Soft Commodities Firming

October 25, 2020

Weekly Market Outlook

By Keith Schneider

blankThree key US Equity stock indexes (SPY, QQQ, DIA) modestly sold off, -1.0% on average while longer term laggards Small and Mid -Caps (IWM and MDY) improved. Major sector rotation is occurring as we await the outcome of the US Elections.


Considering the venomous(negative, divisive and at times vicious) politics taking place it’s not a big surprise that the dollar is getting hit while our democracy is being questioned,

Meanwhile, at least for the moment, the domestic domestically markets don’t seem to care and are acting mostly bullish.

The highlights of this week's market action are the following:

  • Risk gauges stayed positive
  • Volume patterns show institutional distribution in the key Equity benchmarks (DIA, SPY, QQQ) with the exception being Small Caps (IWM) which is under accumulation
  • US Bonds (TLT) sold off hard breaking down under the 200 DMA
  • Small and Mid-caps are trading above short term MA’s and are showing life verses the S&P500
  • Value is trying hard to make a comeback, Growth still way out ahead for the year
  • Rotation into Regional Banks, (KRE) up over 8% for the week
  • Transportation and the Retail Sector continue performing well. (MG calls week ago)
  • Market Internals improved with the McClellan oscillator stabilizing and avoiding a sell signal
  • Emerging Markets continued its recent leadership on our daily charts (over both US equities and established foreign markets) with commodity sensitive countries leading
  • Dollar weakness continues, especially against the China Yuan
  • Volatility (VIX) staying elevated; typical for pre-election jitters
  • Utilities (XLU) continue in an uptrend, casting some uncertainty in SPY
  • Bitcoin making new positive strides, a recent MG call.
  • Earnings start in earnest this week and will indicate if companies can hit their much-lowered expectations. This may hold the key to the 4th quarter's US overall stock market.

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