“The entry point for the seasonal trade in North American equity markets is here”
The Bottom Line
The entry point for the seasonal trade in North American equity markets is here. The TSX Composite Index reached a seasonal low on October 15th at 12,132. The Dow Jones Industrial Average reached a seasonal low on Thursday October 25th at 13,040. Downside risk is limited and upside potential into early next year is above average. Average gain during an election year by the S&P 500 Index from November 1st to February 1st is 5.0%. Preferred strategy is to accumulate equities and Exchange Traded Funds with favourable seasonality at this time of year that already are showing technical signs of performance or outperformance relative to the market (S&P 500 Index for U.S. markets or TSX Composite Index for Canadian markets). Sectors include agriculture, forest products, transportation, industrials, steel, coal, mines & metals, consumer discretionary, home builders, semiconductors, China and Europe.
Mark Leibovit Comment: “Back to the stock market, we could very well see a rally to test or even see new highs because it is either that or ‘blood in the streets’. High unemployment, a still imploding Europe and now recovery from a major national natural disaster are all potential bullish factors if you’re a contrarian. But, if it comes (50/50 in my opinion), I would not wear out my welcome”.
The TSX Global Metals and Mining Index added 50.55 points (5.48%) last week. Intermediate trend is up. Short term momentum indicators are trending up. The Index remains above its 20 and 50 day moving averages and moved above its 200 day moving average on Thursday. Strength relative to the S&P 500 Index remains positive.
Lumber gained another $2.42 (0.76%) last week. Intermediate trend is up. Lumber remains above its 20, 50 and 200 day moving averages. Strength relative to the S&P 500 remains positive
The Agriculture ETF slipped $0.14 (0.27%) last week. Intermediate trend is up. Support has formed at $50.80 and resistance is at $53.19. Units trade above their 200 day moving average, but fell below their 20 and 50 day moving averages on Friday. Short term momentum indicators are neutral. Strength relative to the S&P 500 Index remains positive. ‘Tis the season”!
The election on Tuesday is the primary focus for equity markets this week. Equity markets are expected to remain virtually unchanged on Monday and Tuesday prior to the news. Polls show the Presidential race at a dead heat. If results come down to the winner of Ohio, a final selection of the next President may be delayed until November 16th when votes triggered by absentee ballots will have been counted. Polls also suggest that Republicans will maintain control of the House of Representatives and Democrats will maintain control of the Senate. A Congressional stalemate is expected to continue after the election. Changes in Congress likely will impact attempts to forestall the “Fiscal Cliff”. Weather conditions (possible Nor-Easter on Election Day) could influence attempts to “get out the vote”.
The VIX Index slipped 0.22 (1.24%) last week despite a gain of 0.90 on Friday. Intermediate trend is up.
…..read more about economic news this week & vuew 47 charts HERE