The Quant View: Anticipating Black Friday

I rather expected the market to be somewhat slow this week, waiting to see what would happen on Black Friday (traditionally initiating the period when retailers go from posting a loss to turning a profit). Instead, the market rose rapidly this morning, up nearly 2% in the first couple of hours. It later tailed off a bit but still closed as a very good day.

Of course, the dollar continues to sink, and I suppose that is the main impetus for the market's buoyancy, along with the fact that existing housing sales were up more than expected. It does seem to me, however, that the worse-than-expected new housing starts on Friday would trump to some extent existing housing sales report today. Jobless claims were a little better than expected last week but still over 500,000 and that certainly can't be considered good. 

Last Monday, the market was up quite sharply, up a tad on Tuesday-in fact, reaching a new 52-week high, with the S&P 500 topping out at 1113-and then gave it all back over the next three days to end the week slightly down.  Indeed, Small-cap Value, which has been taking it on the chin for a few weeks, was the only positive style/cap last week, up almost 0.2%, while Mid-caps were the worst, down 1.27%.

Sectors. From a sector perspective, Materials led the way, up 1.8%, fueled once again by the weakening dollar. Healthcare rose a robust 0.84% and Consumer Staples was up 0.45%, both sectors following quite closely the Sabrient forecasted sectors performance. Technology was at the bottom, losing 1.3% while Consumer Discretionary and Energy both lost a little over 1%.

It is very difficult to draw much of a conclusion from last week's market, especially in light of the forthcoming Thanksgiving holiday followed by the important retail sales day on Friday. There were positive retail reports last week, but it certainly is not clear that those will influence a positive Black Friday.

Looking Forward.  Sabrient's forward-looking SectorCast model, which is based on fundamentals and has a Growth-at-a-Reasonable-Price (GARP) bent, continues to take a conservative approach to the current market by favoring Telecom, Healthcare, Consumer Staples, and Utilities. Evidently, this highly predictive model views the market as somewhat extended. But as we all know, the market can continue to get a lot more extended.

So we will continue to maintain a market neutral outlook, looking for bargains where available, taking profits on fully valued companies and hedging where we can. In other words, stick with the uptrend, but be prepared for sudden corrections.

Stocks ideas for this week are below the tables.

Style/Cap Overview

Current Sector Performance

Best & Worst Industries

The Sabrient SectorCast.   

4 Stocks Ideas for this Market

This week, I ran our proprietary MyStockFinder stock search tool (http://MyStockFinder.com) using the Growth at a Reasonable Price (GARP) pre-set search. However, I also excluded micro-caps, and I slightly up-weighted Momentum, Long-Term Technicals, and Group Strength. Here are some intriguing stock ideas to consider:

TELUS Corp (NYSE: TU) - Telecom

CareFusion (NYSE: CFN) - Healthcare

Kellogg (NYSE: K) - Consumer Staples

Jinpan International (Nasdaq: JST) - Industrials