Weekly Stock Market Analysis: Commentary and Stock Picks - Dec 6

Stocks Rally sifts focus to aggressive sectors …

The market continued to push higher as Dow Jones hit 45,000 for the first time before retreating. S&P 500 also finished higher but real strength returned to the Tech heavy Nasdaq 100 and Nasdaq Composite. The Magnificent seven stocks were hot last week and several broke out last week such as Amazon, Apple, Tesla, and Meta. Russell 2000, the small stocks’ index, however, fell 1.2% for the week as it took a breather from a recent rise and some capital rotation towards the magnificent seven stocks. Companies like Salesforce and Lululemon also exceeded earnings expectations, boosting sentiments in their respective sectors.

The November job reports showed a solid 230,000 new jobs added exceeding expectations while unemployment ticked slightly higher to 4.2% signaling potential cooling in labor markets. The data increased speculation about a Federal Reserve rate cut during its December meeting.

The real winners, however, were cryptocurrencies. Bitcoin briefly exceeded the $100,000 mark, buoyed by favorable comments from President-elect Donald Trump and his pro-crypto SEC leadership pick. Ethereum also gained 6.5%, climbing to $6,800 as digital asset sentiment remained robust. Since the elections, Bitcoin has gained nearly 50%. It will be interesting to see how a pro-crypto administration could further strengthen its upward momentum in 2025 and beyond.

Investors, however, should note that although December is historically a bullish month for markets, the second week of December is not a great week where more profit taking is observed. It does not mean that it will necessarily happen again, but we should remain cautious and should not chase extended stocks in the short term. A noticeable drag on Dow Jones was its Transportation Index, which was down by 4%, which also brought down Dow Jones Index below 45,000. If it continues to lag, then it would make it difficult for Dow and the broader S&P 500 to move forward.

The performance of the different indices is summarized as follows:

Index Friday (12/05) Weekly Monthly YTD 1 Year

S&P 500: +0.25% +0.96% +2.72% +27.68% +33.87%

Dow Jones Ind: -0.28% -0.60% +2.09% +18.45% +23.82%

Nasdaq 100: +0.92% +3.31% +4.05% +28.51% +36.95%

Nasdaq Composite: +0.81% +3.34% +4.62% +32.30% +40.38%

Russell 2000: +0.36% -1.22% +0.72% +20.09% +31.43%

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

Sector Weekly Performance

Discretionary, XLY: +4.72%

Technology, XLK: +3.04%

Communications, XLC: +2.57%

Staples, XLP: -1.01%

Financials, XLF: -1.83%

Healthcare, XLV: -2.12%

Industrials, XLI: -2.38%

Real Estate, XLRE: -2.73%

Materials, XLB: -3.03%

Utilities, XLU: -3.91%

Energy, XLE: -4.72%

The top three S&P 500 sectors are all from the risker asset class, showing the powerful momentum displayed by the magnificent seven stocks.

On the downside, the energy sector continued to lag and fell by 4.72%, followed by a 3.91% drop in utilities and a 3% decline in materials. Real estate, industrials, health care, financials and consumer staples also moved lower on a weekly basis. This pattern shows a shift from defensive sectors to aggressive sectors at least for the time being as investors were willing to take more risks.

Important Events next week:

Data due next week includes the November consumer price index on Wednesday and the November producer price index on Thursday.

Tuesday (12/10): Nonfarm Productivity, Unit Labor Cost

Wednesday (12/11): Core CPI (MoM and YoY), Crude Oil Inventories

Thursday (12/12): Continuing Jobless Claims, PPI (MoM and YoY)

Friday (12/13): Baker Hughes Rig Count

Important Earnings this week:

Majority of companies have already announced their Q3 earnings results. Some which are due in the upcoming week are:

Monday (12/09): Toll Brothers (TOL), Oracle (ORCL)

Tuesday (12/10): Academy Sports (ASO), GameStop (GME) Ollie’s Bargain Outlet (OLLI), AutoZone (AZO)

Wednesday (12/11): Adobe (ADBE)

Thursday (12/12): Costco (COST), Broadcom (AVGO)

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 profits are high.

MSFT:

Microsoft finally got support from the 50-days EMA and gained 4.75% for the week. This was in line with our expectation that Microsoft will come out of the months long consolidation. As such we think it is well poised to move forward and test its previous high of 466.57. Remains our long-term favorite.

NVDA:

Although Nvidia lost 1.81% on Friday but was still up by 3% during the week and a pullback to its 50-days EMA immediately provided a support. As mentioned last week, the weakness short lived and anxious investors once again pushed the stock up. Nvidia is a long-term leader and once again lived to expectations.

The stock is once again actionable at current prices and investors could make an entry or add to the existing position (if any) with a stop loss below the recent low 131.79.

AAPL:

Apple continued its march to new highs (2.32% weekly gains) and remains in our long-term favorite list. Aggressive investors could add to their positions at the current levels with a stop loss below 219 otherwise wait for a pullback to EMA-50 line at 230.

COST:

Costco also continued its march by breaking out to another new high after reporting fiscal Q1 2025 results. Several analysts hiked its price target after a 15% jump in revenue. Although Costco shares have increased by 50% on YTD basis, we think that any pullback to its moving averages around 911-935 will be an opportunity for investors who like this long-term leader and will resurface to capture a good opportunity.

Medium- and Short-Term Picks:

META:

Meta Platforms (META) is forming a flat base that also qualifies as a base-on-base pattern. It remains a favorite in the medium and long term. As mentioned last week, it has provided an alternate entry since it has moved back above 565 with a tight stop loss below 550.

AMZN:

Amazon moved to new highs and gained 9.21% in the week as expected after its customer conference for its cloud business. It stepped up its efforts to offer an AI chip alternative to Nvidia staging the breakout. Its price action suggests further upside as it is riding the upper Bollinger band but now seems a bit extended. Any pullback to close the gap at 215 would likely find buyers who missed this chance. Till then, let us capitalize on the existing move and take some money off once 15-20% profit is obtained.

PLTR:

PLTR recorded another 13.80% weekly gain, it got a higher federal rating for secure computing and formed an alliance with government consultant Booz Allen Hamilton. We think that after a tremendous run, the stock is extended, and investors should wait for a pullback to key moving averages (20 and 50-days moving averages).

As suggested earlier, this is another AI winner and for the time being remains market favorite.

Interesting Stocks for Actions and Watchlist:

Interesting New Picks:

Oracle: Oracle (ORCL) aims to extend its impressive performance streak as it prepares to report earnings on Monday. The stock has consistently delivered double-digit gains following its last three earnings releases, including a remarkable 14% jump after its September report. Year-to-date, Oracle shares have surged over 75%, setting the stage for the company’s strongest trading year since 1999.

The stock is actionable (although earnings always make stock volatile). Any positive guidance will push the stock beyond 200 while any move below 177 will be a sell signal.

Recently Picked Stocks:

PI

PI triggered a sell signal last week with a 14.03% loss and is testing its 200-day EMA line. Aggressive investors could try with a 50% position as the stock is likely to get support at these levels with a stop loss below 129.

For conservative investors, it is recommended to put a hold till a bounce back occurs.

ANET

Mentioned two weeks ago, ANET made another high last week. The breakout seems to continue with a stop loss below 20-day EMA at 95.

ANF

ANF continues to trade in a tight range while gaining 1.11% during the week. It is actionable at current levels with a suggested Stop loss around 136.5 being the 200-day EMA line.

ALAB

Astera Labs made a huge gain of 16.61% and met our expectations set forth in Nov 22 commentary. The stock is at all-time highs and is likely to continue its uptrend but seem extended as it is riding its upper Bollinger band. Hope our readers were able to catch this move around 100, otherwise a pullback is desirable to key moving averages for another entry.

CMG:

Chipotle finally broke out from its consolidation range and gained 6.31% for the week. We have mentioned this stock several times during past weeks and think that it is now close to test previous highs of 69.26. Seems a bit extended at current levels but any pullback to its key moving averages (EMA 50 at 55.44) could provide another suitable entry.

VRT:

After gaining 16% two weeks ago, the stock is consolidating at current levels and provides an opportunity for re-entry with a stop loss at 118.61. It is in a strong uptrend and is likely to continue the same in the near future.

LOAR:

After a huge gain of 16.67% two weeks ago, the stock is consolidating at current levels. Although it lost 2.40% last week but this could be an opportunity for a late entry into this IPO in the Industrial/Aerospace area.

As mentioned last week, an aggressive entry could be made as the stock which is likely to test the 100 level, otherwise wait for a pullback to the key moving averages (82-87)

Beware that it is a volatile stock and in case of a broader market sell-off, a stop loss could be triggered.

GE:

Although GE, along with other Industrial players, did not perform well last week (3.61% loss), we think that the stock is still actionable, targeting a move above 194.80 while a stop loss below 155.

HD

Home Depot is enjoying its near all-time high as stock gained another +0.52% in the week. Now it seems a bit extended and let the moving averages catch-up with the price for another entry.

AVGO:

The overall comeback in the Tech sector also led Broadcom to make a sharp move upwards (10.77% weekly gain). Aggressive investors could add to their existing positions otherwise another pullback to key moving averages (169.40 – 169.68) should be targeted with a stop loss below 150.

CAVA:

Cava gained another 7.08% and accordingly it is actionable at current levels with a stop loss below 135 while targeting the last high at 172.43. We think that this mediterranean casual restaurant chain is likely to advance and test its previous highs.

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