Uptrends and All-time highs
A brief note on why I think we can go higher moving into the final months of 2020
We are going to go higher and continuing the current uptrend in the S&P 500, and this is why…
We just had a new all-time high for the S&P500 yesterday and just to fill you in… all-time highs are typical characteristics of uptrends, not downtrends and during uptrends, its often more beneficial to own stocks rather than being short them.
Market internals strong
58% of the S&P 500 members are above their 200-day moving average.
74% of the S&P 500 members are above their 50-day moving average.
Breadth is continuing to improve in a constructive way.
Growth Vs. Value
Growth stocks continue their march to the upside relative to value stocks.
Offensive Vs. Defensive
This ratio gives me a good indication of risk appetite among the market. From the market lows in March this ratio held a support level dating back to 2008. It then moved higher to re-test a well-established resistance zone and over the last week it has shown strength and broken to the upside of this zone, this ratio is supporting the bull case for the market with a possible move in the ratio back to re-test its 2018 highs.
The offensive sectors (Financials, Technology and Consumer Discretionary) have had a strong upwards move since the 2020 March lows, and are now looking to re-test its early 2020 all-time highs. (Financial stocks don’t need to outperform they just need to participate)
Strength from leaders
Areas of the market that are generally thought of as leading the S&P 500 continue to outperform during this rally from the March 2020 lows, which is another argument for the case that the S&P 500 will go on to make newer highs. The technology sector continues to outperform.
And outperformance also in the consumer discretionary sector.
FAANG stocks continue to lead
Investors love to latch onto growth themes during bull markets, and the FAANG trade continues to be a leading theme.
Long term yields basing.
The 10-year yield looks to have found a base.
Commodity prices
Commodity prices don’t always have to have a consistent relationship with growth. However, after commodity prices plunged lower due to the COVID crash, prices have started to turn up in a meaningful way.
Seasonality, Strong end to the year
From a seasonal perspective, market bulls have the calendar on their side. Over the last 70 years, the last three months of the year for the S&P 500 are generally healthy for the markets.
There you have it, MY why!
So, if you have a different thesis or ideas for the current market, please share your thoughts in the comment section or get in contact with me on Twitter: @granthawkridge. The stock market always has two sides to the story… buyers and sellers, and it’s okay to switch between the two when the price/data changes.
Until next time, stay safe and good luck out there…
GH
DISCLAIMER: The information included in this report are obtained from sources which Jotting on Charts believes to be reliable, but we do not guarantee its accuracy. All of the information contained herein should be independently verified and confirmed. All opinions expressed by Jotting on Charts are for informational purposes only. Jotting on Charts is not a financial advisor, and this does not constitute investment advice nor any opinions expressed, constitute a solicitation of the purchase or sale of any securities or related financial instruments. Jotting on Charts is not responsible for any losses incurred from any use of this information. Do not trade with money you cannot afford to lose. It is recommended that you consult a qualified financial advisor before making any investment decisions.