Stocks Up Two Days In A Row, Optimism Grows For More Gains To Come

Stocks closed mostly higher on Friday for the second day in a row, but lower for the week.

But I was very happy with last week's price action as it finally cleaned up those nagging gaps left on the charts dating all the way back to 10/30.

As I was saying all week last week, common chart gaps act as magnets, preventing the market from getting too far ahead of itself before it has to backtrack and fill those in. Because of this, plenty of technicians are reluctant to build new positions until those gaps are closed. But once they are, stocks typically take off.

And that's exactly what happened on Thursday and Friday of last week. The gaps on the Dow, S&P, Nasdaq, and Russell 2000 were finally filled in, and stocks almost immediately rallied right after. The Nasdaq and Russell both gained more than 1% after closing their gaps, while the S&P gained 1.89%, and the Dow 2.03%.

And I'm expecting more gains this week.

The market also was buoyed by the parade of solid economic reports last week. And that too should continue this week.

It was also helpful to hear the President say he might not impose additional tariffs on China. While some think the softer tone might just be a negotiating tactic as the U.S. and China look to resume trade talks at the G20 summit in two weeks. Any sign of progress between the two largest economies in the world is being cheered by the market.

Add in a fantastic economy, and the fact that November and December are two of the best months in a row for the market, and things are looking good.

Should be a profitable week in spite of a shortened holiday (Thanksgiving) trading week.

See you tomorrow,

Kevin Matras

Executive Vice President, Zacks Investment Research

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