The Chopfest Intensifies

October 4, 2020

Weekly Market Outlook

By Keith Schneider


If you were thinking things could not get more bizarre (like myself) heading into the presidential election think again. Considering President Trump and several members of the Senate have been infected with the Virus, virtually all assumptions about everything and anything are up for grabs. One thing that is a certainty is that volatility will persist.

 

This week’s highlights are:

  • Risk gauges remained positive despite Friday’s swoon
  • Market Phases on key benchmarks are giving a mixed message with both the SPY and QQQ retreating under 50 DMA on Friday while lagging (DIA & IWM) Indexes closed above them
  • Small Caps once again are trying to mount an attack to regain lagging returns for over a decade
  • Volume patterns also giving a mixed confused message
  • Sector Rotation is acting in a schizoid manner with constantly shifting leadership, this week retail and homebuilders led while Semis closed down 3% on Friday but up for the week
  • Fossil Fuels (XLE, UNG, USO) closed down -2.9% for the week while Solar and Clean energy ran up over 15%, with the yearly data showing an even more dramatic divergence
  • Market Internals improved
  • Bonds look to be topping out with a classic technical pattern
  • Regional Banks performed well, highlighting the possibility that the 30-year run of lower bond yields is ending
  • Weekly currency charts show the Chinese Yuan leading and the Euro holding the 200-week moving averages


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