THANKSIVING WEEK IS USUALLY GOOD FOR THE MARKET -- SO IS THE MONTH OF DECEMBER -- THAT'S ESPECIALLY TRUE OF SMALLER STOCKS WHICH ARE TURNING UP -- CONSUMER DISCRETIONARY SPDR NEARS RECORD -- ALEXION AND AMGEN LEAD HEALTHCARE SECTOR

THANKSGIVING TREAT ... Stocks are approaching the Thanksgiving holiday in an optimistic mood. That's not unusual. According to the Stock Trader's Almanac, the Wednesday before and the Friday after Thanksgiving are up days most of the time. Following that, stocks enter December which is usually the strongest month of the year. And stocks are in a stronger technical condition. Chart 1 shows the S&P 500 Large Cap Index ($SPX) in an uptrend. Yesterday's upside reversal day kept it above its 200-day moving average. Its daily MACD lines are also close to turning positive. Small caps are starting to catch up. Chart 2 shows the S&P 600 Small Cap Index ($SML) trading back over its 200-day moving average. It's now in position to challenge its November intra-day high at 708. Its daily MACD lines (below chart) are also turning positive. The SML/SPX ratio (top of Chart 2) is also turning up. Seasonally, that makes sense as well. According to the Stock Trader's Almanac, small caps start showing relative strength during December in anticipation of the traditional "January Effect" (when small caps start doing better than large caps).

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Chart 1

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Chart 2

CONSUMER DISCRETIONARY SPDR NEARS RECORD... Another positive sign for the market is upside leadership by cyclical stocks. Chart 3 shows the Consumer Discretionary SPDR (XLY) nearing a test of its November high. An upside breakout would put it at a new record. Its relative strength ratio (top of chart) is already at a new high. It's being led higher by toys, footwear, autos, and an array of retailers. Another supporting factor is the fact that nearly two-thirds of company earnings in the XLY come from the domestic economy. That means that they get more bang from a stronger U.S. economy, and less drag from weaker foreign markets. That's especially true with a rising dollar which hurts earnings of large multinational stocks that derive most of their earnings from foreign sales. [The same is true of smaller stocks which have less foreign exposure].

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Chart 3

BIOTECHS CONTINUE TO BOOST HEALTHCARE ... Healthcare stocks are starting to show more signs of recovery. Chart 4 shows the Health Care Sector SPDR (XLV) nearing a test of its 200-day moving average. A decisive close over 73 would also put the XLV at a three-month high. Its relative strength ratio (above chart) also appears to have bottomed. Two of today's leaders are Allergan and Pfizer following their recent merger. Other leaders come from the biotech and pharmaceutical groups. Chart 5 shows Alexion Pharmaceuticals (ALXN) breaking out to a three-month high. Its relative strength ratio is also rising. I recently showed Amgen (AMGN) moving above its 200-day average. Chart 6 shows that large biotech bellwether also on the verge of a three-month high. Its relative strength ratio is already there.

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Chart 4

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Chart 5

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Chart 6

FOOD STOCKS TAKE OFF... It seems only appropriate that food stocks are taking off during Thanksgiving week. And they're doing it in a big way. Chart 7 shows Hormel Food (HRL) soaring to a record high. Chart 8 shows Campbell Soup (CPB) pushing through its autumn high to a new record. Chart 9 shows Tyson Foods (TSN) doing so in more impressive fashion. Strong earnings are being offered as the reason all three stocks are surging, combined with lower costs. I can't help but wonder if part of those lower costs are weak agricultural markets like corn and soybeans which are used to feed animals. That certainly has lowered the costs of feeding and raising those animals.

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Chart 7

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Chart 8

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Chart 9

FALLING CORN PRICE BOOSTS TYSON FOODS... Chart 10 compares the trend of Tyson Foods (black bars) to the price of corn (solid matter) since 2010. They appear to trend in opposite directions. An uptrend in corn between 2010 and 2012 kept Tyson in a flat trading range. A collapse in the price of corn in mid-2012 coincided with a major upturn in Tyson. They've trended in opposite directions since then. Another drop in corn starting this July may have contributed to the upturn in Tyson the following month. Corn is the main food fed to chickens which Tyson is in the business of producing. Lower feed costs produce higher profits. I imagine the same is true of other food stocks that use grains in their products or to feed animals they produce. I'm not sure what turkeys eat. But chances are their feed costs are lower as well. That may not help the turkeys much this month, but is good for the bottom line of food producers. All the turkeys want is to be alive on Friday.

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Chart 10

HAPPY THANKSGIVING ...