State Of The Market In 7 Charts – November 2016 Edition

It feels like we have almost packed a full year’s worth of stock market price action into just the last two weeks. With so many diverging market sectors and overall fluctuations, I thought it would be prudent to do an examination of some key charts.

Taking a closer look at these categories can help frame macro views as well as determine areas of strength and weakness.

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SPDR Dow Jones Industrial Average ETF (NYSEARCA:DIA)

Perhaps the most surprising area of strength has been the rocket ship that is the Dow Jones Industrial Average.  The Dow is often easily overlooked for its concentrated mix of just 30 mega-cap stocks. However, this index (as represented by the exchange-traded fund SPDR Dow Jones Industrial Average ETF (NYSEARCA:DIA)) has now blasted off to all-time highs on the back of the Trump victory into the White House.

It’s worth pointing out that there was a technical breakdown of the trend channel near the start of the month that ultimately proved to be a fake out.  SPDR Dow Jones Industrial Average ETF (NYSEARCA:DIA) is now up over 10% so far this year and leads all major domestic stock indices except for small caps.

iShares Russell 2000 Index (ETF) (NYSEARCA:IWM)

Speaking of small cap stocks, the Russell 2000 Index has finally made it back into all-time high territory. iShares Russell 2000 Index (ETF) (NYSEARCA:IWM) has been proclaimed one of the strongest areas of momentum since the February 2016 lows and continues to show diverging strength from its large-cap peers.

Leadership in the small cap category is often cited as a convincing sign of strength for the bulls.  Although, a move of 10%+ in such a short period may call for a bit of hesitation with respect to putting new money to work here.  I would rather investors who have missed this rally wait for a pull back before they decide to commit fresh capital.

It can be enticing to try and chase recent performance, especially in an area that looks red hot.  However, those feelings of enthusiasm can quickly turn to regret if you commit the cardinal sin of buying near an inflection point. iShares Russell 2000 Index (ETF) (NYSEARCA:IWM) is now up more than 14% so far this year.