Phases & Cycles Market Outlook – November 26, 2021
September is usually down, it was. October is usually down, it wasn’t. November is usually up, it is flat. What’s going on?
During September the S&P 500 (SPX) declined 4.8%, the NASDAQ (NASD) fell 5.3% and the Dow (DJI) lost 4.2% just as expected. In contrast, during October the SPX gained 6.9%, the NASD 6.9% and the DJI 5.8%, despite the usual negative October. And then, to date in November, which is usually an up-month, the SPX gained a mere 1.9%, the NASD advanced only 1.6%, and the DJI, which was ahead by 1.7% in mid-month, lost it all.
The table below (courtesy of Investors Intelligence and the American Association of Individual Investors) analyses the last three months. At the beginning of September 64.9% and 71.0% of the New York listed stocks were above their respective 10-week and 30-week Moving Averages (MAs), and the Bulls of the AAII (a contrary indicator) were close to 40%. This changed drastically by the end of the month, as the percentage of stocks above their 10wMAs dropped radically, together with the number of AAII bulls. Moving along to the end of October there was a complete reversal in both indicators.
This brings us to November and another drastic drop in the 10wMA statistics, despite the slight gain in the SPX. The last 10 days provided mix statistics: SPX ended with a relatively large gain, yet the numbers of Declining stocks heavily outnumbered the Advancing ones and the Declining Volumes were twice or even three times the Advancing Volumes. For example, a few days ago AT&T (a negatively rated stock) declined 1.17% on 33.6M volume, while Marathon Oil (a positively rated stock) increased 2.15% on just 12.8M volume. Tax selling and portfolio restructuring may likely cause this activity.
In Toronto the index (TSX) fell 3.1% in September, gained 4.8% in October and 2.4% to date in November, showing the same direction but smaller numbers than New York. Tax selling and portfolio restructuring has also commenced here. A good example of such activity was the 0.92% decline in Denison Mines on 6.3M shares vs. a 1.30% gain on Cardinal Energy on 1.1M shares last Wednesday.
OUTLOOK
Look for continued tax selling and portfolio adjustments in December, following a period of 25.2% and 23.6% gains by the SPX and TSX respectively during 2021. The month will also include a Triplewitching Friday which usually ends on a low, and a Santa Claus Rally which starts near the end of the month and will end on January 4th, 2022. In other words, look for a possible 4.5% decline in the SPX to 4550-4500 and a similar decline to 20,500 in Toronto towards midmonth. Using the metaphors of our last Market Comment, not a tragicjam, just a slowdown as one of Santa’s deers crosses the road.
PAC-20-198; MKT-501; November 26 , 2021
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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