Market at a Glance - 12/17/2020

By: Christopher Mistal

December 17, 2020

Fundamental: Still Mixed. Limited quantities of vaccines are shipping, but it will take time to reach all that desire one. Covid-19 continues to spread and weekly initial jobless claims have started creeping higher. Many areas of the economy have shown improvement however, the lofty number of weekly claims suggests there could be a cap on how far and how long positive trends can continue.

Technical: Breaking out. DJIA, S&P 500 NASDAQ and Russell 2000 all broke out to new all-time closing highs today. Strength across all four indexes is bullish as it shows broad participation and support from stocks. Barring an exogenous event, the typical yearend rally most likely has begun.

Monetary: 0 – 0.25%. During the last Fed meeting of the year this week, the Fed once again confirmed its commitment to doing essentially whatever it takes, within their powers, to support the economy. Low rates, yes, more QE at a pace of $120 billion a month, yes and they stand ready to respond further if new risks emerge. Historically, an accommodative Fed has benefited the stock market and this time looks no different.

Seasonal: Bullish. January is the third month of the Best Six/Eight, but it is the last of the Best-Three-Consecutive-month span. January is the top month for NASDAQ (since 1971) averaging 2.8%, but it has slipped to sixth for DJIA and fifth for S&P 500 since 1950. Post-election-year Januarys have been weaker (DJIA +0.6%, S&P 500 +0.8% NASDAQ +2.3%), but still positive. The Santa Claus Rally ends on January 5th and the First Five Days early-warning system ends on the 8th. Both indicators provide an early indication of what to expect in 2021. We will wait until the official results of the January Barometer on January 29 are in before tweaking our Annual Forecast. Email Alerts will be sent after the close on these dates.

Psychological: Nearly Euphoric. According to Investor’s Intelligence Advisors Sentiment survey Bullish advisors stand at 63.6%. Correction advisors stand at 19.2% while Bearish advisors are at 17.2%. However, Bullish advisors actually declined fractionally from their previous peak of 64.7% from two weeks earlier. This is a high level, but it is lower than the January 2018 peak of 66.7% Bullish advisors. Bullish sentiment is clearly lofty, but not without reason. It is the holiday season and Covid-19 vaccines are shipping.