Despite the weak payroll report for October, the bond market sold off surprisingly hard, resulting in a break of rising trendline support on the Aggregate Bond Fund.
*** 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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Super Simple Seasonal Portfolio
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The Markets
Stocks rebounded slightly from Thursday’s selloff as strength in the consumer discretionary sector as a result of a positive reaction to earnings from Amazon (AMZN) helped the market to mitigate the pressures stemming from the rise in interest rates and the US Dollar. The S&P 500 Index closed higher by just over four-tenths of one percent, remaining below the 20-day moving average (5804) that was broken in the prior session. A level of resistance remains in place between Thursday’s open at 5775 and Wednesday’s close at 5816. The short-term trend can been deemed to be negative as investors show caution ahead of election day. Support will be scrutinized around the 50-day moving average (5701) to determine if it can break the benchmark out of this short-term slump. Despite the recent stall, this market is not showing any broader topping setups and there remains greater evidence of support than resistance over an intermediate-term timeframe, presenting characteristics of a bullish trend that remains enticing for the positive seasonal tendencies ahead. The concern to the prevailing path, however, is the waning of upside momentum with MACD negatively diverging from price since the end of last year, highlighting the fading enthusiasm towards the risk profile that equities encompass. The risk-reward, broadly, remains unattractive, but this pullback should provide us with an entry point to the strength that is normal of the equity market through the last couple of months of the year. We continue to like the groups that are on our list of Accumulate candidates, but there are certainly segments of the market to Avoid. With the start of the best six months of the year for stocks slated to get underway, we will be seeking to use weakness to ramp up risk exposure, preferably when metrics of volatility/fear alleviate their rising path that has evolved over the past few months (see our commentary of the Volatility Index (VIX) in our November monthly report).
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Seasonal charts of companies reporting earnings today:
S&P 500 Index
TSE Composite
