Stock Market Outlook for November 4, 2020
The perpetual underperformance of the Canadian stock market continues as energy remains among the factors acting as a drag.
*** Stocks highlighted are for information purposes only and should not be considered as advice to purchase or to sell mentioned securities. As always, the use of technical and fundamental analysis is encouraged in order to fine tune entry and exit points to average seasonal trends.
Stocks Entering Period of Seasonal Strength Today:
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The Markets
Stocks jumped on election Tuesday as investors unwound negative bets enacted at the end of October amidst the uncertainties pertaining to the election and the rising coronavirus case count. The S&P 500 Index gained 1.78%, moving back towards its 50-day moving average, a logical point for investors to pin price to ahead of what remains an uncertain outcome. The intermediate moving average remains in a position of resistance, capping the short-term upside rebound. Long-term support at the 200-day moving average now hovers around 3130. With horizontal support below at 3200 and resistance overhead above 3500, the benchmark is deemed to be in a trading range until broken. Longer-term, investors can take their cue based on the direction of the break.
The TSX Composite has been bouncing around its declining 200-day moving average in recent days and weeks, still unable to regain levels above its February peak. Unlike US benchmarks, which have yet to break below the September low, the TSX is definitively in a trend of lower-lows and lower-highs from its peak in August. The benchmark has much to prove.
Charting the TSX relative to the S&P 500 Index shows that the relative performance has recently broken the lows seen in 1999 when the tech bubble made US benchmarks the place to be. Momentum indicators on the relative chart continue to show characteristics of a bearish trend. Seasonally, the optimal holding period for the Canadian benchmark runs between the middle of November and the middle of February, as gauged by the iShares S&P/TSX 60 Index ETF (XIU). With this optimal period on our doorstep, we feel little enticed to make any significant bets in the Canadian market until evidence materializes that the relative declining trend has concluded.
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Just Released…
Our monthly report for November was just sent out to subscribers, breaking down everything you need to know for the month(s) ahead.
Highlights in this report include:
- Equity market tendencies in the month of November
- Shift of focus on the rising level of coronavirus cases in the US
- Return of strength in the consumer going into the holiday spending season
- A healthy consumer follows a healthy labor market
- The strength in the manufacturing economy
- Our call through the back half of the year
- The impact of the presidential election on the equity market in the year ahead
- The rise of Bitcoin
- The lack of conviction to stocks ahead of the presidential election
- The potential fuel for stocks through the end of the year
- Key metric to track to determine systemic strains
- Is the rising trend of stocks stemming from the market low in March becoming sustainable?
- Time to shift focus to smaller cap stocks
- Bonds prices showing an intermediate declining trend
- The technical status of the S&P 500 Index
- Positioning for the months ahead
- Sector reviews and ratings
- Notable stocks and ETFs entering their period of strength in November
Sentiment on this election Tuesday, as gauged by the put-call ratio, ended slightly bearish at 1.03. The Dark Index, our gauge of institutional sentiment, ticked slightly higher to 41.1%. A level 45% or higher is indicative of buying demand.
Seasonal charts of companies reporting earnings today:
S&P 500 Index
