Pre-Election Jitters

November 1, 2020

Weekly Market Outlook

By James Kimball


blankEquity Indexes retesting the September Low amid growing volatility just ahead of a potentially contentious presidential election next week. 89% of stocks traded below their 10 DMA average on Friday. The market is still looking for another major round of stimulus/relief, but that has been delayed until at least after the election. Small and mid-caps have been holding up the best amid the recent sell-off with a slight shift from growth into value stocks. KRE was the lone member of the modern family to buck the down move on Friday.

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The highlights of this week’s market action are the following:

  • Risk gauges are negative
  • DOW oversold – running weak – could bounce off 200 DMA
  • Volume patterns show hardly any accumulation days as markets sold off. Markets still in distribution condition.
  • Risk-off safety play like Utilities down less than overall market
  • Long volatility (risk-off play) up almost 20 percent
  • Oil & Gas leading down movement – down -10% on average – Oil and Gas Exploration hit worst
  • McClellan oversold – but not at extreme levels from March 2020
  • Next critical area in the SPY under 320 and 312
  • 89% of Stocks under 10 DMA
  • US Bonds (TLT) failed at 200 DMA – major issues with potential top and head and shoulders pattern continuing to play out.
  • Small and Mid-caps are holding up better than big and mega cap stocks.
  • Value and Growth both look bad
  • KRE (Regional Banks) closed up on Friday – 5 of 6 modern family sectors dropped – KRE has been weak but strong counter-move this week
  • From the mid-May low in the EEM/SPY ratio, EEM up approximately 20% vs SPY up around 10%.


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