

TSM:

Due to the proposed Trump Tarriff on China based products, it is suggested to wait for the new administration to see the impact of future policies on Taiwanese semiconductor. It could further dip below at which a fresh evaluation will be required.

Loar:

We mentioned last week that an aggressive entry could have been made. To our expectations, the stock bounced back with a huge gain of 16.76% last week. Its stock is likely to test the 100 level, otherwise wait for a pullback to the 50-day EMA (80.81) for another entry. Beware that it is a volatile stock and in case of a broader market sell-off, a stop loss could be triggered.

CAVA:

Watch CAVA to pull back to its rising 20-day EMA line (92.79 now) where it is likely to find support again. Its stock is in an uptrend but seem extended at current prices.

GE:

We mentioned GE last week again and it added 2.39% confirming our positive bias. It is being accumulated by institutions and has cleared its 50-day EMA line now. Analysts are also expecting it to generate 32% earnings growth in 2024. The stock is still actionable targeting a move above 194.80.

HD

Mentioned last week, The Home Depot gained 2.90% and is trying to break out from a cup with handle. Its stock is still in a buy range with a tight stop loss just below the previous week’s low at 381. Long-term is uptrend is in place for this large cap stock.

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