US Stock Markets - Seasonal/Cyclical Correction Nearby
by Antonis Benis, on Nov 12, 2020 4:19:22 PM
Markets tend to turn bullish around elections, last Monday’s - news related - blowoff top, must have marked the high for the rally that started from the October 30th low.
Dow Jones 30 registered a sell countdown 13 on November 9th, the sequential sell setup is on 8 today; will be perfected with a close above 29319 (Dec. futures), as early as tomorrow (see chart 1)
Russell 2000 needs a close above 1734 to also register a sequential sell setup 9. Nasdaq 100 has exhibited a bearish price flip, the high is in place, possible double top.
NYSE Advance/Decline line has made a new high, confirming the recent highs, no divergence there. High yield bond Advance/Decline line has also made a new high, strongly suggesting that liquidity is not an issue in the near future.
Valuations at very high levels, last seen at the top in 2000.
TRADING CENTRAL'S STRATEGY NEWSLETTER
Sign up for free access to Trading Central's expert financial insights!
Seasonality is positive from November through April. Presidential election pattern shows a dip from around now into late November/early December followed by resumption of the rally (see chart 2)
Cycles (daily, short term) suggest a correction that should start around now and should bottom on November 20th and/or December 4th. (see chart 3). The decline shown from mid-December until the middle of January could be a false one, like it was last August (cycle reversal).
Weekly, long term cycles suggest a decline around now followed by a rally into May 2021 (see chart 4)
Dow Jones: major resistance at 30142/30250, it is much higher than current levels (29111 at the time of writing this report); I don’t think it can be reached (see chart 5).
S&P 500: major resistance at 3587/3620, reached in September and again last Monday but failed to close above it (see chart 6). Next major resistance at 3970, if/whenever the recent highs are exceeded.
Nasdaq 100: major resistance at 12413, reached in September and retested last Monday; is the weakest since September (see chart 7).
Expect a short term pullback/correction into November 20th and/or December 4th (higher low?). From there, expect a rally into Christmas and possibly major top in April/May 2021.
Investors are advised to wait for better prices in the next 1-2weeks; traders could take sell signals against last Monday’s highs as early as tomorrow.