Market Breadth Improves, November Finishes Positive

Market breadth improved for the first time in 4 weeks as equities marched higher last week. Despite a 4% drop during the month of November, equities finished the month

strong, helping November end with a positive return. Last week was the first time volatility, as measured by the VIX Index, dropped for four consecutive days and breadth improved each day last week. The Zweig Breadth Thrust, which hit its low bar of 0.4 or less on November 20th, is now just 0.03 points away from triggering. When the ZBT triggers, the S&P 500 Index is higher 1 month later at least 95% of the time, since World War II.

Last week, the PPI number for September was finally released. August's reading of +2.6% was revised higher to +2.7%, while the September figure stayed flat at +2.7%.

We hope to see the release of September's PCE Price Index this week. The previous reading was +2.7%, so it will be interesting to see how much the September figure rises and how that affects the probability of a December rate cut by the Fed. That probability has risen to 75% after plummeting earlier in November to only a 30% probability of a rate cut on December 10th.

Growth has remained steady, while the labor market has shown more strength than expected. Redbook Sales remain well above average at 5.9% on a year-over-year basis.

Black Friday sales in the U.S., according to Adobe Analytics, came in at $11.8 billion, which is up 9.1% from last year. The Saturday and Sunday totals are expected to be up close to 4% versus last year. So far, Jobless Claims are down from this same period in November, so the consumer has reason to spend. December is historically the 2nd strongest month of the year, so if we get a rate cut next week, that would likely be bullish for equities.

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