LARGE CAP VALUE INDEX HITS NEW HIGH -- EXXON MOBIL PROVIDES A LOT OF VALUE -- NEXT UPSIDE TARGET FOR OIL SERVICE HOLDERS -- INTERNATIONAL PAPER LEAD PAPERS HIGHER -- HAPPY THANKSIVING

TURKEY BOUNCE STILL FAVORS VALUE... The market enjoyed its traditional pre-Thanksgiving bounce. All the major averages ended the day in plus territory with the the S&P 500 closing up nearly 5 points. The hourly bars in Chart 1 show, however, that the S&P 500 is still trading midway between 1168 at its recent low and 1188 at its recent high. Charts 2 and 3, however, show something else going on beneath the surface which I wrote about yesterday. And that has to do with the fact the large cap value stocks continue to do much better than growth stocks. The hourly bars in Chart 2 show the S&P Large Cap Value Index trading back over its November high today. By contrast, the S&P Large Cap Growth Index (Chart 3) is much closer to the bottom of its recent short-term range. Investors are still opting for large cap dividends over growth.

Chart 1

Chart 2

Chart 3

VALUE BET ON ENERGY... Energy has a lot to do with the recent preference for value. Energy has the third highest weighting (10%) in the S&P Large Cap Value Index shown in Chart 2. The biggest individual stock weighting is Exxon Mobil (5%). Its monthly chart shows the huge oil stock hitting a new record high this week after breaking through its 2000 peak a couple of months ago. Chart 5 shows the Energy Select SPDR also having achieved a major bullish breakout during September. So far, there's no sign of that uptrend ending. That helps large cap value stocks in a number of ways. First of all, since Exxon Mobil is the biggest stock, its strength helps the group. Second, rising energy prices diminish future hope for the stock market and the economy. That also favors more defensive value stocks. As I suggested yesterday, it's a safer way to participate in the current market rally. Not only are value stocks rising faster than growth stocks, but they usually drop less if and when the market starts to drop. Either way, you also get the dividends these large cap stocks are paying.

Chart 4

Chart 5

TARGET FOR OIL SERVICE HOLDERS... With the Oil Service Holders (OIH) closing today at a new recovery high, one of our readers asked for the next upside target. And here it is. It's better to use longer-term charts for that purpose. The monthly bars in Chart 6 show the OIH closing near 87, which is the highest level in more than three years. The next major upside target is the early 2001 peak near 98. That's roughly 12% from tonight's close. And, as I've written before, I still consider the Oil Service group to be the best value in the energy patch. In my opinion, the easiest way to participate is with the Oil Service ETF shown below.

Chart 6

INTERNATIONAL PAPER LEADS GROUP HIGHER... Papers are finally joining the uptrend in the basic materials group. The Dow Jones Paper Products Index is on the verge of hitting the highest level in four months. Its relative strength is finally starting to rise as well. The group leader today was international Paper. Chart 8 shows IP moving up to challenge its 200-day moving average and chart resistance 41.5. Given the strength in the materials group, I expect it to break through.

Chart 7

Chart 8

HAPPY THANKSGIVING... From all appearances, it looks like the market is going to end the year in much better shape than it began it. So far, November has lived up to its billing as one of the year's best months. December is usually even better. For that, and a lot of other things, we all have a lot to be thankful for. Have a Happy Thanksgiving.