Stocks Rally While the Dollar Slumps

November 8, 2020

Weekly Market Outlook

By Keith Schneider

blankYesterday, November 7, the contentious U.S. Presidential election concluded with Joe Biden declared the victor by the Associated Press. Trump’s legal team is pressing on to disallow many mail in ballots across key battleground states to keep the presidency, but the odds makers in England say that Biden will assume the job and Trump's legal efforts will ultimately fail.

However, the expectation of a change in U.S. leadership along with the prospects of no change in the Senate and ultimately a stable, “not much change,” government fueled the market higher and “lifted all boats”.

With the dollar under pressure, it appears that the global reflation trade is on and all asset prices (especially housing) are the beneficiaries of this NEW DIRECTION under a changing and evolving government.


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

  • Risk gauges reversed direction and closed positive, with equities having their strongest week since April
  • The Dow Industrials (DIA) bounced off its 200 DMA from oversold levels but remains the weakest U.S. equity index
  • Volume patterns on the four key U.S. equity benchmarks improved marginally
  • The Dollar sold off hard -1.89% for the week, and the longer-term trend is under pressure trading under its 200-week moving average, good for hard assets
  • Gold Miners, Gold, and Silver all broke out above key moving averages and their pennant /wedge formations (benefitting from the dollar as noted above)
  • The McClellan Oscillator reversed the oversold conditions we highlighted last week and is now a bit extended to the upside
  • U.S. Bonds (TLT) failed at 200 DMA and has major issues with potential head and shoulders pattern continuing to play out.
  • Small and Mid-caps now have the strongest TSI (Trend Strength Indicator) despite yearly underperformance
  • Emerging Markets especially countries in Latin America, continue to lead but running a bit rich in the short term
  • Growth stocks, led by Tech plays, took the lead once again over Value
  • Crypto Currencies roared with Bitcoin up over 50% since early October (GBTC-a Mish pick)
  • Clean Energy with ETF’s like TAN, perked up given the expectations of a Biden win.

Markets loved the fact that the election came to a close with no violence or social unrest.
Assuming that a peaceful transition occurs with electoral votes being certified on December 8, western democracy will have survived.

However, considering that this week the dollar tanked, long bonds sank and look heavy and with precious metals, cryptos roaring it is hard to call what is next for the markets.

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