Can a stimulus bill end the stock rally? | Zoom Fintech
Additional data for major stock indexes, which started December with solid notice. Preliminary knowledge of gross sales for Black Friday and Cyber Monday has been favorable. For Black Friday, gross online sales jumped more than 20%, offsetting the sharp drop in gross in-store sales. Even the upward shift in bond yields did not deter equity market bulls last week, as the 10-year T-Notice hit its highest yield since last March.
It was another solid week for the iShares Russell 2000 (IWM) small cap, which was up 2.1% and made another new excess. New highs were also recorded for many market averages, as well as the Nasdaq 100, which was up 2.2% and is now up 43.5% year-to-date (YTD).
Although the S&P 500 also set a new record and gained 1.7% for the week, it is only up 14.4% since the start of the year. The 2% drop in the Dow jones Utility Common has clearly dropped it in unfavorable territory for the year.
The SPDR GoldShares (GLD) had a nice rebound last week after the recent sharp drop. The recent increase in the yield of the 10-year T-Note has not helped gold prices. Historically, there have been a number of times when an increase in yields, after a long decline, has put pressure on gold, which is then considered a non-performing asset.
The yield on the 10-year T-Note peaked in October 2018 at over 3% (line b) as gold hit a low of around $ 1,200. For the following year, yields fell more sharply than gold rose. In June 2019, gold moved above multi-year resistance (line a).
While gold hit a near-term high in September 2019, yields bottomed out and rallied late in the year (section c). During this period, gold underwent a correction of several weeks, then hit a low in December and resumed its positive trend. This coincided with another drop in yields that peaked with the lows of March 2020.
Goldprices peaked in August (line d) as yields bottomed out before rising again. So was this a major trend change for gold or the 10-year yield?
The Comex GoldFutures had a low last week of $ 1,767.20, which was just below the 38.2% Fibonacci aid from the 2019 low of $ 1,267.90. The 50% aid stands at $ 1,678.30, and the weekly chart shows an aid band between these two ranges. The downtrend (line a) is currently at $ 1,949.40.
The balance sheet quantity (OBV) fell below its weighted transfer average (WMA) at the end of October, but held up quite well, as it is above aid (row b ). OBV rose last week as futures volume was the best since March. There was no corresponding large quantity in the SPDR GoldStocks (GLD).
The Herrick Payoff Index (HPI), which uses price, volume and open interest to determine cash flow, has fallen sharply in recent weeks. The weekly HPI is now well below the zero line and its declining WMA. Typically, it would take several weeks for it to become positive again.
The 10-year T-Note yield closed last week above the early June high of 0.957% (line c). I have been monitoring this level for a few months. The strong downtrend (line a) has also been overcome, but given the length of the downtrend this may not be significant. Then there is strong resistance at 1.258% (line b).
The moving average convergence divergence (MACD) and the MACD histogram turned positive at the end of May. The MACD and the signal line have been rising sharply for several weeks while the downtrend (line d) has been broken. MACD-His shows a less bullish trend as it hasn’t hit a new high for five weeks.
Of course, central banks are still on track to keep rates low for the foreseeable future, with European Central Banks (ECBs) scheduled to meet next Thursday. The Federal Open Market Committee will then meet on December 15 and 16. From a technical standpoint, I don’t think falling gold prices or rising yields signals a major trend change.
The consensus of most economists is that the economic recovery is weakening and that this will likely be the trend heading into 2021. Last week’s monthly jobs report supported this view, as 245,000 jobs were created, well below the expected 400,000.
Last week, investors once again focused on encouraging news on a COVID-19 vaccine and never the worsening of the virus throughout the country. The market was inspired by the fact that it finally gave the impression that there was a motion in Congress for a long overdue stimulus package. Hopefully, the weak jobs report will cause the Senate to do nothing.
The NYSE Composite closed last week at 14,417, finally breaking the January 2020 excess (line a) as it was behind the opposing major averages. The starc + weekly band has been exceeded in the past two weeks, indicating high danger. There could be pivotal month-to-month resistance for the NYSE at 14,673 and 15,339.
The S&P 500 daily chart shows the completion of flag formation in early November (strains a and b). Targets measured from these graphic formations vary in the 3800-3950 space. As of Friday’s close, 79.6% of S&P 500 stocks closed above their 20-day Exponential Transfer Common (EMA), which continues to be effectively below the degrees seen in June (line c). There are 83.6% of S&P 500 stocks above their 50-day EMA. This study was 97% in June (line d) earlier than the market correction. Each value fell sharply at the end of November, creating a lower risk alternative purchase.
Obviously, the bulls are responsible for the market right now, but given the growing danger in the market, I’m not sure this could continue into January. Over the past month I have been looking for a sharp correction that might help keep the rally intact. This is now an additional standard opinion, which may cause the stock market to rise even earlier than the correction.
A stimulus bill can stimulate additional purchases at the start of the year, but on the contrary, it may be a chance for traders to promote the information. Keeping track of every technical move and political offerings in Washington over the following weeks can be essential for buying, selling, and investing properly. Stay tuned for my review as the month progresses.
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