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I trust you all had a wonderful Thanksgiving holiday. Many years of international business with extended time overseas taught me that we in the United States are truly fortunate. It is still the best country and the best economy in the world and most people in other countries would gladly trade places with us.

I’m actually writing this a couple of days early because of travel commitments in the latter part of the week. So if my market observations seem a day or two behind, that is the reason.

This week started off badly with major indices dropping sharply. The supposed catalyst was a poor holiday sales report from Wal-Mart. A drop in Wal-Mart sales does not surprise me. I hate shopping at Wal-Mart and will go almost anywhere else first to get what I need. The aisles are too crowded and the lines are too long. The convenience of being able to get almost anything one needs in one location is neutralized by the painful experience. Holiday shopping at Wal-Mart reminds me of the chariot race scene in the movie Ben Hur. I will gladly pay a little more somewhere else to avoid the unpleasant Wal-Mart experience. Many of my friends and neighbors express similar feelings and frustrations.

So I am not overly concerned by a slight slump in sales by the world’s largest retailer. I suspect that decline will be offset by higher sales numbers at other stores and by rising online sales. Based on early reports, that appears to be what is occurring.

Below is a chart of the Nasdaq. Monday’s sharp decline looks similar to the steep drop we saw at the end of October. The green line is a trend line showing the bottom of the current channel. Notice that the decline this week found support at that mark. The blue line marks the resistance level that the index finally broke through in November. That has now become a support level. So there is converging support for the Nasdaq at about 2370. It would be surprising to see the index break below that level.

The gold line is a 50-day moving average. During this rally that began in mid-summer, corrections have stayed well above that line. That is unusual and is one sign of a powerful bull trend. The bottom portion of the chart shows a moving average convergence divergence (MACD) and it is showing that market momentum remains strongly positive.

While it is certainly painful to watch the Nasdaq give back a big chunk of its November gains, for now this pullback appears completely normal. The time to be concerned would be if it breaks below that 50-day MA and that appears unlikely.
F.S.