Happy Thanksgiving from all of us at TrendLabs.
This has been a special year, and I’m incredibly grateful for all your support. Everything we’re building here is only possible because of you. Thank you.
Quick reminder: Today is a shortened trading session on the New York Stock Exchange (NYSE). The market closes early at 1 pm ET.
So what does that mean for investors?
For me, it simply means we get our Monthly Candlesticks a little earlier than usual — and that’s a win.
Whenever in Doubt, Zoom Out!
There might not be a single human on Earth who loves Monthly Japanese Candlesticks more than I do.
I’ve searched far and wide — even across Tokyo — trying to find someone who appreciates them the way I do.
I don’t think they exist.
Let me tell you this: even if you ignore everything else I ever say, take this one to heart…
Nothing in my entire process is more valuable than reviewing every major monthly Japanese candlestick across the indexes, stocks, and assets all over the world.
Whenever in doubt, zoom out.
And that’s exactly what monthly candlesticks force us to do.
They’re already starting to populate around the world — the U.S. is always last, being furthest west on the map. Crypto won’t print until Sunday night, so those still have a few days left.
Why Japanese Candlesticks and not bars or lines? I use those too. But for understanding monthly closing prices, nothing tells the full story of a period the way a candlestick does.
This will likely be the first month since June where the S&P 500 doesn’t close at a new all-time high. We’ve just printed five straight.
And we’re still only 1% away from a new all-time high on a daily closing basis.
Yet somehow, investors remain bearish. How is that possible?
More Bears Than Bulls
Let me repeat this so it really sinks in: The S&P 500 has closed at new all-time monthly highs for five consecutive months.
It’s sitting just 1% from another one.
The Russell 2000 Index of small-cap stocks is on pace to finish the month at its highest level in history.
And yet — for the third week in a row — there are somehow more bearish individual investors than bulls:
Every Wednesday night at midnight, the American Association of Individual Investors (AAII) sentiment survey updates.
And for three consecutive weeks now, more individuals expect stocks to fall over the next six months than rise.
What are these people so angry — or terrified — about?
Nearly two-thirds of NYSE stocks are currently in uptrends.
Strip out the mega caps and look at the broader equally weighted indexes, and both the S&P 500 and the Dow Jones Industrial Average are up double digits this year… just like last year… and the year before that.
This is a bull market.
Corrections happen — like the one that kicked off in September — but it looks like that’s wrapping up.
And a confirmed breakout in the iShares Russell 2000 ETF (IWM) would seal it:
This index has gone nowhere since 2021. That’s nearly five years of dead money.
Now it’s on track for its highest monthly close ever.
Same with the Russell Microcap Index — the tiniest stocks in the market are also on pace for the best monthly close in their history.
Does that sound like risk aversion?
Or does that sound like risk appetite in a market where individuals are clinging to their bearish outlook?
To me, this looks like the perfect recipe for a year-end rally that carries right into January.
The candles don’t lie. And later today, the monthly charts are about to tell the story — whether the crowd is ready for it or not.
Stay sharp,
JC Parets, CMT
Founder, TrendLabs