While the deterioration in the technicals is enticing to continue downgrading various segments of the market, we are highly reluctant to flip to a negative view while navigating through this notoriously positive period at year-end.
*** 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
End-of-year asset allocation rebalancing was sufficient to weigh on US equities during Monday’s session as the bond market received a bid after a couple of weeks of declines. The S&P 500 Index ended lower by 1.07%, continuing to hover around the 50-day moving average (5942). The benchmark remains above the previous level of horizontal support at the open gap charted following the US Election at 5850. While we continue to rely on this point as the propping level for the strength that is normal during this holiday period, there is still much to be contemplated pertaining to the near-term trend given the sharply negative candlesticks charted during the last two hours of trade a couple of weeks ago following the FOMC announcement. If you recall, it is within the one-day range of that volatile Wednesday session that we have expected the Santa Claus rally period to trade within and this is certainly proving to be the case. Zooming out, a head-and-shoulders topping pattern can be picked out based on the declines produced over the past three sessions, but, given the low volume environment that we are within during this holiday timeframe, the significance of this topping setup is certainly diminished. The bearish pattern proposes a downside target of 5670, which was the level of resistance from this summer’s high. Neckline support at 5850 would have to be definitively broken, first, to achieve the downside potential that the pattern suggests. More important is the resistance that is being derived at the 20-day moving average, sufficient to raise concern. Should major moving averages increasingly derive points of resistance, reason to conclude the shift of trend would be provided. Our list of candidates in the market to Accumulate and to Avoid remains appropriately positioned at this seasonally strong time of year, but our Avoid list has been growing in recent weeks given the fading of the election euphoria in the market.
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Sentiment on Monday, as gauged by the put-call ratio, ended slightly bullish at 0.93.
Seasonal charts of companies reporting earnings today:
- No significant earnings scheduled for today.
S&P 500 Index
TSE Composite
