Equity Clock

Stock Market Outlook for November 6, 2020

Payroll Report Friday: Non-seasonally adjusted, Nonfarm Payrolls typically increase by 0.6%, on average, in the month of October, which would imply the addition of 851,000 jobs.

 

 

 

*** 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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Plaza Retail REIT (TSE:PLZ/UN.TO) Seasonal Chart

The J. M. Smucker Co. (NYSE:SJM) Seasonal Chart

Badger Meter, Inc. (NYSE:BMI) Seasonal Chart

Capstead Mortgage Corp. (NYSE:CMO) Seasonal Chart

Dynex Capital, Inc. (NYSE:DX) Seasonal Chart

United Corp.s Ltd. (TSE:UNC.TO) Seasonal Chart

SPDR S&P 500 Value ETF (NYSE:SPYV) Seasonal Chart

Health Care Select Sector SPDR Fund (NYSE:XLV) Seasonal Chart

 

Upcoming Event:

Today (November 6th) we will be presenting at the Money Show’s Virtual Expo on the topic of “Using Seasonality to Invest During a Pandemic.”  Registration is free via the following link.  See you at 2pm ET!

 

 

The Markets

Stocks surged for the fourth straight session on Thursday as the unwind of negative bets that preceded Tuesday’s election continues.  The S&P 500 Index gained 1.95%, achieving the fourth day of gains exceeding 1%.  This is the first time that this has occurred since October of 1982!  So far this week, the large-cap benchmark is higher by 7.35%, which, if confirm by the close on Friday, would be the strongest weekly returns since April and the ninth best weekly return in the past two decades.  As we noted prior to the election, investors were highly cautious of the event, leading to investors holding portfolio hedges to mitigate equity volatility.  Credit balances in margin accounts, often indicative of short positions, were elevated into the event, as was the volatility index, indicative of the amount that investors were paying to protect positions.  But now that the event has past, even though the winner of the election has not been confirmed, volatility has collapsed and stocks have surged as the cautious bets are reversed.  This has allowed the large-cap benchmark to get within two percent of the all-time high charted at the start of September.  But as with our previous comments, until resistance at the previous peak or support at 3200 is definitively broken, a trading range is implied.  We should know soon enough whether the previous cap at the all-time high is a level of significance that investors are inclined to sell into.  MACD has just triggered a new buy signal with Thursday’s bullish cross above its signal line and the relative strength index has rebounded back to bullish territory.

On schedule for the Thursday session, the weekly jobless claims report was released before the opening bell.  The headline print indicated that initial claims fell by 7,000 last week to 751,000.  Analysts had expected a dip of 13,000 to 745,000.  Stripping out the seasonal adjustments, which remain irrelevant in this environment, initial claims actually came in at 738,166, a decline of 543 compared to the week prior.  The claimant count continues to buck seasonal norms for this time of year, which call for a rise in the tally through year-end.  There remains a long way to go to return to levels that are normal for the time of year that we are in, but the mere fact that initial claims are declining while the seasonal norm is rising indicates the narrowing, or improving, of the path, which is encouraging for the labor market overall.

The change in the claimant count can often be indicative of the strength of the monthly employment report, which is slated to be released on Friday.  Analysts are expecting that payrolls increased by 600,000 last month, which is down from the 661,000 reported for September.  Before the seasonal adjustments, payrolls increase by an average of 0.6% in the month of October as businesses ramp up hiring activity for the end of year shopping season.  If inline with what is average for this time of year, payrolls would actually (non-seasonally adjusted) be expected to increase by 851,000.  Since the lows of the labor market in April, payrolls have shown above average gains, month-over-month, which is helping to close the gap between the year-to-date change and the seasonal average trend.  If the report on jobless claims is any indication of what to expect for the payroll report, another above average print should be realized.  We’ll break down the results in our intraday report that will be released to subscribers on Friday.  Subscribe now to be included on our list.

Sentiment on Thursday, as gauged by the put-call ratio, ended bullish at 0.80.  The Dark Index, our gauge of institutional sentiment, ticked higher to 42.3%, hinting that large money managers have had their interest piqued by the recent gains.  Typically, levels 45% and higher are indicative of broad buying demand.

 

 

Seasonal charts of companies reporting earnings today:

 

 

S&P 500 Index

 

 

TSE Composite

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