Phases & Cycles Market Outlook – November 17, 2020
The stock market gave us a good sample of its sensitivity to the discovery of a vaccine for the Covid-19 virus last Monday, as all indices opened up strongly, some at an all-time high, from the Friday close. The news from Pfizer was great for the Bull Market.
The Long-term outlook benefited from Monday’s action as both the S&P 500 Index (SPX) and the Dow Jones Industrials (DJI) reached new all-time highs (even if by a minute amount).
The Mid-term actions. The predicted cycle-low for the end of October brought both the SPX and Toronto (TSX) to important lows. Our most recent Market Comment outlined the market behavior between September and the end-of-October as a horizontal trading-range, as both the SPX and the TSX moved between well-defined bottoms at ±3200 and ±15,500 and equally well recognized tops at ±3600 and ±17,000 (See D to H on the charts overleaf).
Monday’s action (November 9th), generally speaking, did not change the above described market behaviour. However, with the exception of Google, none of the FAANG stocks participated in the action. On the other hand, numerous Industrial stocks in New York, including Caterpillar (CAT), Deere (DE), Dover (DOV), Honeywell (HON), Norfolk (NSC), St. Joe (JOE) and Timken (TKR), as well as others such as Best Buy (BBY), Comcast (CMCSA), General Motors (GM), News Corp. (NWSA), NIKE (NKE), Sony (SNE), Colgate (CL), COSCO (COST) and Walmart (WMT); and Canadian stocks such as Canadian Tire (CTC.A) Canadian National Railway (CNR), Canadian Pacific Railway (CP), First Service (FSV), Linamar (LNR), Magna (MG) and Toromont (TIH), (but not any of the Banks), moved to new yearly highs.
The short-term action looks at the activity on Monday, November 9th.
The SPX closed on Friday (November 6th) at 3509, opened at 3583 (+2.1%) on Monday, reached a high of 3646 (+3.9%) and closed near its daily low of 3551 (+1.2%).
A worse outcome happened to the NASDAQ which closed on Friday at 11,895, opened at 12,047 (+1.3%) on Monday, reached a high of 12,108 (+1.8%) and closed at 11,714, below both its Friday low and its opening price.
A similar outcome occurred in Toronto, which closed on Friday at 16,283 opened at 16,551 (+1.6%) on Monday, reached a high of 16,716 (+2.7%) and closed below 16,476, below its opening price.
Technically speaking it is a negative short-term signal when an index (or stock) opens powerfully but ends near its daily low. This is the reason that the SPX did not reach or exceed its Monday’s high for the rest of the week.
Conclusion: It is likely that, despite the minor new all-time high for the SPX, this trading range will continue, waiting for decisive news about the Election and more news about the potential of the new vaccines. Since the 39-week cycle low has come on time (at the end of October), market action should eventually be more positive, towards the next 39-week cycle high near mid-March.
Finalizing the Election results and obtaining more details from Pfizer and other manufacturers of potential vaccines should help both markets to reach new all-time highs.
PAC-20-198; MKT-501; November 17, 2020
Ron Meisels
Phases & Cycles Inc., 4000 Boul. De Maisonneuve West, Suite 2010, Montreal, QC, H3Z 1J9
Tel.: (514) 393-3653. E-mail: RonMeisels@phases-cycles.com
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