Weekly Wrap-Up: Dow Rally Pauses Ahead of Holiday Weekend

While the Dow Jones Industrial Average (DJIA) started the week with the 20,000 mark in sight, the rally ran out of gas

Dec 23, 2016 at 12:59 PM
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This week kicked off with expectations running high for the Dow Jones Industrial Average (DJIA) to make a push for the round 20,000 level. Monday, things seemed to be off to a strong start, as Federal Reserve Chair Janet Yellen gave an upbeat outlook on the U.S. economy, calling the current job market the strongest "in nearly a decade." The DJIA came within 13 points of tapping the 20,000 mark on Tuesday, settling for a record intraday high of 19,987.63. Since then, the large-cap index has pulled back slightly, but even if the 20K level remains out of reach for now, the Dow is still on pace for its longest weekly win streak since 2014.

President-elect Donald Trump made a few ripples this week, adding to his list of administration appointees, including his campaign manager Kellyanne Conway, who will become counselor to the president. The latest "Trump tweet" drama regarding nuclear weapons sent this uranium miner soaring Thursday, while the president-elect's ongoing criticism of jet pricing continues to weigh on Lockheed Martin Corporation (NYSE:LMT). Meanwhile, one trader placed a seven-figure options bet, hoping for Treasury bonds to pop should the broad market "Trump rally" burn out.

Walt Disney Co (NYSE:DIS) opened the week on a high note after the latest "Star Wars" installment brought in $155 million in its opening weekend at the box office. As was the case last year, the media giant could benefit from related merchandise sales this holiday season. And speaking of stocks depending on strong holiday sales, these two toymakers saw options volume pop ahead of Christmas.

However, we also discussed why we're expecting triple-barreled resistance to send Mattel, Inc. (NASDAQ:MAT) sliding lower. That's not the only Schaeffer's trade we highlighted this week, either. We also took a closer look at Deutsche Bank AG (NYSE:DB), and why we're betting on a rally. Today, news from the Department of Justice has the financial stock on the rise.

Facebook Inc (NASDAQ:FB) found itself in the headlines after the European Union (EU) accused the social media giant of providing misleading information in its WhatsApp takeover. Meanwhile, sector peer Twitter Inc (NYSE:TWTR) slumped on news two more executives hit the bricks. And though the stock is managing to stay above water today, an unusual rush of put players seem to be targeting TWTR. Apple Inc. (NASDAQ:APPL) largely stayed out of the news this week, but the company stepped into the spotlight on Wednesday, when Nokia Corp (ADR) (NYSE:NOK) announced it is suing the tech giant for patent infringement. AAPL and TWTR also landed on our list of stocks to see the highest weekly options volume over the past 10 sessions. Speaking of internet stocks, we conducted a trade postmortem to outline how Alibaba Group Holding ltd (NYSE:BABA) just turned out a profit of more than 90% for Schaeffer's Leverage service subscribers.

Rite Aid Corporation (NYSE:RAD) announced it would sell 865 stores to Fred's, Inc. (NASDAQ:FRED) -- sending the latter up more than 92% -- to satisfy antitrust requirements in its merger with Walgreen Boots Alliance Inc (NASDAQ:WBA). Also on the M&A front, unconfirmed talk gave GoPro Inc (NASDAQ:GPRO) a lift on Thursday, and sent a rare batch of call players rushing to the equity's options pits.

And shifting focus to technical analysis, these three mining firms appeared ready to make a move near key technical levels. We also took a look at how a Fibonacci level could be spelling trouble for Fortinet Inc (NASDAQ:FTNT).

On the sentiment side, Schaeffer's Senior V.P. of Research Todd Salamone began the week by exploring the sentiment signal suggesting stocks could go flat, as investor optimism continues to soar. We also explored why this extreme bullish skew could be a bearish indicator for the S&P 500 Index (SPX) in the weeks ahead. Plus, despite the Dow's historic weekly win streak, the blue-chip barometer has been trading in an unusually tight range this week -- a signal that may mean the run to 20,000 could take some time yet. Looking to some individual stocks, Schaeffer's Senior Quantitative Analyst Rocky White examined how stocks tend to perform after being added to or removed from the Nasdaq-100 (NDX), and named 10 names to watch over the next year.

For now, it seems the 20,000 level will remain out of reach for the Dow, which is set to finish the week on a 0.3% gain. The broader SPX and the tech-heavy Nasdaq Composite (COMP) have lagged slightly, but are still on track to finish the week higher, tacking on 0.1% and 0.2%, respectively. Next week will be a shortened week of trading, with the markets closed Monday following the Christmas holiday. The economic calendar is in for a quiet week, while the earnings schedule is completely bare. We took a look at 30 stocks to avoid the week between Christmas and New Year's, and 30 more that could be set to outperform -- including these two retail stocks.

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