ISM uses five components, each weighted evenly at 20% — new orders, production, employment, supplier deliveries and inventories.
IHS uses a weighted average that gives greater importance to new orders (30%), output (25%) and employment (20%), and lower weighting to suppliers’ delivery times (15%) and stocks of purchases (10%).
-- Dion Rabouin, Axios
I don't know that comparing ISM to IHS ("Markit") is all that useful. Yes, Markit appears to lead ISM, recently (perhaps now, and certainly during May and June of 2018), but the S&P 500 has shown itself to be little-affected in the near term, by the transition in trend, in either ISM or Markit.
I track manufacturing ISM against the S&P 500 for a "big macro picture" data point, but as you can see from this monthly chart, the two do not move in lock-step. That being said, I like to be aggressive in the S&P 500 when the manufacturing ISM is rising, and not-so-aggressive when it is falling. If Markit is truly leading the ISM data, we should see a corresponding rise in the ISM, for December (which will be released in January). Does that seem likely, though? It does not to me, but let's let the data do the talking.
The month of November began with a bang, as the market gapped-up to open at 3,050.7 on the first trading day of the month, closing the session at 3,066.9 for a gain of 1% over October’s 3,037.6 close. The S&P 500 continued nearly unabated, to an intraday high of 3,127.6 on 19 November, before pulling-back nearly 1% to close at 3,103.5 on 21 November. The index would proceed to close November at 3,141.0 after hitting 3,154.3 on 27 November. For the month, the S&P 500 gained 3.4% which equaled its 2016 November performance. Quite a month!
Recent history has not been nearly as kind to the S&P 500 in December, as it has been in November. The index gained 1.8% in 2016, 0.9% in 2017 and -9.2% last year. The 10-month moving average currently sits at 2,932.1 or 7% below November’s close, while the 3-month moving average is 2.9% below November’s close at 3,051.8. Both moving averages are rising.
We will get the manufacturing PMI on Monday. The market really wants to see another increase, so anything over October’s 48.3 number is going to be good news. We have not seen two consecutive months of manufacturing PMI increases since May and June of 2018 (and three consecutive increases since 2017!).
We start all over again on Monday, so enjoy your Black Friday and have a fantastic weekend!