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Wednesday’s daily upswing came, which I saw as probable. While Monday was a reversal, it was still a daily upswing, and its consolidation continues. So far continues, and the low daily volume yesterday spells an attempt to move down today.

It’s not only because of the Pfizer study effect wearing itself off – rightly so if you examine the mechanics I linked to. If I had to pick one of the many brave souls coming forward as regards the elections, it would be Richard Hopkins, the USPS Pennsylvania whistleblower – and I say power to those who take on wrongdoings wherever they happen – may justice be served! Back to Pennsylvania, it must be really serious when even a registered Democrat comes forward, or a Bernie Sanders supporter speaks.

I am standing by my call that we’re in for an elections upset. Republicans strengthen all around while Biden wins the presidency? Don’t forget about the Dominion or other software, about the analyses on how this flipped or lost votes by state. Take a look then at how the election results stand at the moment given the evidence. Keep an eye on the courts, on the Trump moves, watch the rule of law to win the day…

That’s what I see as the narratives gripping the marketplace ahead, and I don’t even bring up the post-election Pfizer announcement timing that didn’t benefit the President really.

Do the charts support the conclusions from my deep research? Do they exhibut signs of uncertainty coming back?

S&P 500 in the Short-Run

I’ll start with the daily chart perspective (charts courtesy of http://stockcharts.com ):

Yesterday’s upswing confirms that stocks aren’t looking for an upset. Volume declined, making the move higher a bit more vulnerable ahead, pointing out that the general outlook of a bullish bias may be about to be punctured.

Credit Markets and the Dollar

High yield corporate bonds (HYG ETF) had an uneventful session yesterday – one that could go both ways in the very short run, but the direction down still remains as more probable (I am still talking the very short run, only that).

No spectacular action in investment grade corporate bonds (LQD ETF) or the leading credit market ratios (HYG:SHY and LQD:IEI) either.

Long-term Treasuries (TLT ETF), this is where things get interesting. They’re not declining further, and moved higher timidly yesterday. I think they have good potential to rise some more when both the election and vaccine study results get more attention.

The dollar also gained ground yesterday, making it likely that stocks would take a breather today.

Let’s examine other stock markets and dig deeper into S&P 500 to whether that’s the case.

Smallcaps, Emerging Markets and S&P 500 Ratios

The Russell 2000 (IWM ETF) is leading the 500-strong index up, which is positive for U.S. indices, and a testament of rotation out of tech and into value plays that I’ve discussed lately.

Emerging markets (EEM ETF) are weakening a little here, which might be the precursor to the S&P 500 setback that I still see as hanging in the air, its timing being the great question. Couple that with IWM though, and there is no clear outcome from these two charts alone.

The consumer discretionaries to staples (XLY:XLP) ratio reflects the post-Pfizer reversal and persisting stimulus uncertainties. While it doesn’t flash danger to stocks, it shows they are under growing pressure.

The financials to utilities (XLF:XLU) ratio has been slowly moving lower in the last two days as well. While financials will rise in the latter stages of the stock bull run much more, the time for utilities to perform well now is far from over.

Both ratios are leaning towards the side of short-term caution.

Metals and Oil

Copper didn’t trade in an eye catching mode yesterday, but it’s stability is telling me that its bull run is far from over. It’s the precious metals and oil that are sending engaging signals here.

The oil to gold ratio got under pressure yesterday, and that makes gold likely to outperform oil on the upside shortly, which would be consistent with the dollar and credit markets’ message, as that is of risk reprising and caution ahead. We had already seen much of the downside in the yellow metal, and the opportune entry point I talked about two days ago, is about to be seen even more in the rear view mirror soon.

The silver to gold ratio shows that the white metal might be a little too optimistic here, making gold the short-term favored precious metal in my eyes. The takeaway for the stock market traders and investors is that the ratio is trading well above the September and August lows, making the king of metals still the star. And that attests to the not absolutely clear skies for stocks ahead.

Summary

Summing up, the short-term seesaw trading continues until a catalyst comes. Vaccine news didn’t do the trick for the markets (I called the 3650 levels on Monday as quite rich), and the S&P 500 is meandering now, still in appreciation of the Biden media-declared win. That’s where I am looking for the upset to the current complacency to come from – first as uncertainty about the result, then as coming to terms with the Trump win that’s in the hands of the courts now.

The big picture though is of the S&P 500 bull market – it’s just about the suitable entry point now.

Thank you for reading today’s free analysis. If you would like to receive daily premium follow-ups, I encourage you to sign up for my Stock Trading Alerts to also benefit from the trading action described - the moment it happens. The full analysis includes more details about current positions and levels to watch before deciding to open any new ones or where to close existing ones.

Thank you.

Monica Kingsley
Stock Trading Strategist
Sunshine Profits: Analysis. Care. Profits.

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The daily consolidation after a fleeting S&P 500 reversal on Monday, goes on. Fleeting reversal, because it marks a local top only, and not a bull market top. Daily consolidation, because much of the downside move has been rejected yesterday, giving stocks appearance of wanting to go higher.

Yes, higher – such is the power of the corona vaccine news on risk-on repricing, which will be visible from today’s sectoral analysis. The post-elections calm is also quite remarkable, and the mainstream media keeps concentrating on Biden White House preparations.

What would be the legal fate of irregularities such as almost 10,000 dead people voting in Michigan alone, or of voter turnout well over 100% across more than a handful of states:

Societal polarization is present, Stop the Steal caravan is heading to DC, and Trump legal team is working hard and against the clock. That’s the view of some Republican senators as well. Stocks aren’t thus far giving Trump much real-time chance as the footprint shows. If you look at the words of Jason Miller (Trump senior adviser) – to concede is not even in our vocabulary – the markets still have quite something to look forward for in my view.

An inspirational quote that I wholeheartedly agree and am inspired with, comes from Thomas Paine: “…the harder the conflict, the more glorious the triumph. What we obtain too cheap, we esteem too lightly: it is dearness only that gives every thing its value. Heaven knows how to put a proper price upon its goods; and it would be strange indeed if so celestial an article as FREEDOM should not be highly rated.”

I hope to have lifted your spirits with this evergreen as to what matters the most in life.

Let’s leave aside for a moment the question of markets recalibrating to a Trump win, not a Biden one, and look at the rally’s technicals.

S&P 500 in the Short-Run

I’ll start with the daily chart perspective (charts courtesy of http://stockcharts.com ):

The consolidation has thus far been shallow, and the selling pressure didn’t reach far yesterday. Elevated volume is a sign of accumulation, meaning that the markets aren’t looking for an upset currently. The general outlook remains of a bullish bias that hasn’t been punctured.

Credit Markets’ Point of View

Yesterday’s lower knot in high yield corporate bonds (HYG ETF) reveals the downside risk. But if you remember, Stockcharts showed a prominent upper knot a few days ago (and investing.com has yesterday’s lower one on their daily chart too), but it disappeared later on. This means it’s best to read into yesterday’s candle as highlighting the possibility of a move lower, as some risk of it only. Nothing to bank on.

Both leading credit market ratios – high yield corporate bonds to short-term Treasuries (HYG:SHY) and investment grade corporate bonds to longer-dated Treasuries (LQD:IEI) – moved down. That’s risk-off but the interpretation as long-dated Treasuries (TLT ETF) aren’t on fire (thanks to Pfizer), is that the risk-off effect is muted.

S&P 500 Market Internals and Volatility

The positive Force index shows the strength of the bullish push, and a plateau appears to have been reached. While the indicator ticked lower, it doesn’t mean much on a standalone basis. To see more of a temporary weakness in stocks, would require it to turn lower much more, or progressively lose altitude as it approaches zero again. No sign of that willingness in the charts right now.

The advance-decline line keeps favoring the bulls in the very short run, and so does the advance-decline volume. Monday’s spike in new-highs-new-lows just underscores that the stock bull market is alive and well.

Yesterday’s rejected downswing shows in the $VIX upper knot, and doesn’t rule out the return of the bears in a few days. Not immediately right now (given the market’s take on the fundamental backdrop), but it’s my view that we’re trading near volatility’s lower band currently.

S&P 500 Sectoral Analysis

Technology (XLK ETF) is the major sector getting hurt here – yet the pressure seems abating, and that’s positive for the full index as well.

Healthcare (XLV ETF) is currently riding on the euphoria wave, unwilling to decline much intraday. Its bullish chart will bring sectoral investors even more gains shortly in my view.

Financials (XLF ETF) are willing to decline even less than healthcare, and this speaks volumes about the vaccine expectations, about its effect on the economy. Unless this story deflates to a degree, don’t look for too much downside in the sector.

Summary

Summing up, the correction to manic Monday’s trading is thus far a shallow one, and looking at gold turning south and oil sharply north, is likely to keep being so. Both of these facts mean limited potential for S&P 500 prices to decline today as the dollar isn’t standing in the way much either.

Regardless of the overly discounted post-elections challenges, the Russell 2000 and emerging markets keep leading the S&P 500 higher. AUD/USD hasn’t sold off much either, giving credibility to the short-term upswing in stocks. Once the consolidation in S&P 500 is over, and even more uncertainties are removed (which might take time all the way till Dec 08 (the deadline for choosing electors), stocks are likely to rally even more.

Thank you for reading today’s free analysis. If you would like to receive daily premium follow-ups, I encourage you to sign up for my Stock Trading Alerts to also benefit from the trading action described - the moment it happens. The full analysis includes more details about current positions and levels to watch before deciding to open any new ones or where to close existing ones.

Thank you.

Monica Kingsley
Stock Trading Strategist
Sunshine Profits: Analysis. Care. Profits.

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Monday’s overnight rally powered mightily by the Pfizer corona vaccine news, fizzled out to validate my point on its precarious short-term nature. Reality check as regards how long the antibodies actually last? Just a news-driven buying climax that doesn’t mean an S&P 500 reversal but signals short-term need for consolidation – that’s my opinion.

As for elections, nothing groundbreaking on a daily basis – the outrage over irregularities (as I called it politely on Friday) goes on, new sworn affidavit landing Nevada elections integrity in hot water filed, and finally a leading Republican throwing his weight behind the many Trump lawsuits. Thank you, Mitch McConnell.

For inquisitive minds, I offer these charts revealing the mail-in ballot preferences. Eye catching to any statistician, really – what’s the level of confidence that such a distribution pattern can really happen? This reminds me of the work of auditors – going through the data, they look for irregularities, and while a few outliers might be natural occurences, when the patterns start cropping up, you end up looking at serious wrongdoing with ever increasing probability. It’s not like this only in elections or accounting, by the way…

This isn’t yet though what stocks care about. They’re not after such worthwhile reads on the legal paths of solving the elections math. As I wrote yesterday, they care about the short-term, which is the stimulus deal prospects. When the GOP Senate Majority Leader starts supporting the mantra “every legal vote counts”, the prospects of a deal with Democrats start to wobble even before Biden loses the media-awarded Pennsylvania win first.

What’s more on the S&P 500 radar screen though, are the vaccine news implications. The effect on cyclicals such as financials (XLF ETF) has been positive, but real estate (XLRE) isn’t buying it. Both technology (XLK ETF) and healthcare (XLV ETF) reversed profoundly on the day – the short-term red flags are still there.

I am not giving in to the appearance of declining volatility just yet. Or to the Baltic Dry index finally turning higher a bit.

Remember, that’s the short-term. Market breadth indicators are clearly showing the returning strength of the bull market. The rally would come well before the almost carved in stone Santa Claus one – the Fed won’t spoil the party by tightening as it did back in 2018.

It’s just about stocks recalibrating to a Trump win, not a Biden one. And the more opportune entry point from the risk-reward ratio such a move would bring.

S&P 500 in the Short-Run

I’ll start with the daily chart perspective (charts courtesy of http://stockcharts.com ):

The daily reversal looks ominous, but isn’t really in my view. Nothing to count on to have more than short-term significance. The daily indicators are supportive of the stock bull run – after all, such a sharp reversal from the pre-election panic lows, is unprecedented in stock market history.

Credit Markets’ Point of View

High yield corporate bonds (HYG ETF) reversed on the day as well, closing much nearer to their Friday’s values than stocks did. That’s a gentle sign that the bullish bets are being pared a little here.

Investment grade corporate bonds (LQD ETF) also moved down, which would be short-term concerning should Treasuries rise.

Long-term Treasuries (TLT ETF) opened down, erased intraday decline, and moved up. That’s not exactly a daily rise – just a pause with potential for upside reversal, which I see as probable to be fulfilled given the dollar’s yesterday session.

Greenback’s daily upswing highlights the potential for seeing more risk-off moves ahead. It’s not that the dollar is staging a great rebound from the tripple bottom zone, no – its decline would go on, as protracted or as fast as the market is ready to go at, but the direction is down.

The stocks to Treasuries ($SPX:$UST) ratio provides the big picture view, and it’s one of rotation into stocks at the expense of bonds. In other words, healthy young stock bull market.

Commodities Speak

Copper hasn’t experienced really wild swings lately – not even yesterday. It’s just solidly running higher, not offering too much downside for those willing to jump on this profitable long bandwagon.

The oil to gold ratio reacted with a spurt higher to the Pfizer news, predictably. Less lockdown fears that help black gold to move higher, and more risk-on sentiment to send nominal and real rates up, thus detracting from gold’s appeal (and offering an interesting entry point in the yellow metal as I like the bullish shape of its protracted consolidation).

What is key, is that the S&P 500 and the copper to gold and oil to gold ratios, are in sync. They are both pointing to higher stock prices ahead.

Summary

Summing up, yesterday’s wild upswing has been indeed reversed, and the implications are rather short-term. Curiously, the sentiment isn’t pointing much to greed, and the put/call ratio shows only modestly rising complacency. Technology seems to be among the losers from the post-elections uncertainty, because no winner can be declared until all the legal battles are over, or unless Trump concedes – which I naturally don’t expect him to do – who would do so when they know and feel that truth is on their side? I wouldn’t certainly.

Regardless of the elections drama though, the path of least resistance for stocks remains higher, and solving the entry point riddle is a matter of risk preferences and holding period horizon.

Thank you for reading today’s free analysis. If you would like to receive daily premium follow-ups, I encourage you to sign up for my Stock Trading Alerts to also benefit from the trading action described - the moment it happens. The full analysis includes more details about current positions and levels to watch before deciding to open any new ones or where to close existing ones.

Thank you.

Monica Kingsley
Stock Trading Strategist
Sunshine Profits: Analysis. Care. Profits.

• Read more