Market at a Glance - 11/24/2020

By: Christopher Mistal

November 24, 2020

Fundamental: Mixed. Vaccines are nearly ready, but distribution still remains a challenge. And as we await an approved vaccine, Covid-19 cases are surging, triggering new shutdowns and economic easing rollbacks around the country. As a result unemployment and weekly initial jobless claims remain elevated. The housing market remains firm, but the migration driving gains is likely to slow. Corporate earnings have largely held up in industries and businesses that remained/remain open. More importantly, the outlook continues to improve, and the market is rising because of this.

Technical: Breaking out. DJIA, S&P 500 and Russell 2000 have all broken out to new all-time closing highs. NASDAQ is close and a breakout by it would be bullish confirmation. NASDAQ has been held back as traders and investors pulled back from this year’s pandemic success stocks in favor of names best positioned to benefit from a vaccine. Today’s broad rally included NASDAQ and could be an early indication that the rally is gaining momentum.

Monetary: 0 – 0.25%. As expected, the Fed’s November meeting announcement did take a back seat to election results as little new was said and no changes to policy were made. However, in the time since that meeting Treasury Secretary did announce that he did not intend to renew or extend the Fed’s Main Street Lending, municipal lending and corporate credit programs. They were and still are set to expire at the end of the year. All three programs were established as part of the Fed’s COVID-19 response earlier this year.

Seasonal: Bullish. December is now the number three S&P 500 and DJIA month since 1950, averaging gains of 1.5% on each index. It’s the top Russell 2000 (1979) month and third best for NASDAQ (1971) and Russell 1000 (1979). The “January Effect” of small-cap outperformance starts in mid-December. Wall Street’s only “Free Lunch” of distressed small- and micro-cap stocks making new 52-week lows on December Triple-Witching Friday will be served before the opening bell on December 21. Santa’s Rally begins on Thursday December 24 and lasts until the second trading day of the New Year. In years when Santa Claus did not come to Wall Street, bear markets or sizable corrections have often materialized in the coming year.

Psychological: Elevated. According to Investor’s Intelligence Advisors Sentiment survey Bullish advisors stood at 59.6%. Correction advisors stood at 22.2% while Bearish advisors were at 18.2% in the most current report from last week. There was a brief dip in bullish sentiment at the end of October, but it did not stick as the market quickly rebounded. Historically, holiday and yearend cheer have translated into market gains and high levels of bullish sentiment so it would not be surprising to see the same again this year and possibly even higher levels of bulls as positive vaccine news breaks.