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Tech Talk for Monday November 30th 2020

The Bottom Line

Most major equity indices around the world were mixed last week. Greatest influences remain growing evidence of a second wave of the coronavirus (negative) and possible approval of a vaccine (positive)

Observations

The Dow Jones Industrial Average and S&P 500 Index are following their historic trend after a U.S. Presidential Election. Indeed, the strongest 12 week period during the four year U.S. Presidential Cycle has occurred from U.S. Presidential Election Day to Inauguration Day on January 20th.

Results of the recent U.S. President and Congressional elections suggest that history by U.S. equity indices between Election Day and Inauguration Day is repeating. Biden became President, control of the Senate remained Republican with a smaller majority and control of the House of Representatives remained Democrat with a smaller majority. Net result is political gridlock for the next two years, a scenario that historically has been mildly bullish for U.S. equity markets.

A caveat to this observation! The run off Georgian senate elections for two seats on January 5th could have a significant impact on U.S. equity prices. After recent elections the Republicans controlled 50 seats and the Democrats controlled 48 seats. Both Georgian seats previously were held by Republicans. However, recent polls suggest that the battle between the Republican and Democrat candidates is extremely tight with the Democrats leading in one of the two seats. If Democrats win both seats, the Republicans will control 50 seats, the Democrats will control 50 seats and Vice President Kamala Harris will have the power to break voting ties in the Senate. Effectively, the Democrats will gain control over the Senate and will be able to pursue a “progressive” agenda including higher personal and corporate taxes, higher regulation and higher government control over the economy. U.S. equity markets will respond accordingly to the downside. Meanwhile, look for higher than average volatility in U.S. equity markets between now and January 5th as various polls on the Georgian senate seats are released. The proverbial “Santa Claus rally” from mid-December to the first week in January may not happen this year.

Medium term technical indicator for U.S. equity markets (e.g. Percent of S&P 500 stocks trading above their 50 day moving average) moved slightly higher last week. It remained extremely intermediate overbought. See Barometer chart at the end of this report.

Medium term technical indicator for Canadian equity markets moved slightly higher last week. It remained intermediate overbought. See Barometer chart at the end of this report.

Short term short term momentum indicators for U.S. markets/commodities/sectors (20 day moving averages, short term momentum indicators) moved slightly higher last week.

Short term momentum indicators for Canadian markets/sectors remained unchanged at elevated levels last week

Information on projected quarterly sales and earnings by S&P 500 companies will resume next week

Economic News This Week

OPEC meets on Tuesday to discuss production quotas.

September Canadian GDP to be released at 8:30 AM EST on Tuesday is expected to increase 0.9% versus a gain of 1.2% in August.

October Construction Spending to be released at10:00 AM EST on Tuesday is expected to increase 0.8% versus a gain of 0.3% in September.

November Manufacturing ISM to be released at 10:00 AM EST on Tuesday is expected to slip to 57.5 from 59.3 in October.

November ADP Private Employment Report to be released at 8:15 AM EST on Wednesday is expected to increase to 420,000 from 365,000 in October.

Beige Book is released at 2:00 PM EST on Wednesday.

Weekly Jobless Claims to be released at 8:30 AM EST on Thursday are expected to slip to 770,000 from 778,000 last week.

November Non-manufacturing ISM to be released at 10:00 AM EST on Thursday is expected to slip to 56.0 from 56.6 in October.

U.S. November Non-farm Payrolls to be released at 8:30 AM EST on Friday are expected to drop to 500,000 from 638,000 in October. November Unemployment Rate is expected to slip to 6.7% from 6.9% in October. November Hourly Earnings are expected to increase 0.1% versus a gain of 0.1% in October.

U.S. October Trade Deficit to be released at 8:30 AM EST on Friday is expected to increase to $64.70 billion from $63.90 billion in September.

Canadian November Employment Report to be released at 8:30 AM EST on Friday is expected to show a gain of 100,000 versus an increase of 83,600 in October. November Unemployment Rate is expected to slip to 8.8% from 8.9% in October.

Canadian October Trade Deficit to be released at 8:30 AM EST on Friday is expected to drop to $2.60 billion from $3.25 billion in September.

U.S. October Factory Orders to be released at 10:00 AM EST on Friday are expected to increase 0.9% versus a gain of 1.1% in September.

 

Earnings News This Week

Focus is on fiscal fourth quarter reports to be released by Canada’s largest banks

 

Trader’s Corner

Equity Indices and Related ETFs

Daily Seasonal/Technical Equity Trends for November 27th 2020

Green: Green: Increase from previous day

Red: Decrease from previous day


Commodities

Daily Seasonal/Technical Commodities Trends for November 27th 2020

Green: Increase from previous day

Red: Decrease from previous day

 

Sectors

Daily Seasonal/Technical Sector Trends for November 27th 2020

Green: Increase from previous day

Red: Decrease from previous day

 

Technical Scores

Calculated as follows:

Intermediate Uptrend based on at least 20 trading days: Score 2

          (Higher highs and higher lows)

Intermediate Neutral trend: Score 0

          (Not up or down)

Intermediate Downtrend: Score -2

          (Lower highs and lower lows)

 

Outperformance relative to the S&P 500 Index: Score: 2

Neutral Performance relative to the S&P 500 Index: 0

Underperformance relative to the S&P 500 Index: Score –2

Above 20 day moving average: Score 1

At 20 day moving average: Score: 0

Below 20 day moving average: –1

Up trending momentum indicators (Daily Stochastics, RSI and MACD): 1

Mixed momentum indicators: 0

Down trending momentum indicators: –1

Technical scores range from -6 to +6. Technical buy signals based on the above guidelines start when a security advances to at least 0.0, but preferably 2.0 or higher. Technical sell/short signals start when a security descends to 0, but preferably -2.0 or lower.

Long positions require maintaining a technical score of -2.0 or higher. Conversely, a short position requires maintaining a technical score of +2.0 or lower

 

Changes Last Week

 

Technical Notes for Friday November 27th

U.S. Dollar ETN (UUP) moved below $24.80 extending an intermediate downtrend. The U.S. Dollar Index briefly moved below at 91.75 to a 30 month low.

Costco (COST), an S&P 100 stock moved above $389.50 to an all-time high extending an intermediate uptrend.

BMO Emerging Markets ETF (ZEM) moved above$23.48 to an all-time high extending an intermediate uptrend.

MercadoLibre (MELI), a NASDAQ 100 stock moved above $1,490.67 to an all-time high extending an intermediate uptrend.

 

Paying it Forward

We often receive comments from loyal readers expressing their gratitude for the services offered by TechTalk blog website. Once again this year, an opportunity is available to “Pay It Forward” for valued daily free investment services offered in this report by donating to a worthy charity. Tech Talk’s favourite charity, Wellspring, is unique providing free non-medical services including .. information on diet and exercise as well as counselling at 12 locations across Canada .. for people diagnosed with cancer. Jan and Don Vialoux (cancer survivor) are actively involved in the organization.

Wellspring adjusted to a new reality last spring when COVID 19 first appeared. In-house programs were cancelled, but cancer did not stop. Programs were changed temporarily from in-house services to on-line services. More information on services is available at https://wellspring.ca/online-programs/

Wellspring’s biggest charity event each year is its “Light Up Wellspring” where individuals and companies make donations in order to “buy lights” to light up facilities for the Christmas season. This year, lighting up facilities is virtual. You can sponsor a bulb, strand of lights, wreath or tree.

This year, “Light Up Wellspring” has changed to reflect new circumstances. Because physical centres are closed, Wellspring has created signs that you can proudly display on your lawn or in your window to show your support during this holiday season. Donations of $100 (String of Lights) and greater will receive a sign. Wellspring is a registered charity. Tax receipts are issued for value received.

Following is a link for donations:

https://41742.thankyou4caring.org/pages/lightup

 

S&P 500 Momentum Barometer

The Barometer added 1.80 on Friday and 2.60 last week to 82.16. It remained above 80.00 and remained extremely overbought.

 

TSX Momentum Barometer

The Barometer added 2.87 on Friday and 5.61 last week to 73.83. It remained intermediate overbought.

 

Disclaimer: Seasonality and technical ratings offered in this report and at

www.equityclock.com are for information only. They should not be considered as advice to purchase or to sell mentioned securities. Data offered in this report is believed to be accurate, but is not guaranteed

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