Where might you invest as the year winds down and holiday spending kicks into high gear? A look at historical seasonality trends might help you figure out which sectors tend to outperform in the final months and into the new year.

To begin, the first step is to open up your S&P Sector ETFs ChartLists. If you don’t have an S&P Sectors ChartList, it’s time to create one. My ChartList includes the ETFs listed in the Sector Summary Dashboard panel.

Consumer Discretionary (XLY)Financials (XLF)Communications (XLC)Industrials (XLI)Technology (XLK)Real Estate (XLRE)Utilities (XLU)Energy (XLE)Consumer Staples (XLP)Materials (XLB)Health Care (XLV)

In the View List As dropdown menu on your ChartList, select Seasonality. When your seasonality chart pops up, you can then select each chart in your sector ChartLists.

Because this is an election year, I am setting each chart to a 10-year lookback period (from 2015 to 2024) to capture three election years. I also view each sector relative to the S&P 500 ($SPX) to set a benchmark comparison (you can set this at the bottom of your seasonality chart in the Compare Symbol To box).

Top Two Sectors to Watch from November to January 2025

If you thought Consumer Discretionary spending might spike from the holiday season to January (considering the beginning of the Q4 earnings season), the results might surprise you.

Remember, we’re looking at entire sectors, not individual stocks that might outperform their sector peers. That said, the two sectors that pop out in a seasonality analysis relative to the S&P 500 are Financials (XLF) and Communications Services (XLC). Take a look at XLF’s seasonal performance (see image below).

FIGURE 1. 10-YEAR SEASONALITY CHART OF XLF. October and November are the strongest months for the Financials relative to the broader market.Image source: StockCharts.com. For educational purposes.

If you bought XLF in August, then you are on the right side of seasonality. November happens to be the strongest seasonal month of the year relative to the broader market. While seasonality alone shouldn’t be the only reason to invest in a given sector, the fundamental and political contexts affecting financials happen to align. Let’s take a look at a daily chart of XLF.

FIGURE 2. DAILY CHART OF XLF. The Bullish Percent Index in the top panel should buying pressure. The divergence in money flow between the On Balance Volume and the Chaikin Money Flow indicates retail traders may be driving prices higher.Chart source: StockCharts.com. For educational purposes.

The Bullish Percent Index (BPI) for the financials sector is soaring above 70%, representing the percentage of stocks experiencing bullish P&F breakouts. However, a BPI over 70% also suggests that the index may be overbought.

Note the divergence between the On Balance Volume (OBV) and the Chaikin Money Flow (CMF). While both measure buying pressure, the CMF can reflect “smart money” activity, since it tracks buying/selling pressure relative to daily price ranges, often capturing institutional accumulation or distribution patterns. If OBV rises while CMF declines, that may signal that retail buyers are driving prices up while institutions quietly sell, suggesting potential weakness in the uptrend.

If you’re expecting a pullback, perhaps to enter or add to an existing position, look to the 20-day and 50-day simple moving averages (SMAs) for a potential bounce. Otherwise, watch support at $46 (see blue dotted line). A close below this level could invalidate the uptrend, fulfilling its seasonal weakness heading into January.

The other outstanding seasonal sector chart was XLC, a proxy for the Communications Services sector.

FIGURE 3. SEASONALITY CHART OF XLC. The January profile reflects an interesting observation.Image source: StockCharts.com. For educational purposes.

This chart is extraordinary.

Over the last 10 years, XLC has had 100% higher closes relative to the S&P 500 in January.Its average return, relative to the S&P 500, has been 3.1%, marking its strongest relative seasonal month.

November and December may be weak, but they’re the perfect setup for a strong January. But will January 2025 repeat this historical pattern? Shift over to a daily chart for a closer look.

FIGURE 4. DAILY CHART OF XLC. XLC has a similar profile as XLF in that it looks overbought. There could be a pullback in price.Chart source: StockCharts.com. For educational purposes.

Like financials, XLC’s BPI is extremely bullish at nearly 87%, yet this level (over 70%) warns of potential overbought conditions.

The OBV and CMF are also diverging, hinting that retail investors may be driving prices higher, while the smart money may be holding back. Given the seasonality context of a weak November (which, so far, it isn’t) and a tepid December, you might expect XLC to pull back, giving you a strong setup for a January 2025 surge.

Watch the 20-day- and 50-day SMAs as potential support levels in this case. More importantly, keep a close eye on the two swing points at $91.50 and $90, indicated by blue dotted lines on the chart. A close below $90 could signal significant weakness and, unless institutional buying pressure increases, the risk of further downside remains high.

A Few Tips and Tricks

I’ve demonstrated a few ways to use Seasonality Charts to identify seasonality in stocks and sectors.

Drill Down on the Seasonality to Prepare, but Not to Predict: Seasonality charts give you historical context to inform the likelihood of a sector performing a certain way if similar seasonal factors influence the market again. Seasonality is NOT a predictor, but an indicator of possible outcomes that certain factors may historically skew.Check Sector ETFs Daily Charts: If you’re interested in investing in sector ETFs, then check the daily chart to see if there are any viable entry points.Drill Down to the Stock Level: If you’re looking at sectors to spot individual stocks, proceed to the stock level. You may want to repeat the process above, as individual stocks may also have their own seasonality depending on factors like earnings cycles, industry-specific trends, or recurring market events.

However, many other ways to apply seasonality charts to your analysis exist. Check out the StockCharts support page on Seasonality Charts and explore how to apply this tool to your analysis.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

In this video from StockCharts TV, Julius pulls the curtain back on the updated Relative Rotation Graphs that are now available on the StockCharts website. He demonstrates a myriad of new features, including alignment of the intraday time frames with SharpCharts/ACP, zoom and position control with your mouse, and increased flexibility with selecting and/or highlighting tails. Julius finishes with a brief update on the S&P 500 chart after the elections.

This video was originally published on November 11, 2024. Click anywhere on the icon above to view on our dedicated page for Julius.

Past videos from Julius can be found here.

#StayAlert, -Julius

Good morning and welcome to this week’s Flight Path. Equities saw the “Go” trend continued this week and price gapped higher after some weaker aqua bars. We now see GoNoGo Trend painting strong blue bars at new highs. Treasury bond prices remained in a “NoGo” trend but the week ended with a weaker pink bar. The U.S. commodities index saw a strong end to the week as bright blue “Go” bars returned and the dollar likewise saw strength with strong blue “Go” bars the second half of the week.

$SPY Gaps Higher on Strong Blue “Go” Bars

The GoNoGo chart below shows that after some weakness that saw price fall from the last Go Countertrend Correction Icon (red arrow), price gapped higher on Wednesday and prices soared to new highs in the aftermath of the election. GoNoGo Oscillator was able to recover positive territory after having fallen into negative territory the week before. Now, with the oscillator in positive territory at a value 4 on heavy volume, we know that momentum is on the side of the “Go” trend once again.

A new higher weekly close was painted on the chart this past week. After a couple of consecutive lower closes after the recent Go Countertrend Correction Icon (red arrow), we saw price surge to a new higher close. GoNoGo Oscillator had been falling toward the zero level but reversed course sharply this week and is now breaching overbought territory at a value of 5. We will see how much higher price can go from here. We will look for it to at least consolidate at these levels going forward.

Treasury Rates Cool after Higher High

Treasury bond yields saw the “Go” trend continue this week but we saw a little weakness creep in with GoNoGo Trend painting an aqua bar. This comes after we saw a Go Countertrend Correction Icon (red arrow) indicating that price may struggle to go higher in the short term. We will watch to see if price finds support here and sets a new higher low. GoNoGo Oscillator has fallen to test the zero line from above and we know that if the “Go” trend is to remain healthy it should find support at that level. If it can rally back into positive territory then we will know that momentum is resurgent in the direction of the underlying “Go” trend.

The Dollar Jumps Higher

Last week we saw some weakness in the “Go” trend as the indicator painted a string of weaker aqua bars following a Go Countertrend Correction Icon (red arrow). This Icon warned us that price may struggle to go higher in the short term. As price fell from its most recent high, we turned our attention to the oscillator panel. GoNoGo Oscillator fell to test the zero level and quickly found support as volume increased (darker blue of oscillator line). Now, with price making new higher highs and GoNoGo Trend once again painting strong blue bars we know that momentum is resurgent in the direction of the “Go” trend.

Today Carl compares this week’s Trump Rally with the rally we saw after Reagan was elected in 1980. There are similarities and differences. The Trump rally has lifted certain sectors of the market as well as Cryptocurrencies. While the Reagan rally had different catalysts.

The market continues to make new all-time highs. Carl gives us the full analysis picture as he covers the market in general as well as Bitcoin, Gold, the Dollar and many more.

It is time for another review of the Magnificent Seven in the short and intermediate terms. Some are positioned well while others are showing weakness.

Erin covers sector rotation with a special study of the small-cap stocks that are soaring higher on the Trump election. Are overbought conditions a problem? Overbought conditions can persist in a bull market move and that is exactly what we have right now.

The pair finish the program looking at viewer symbol requests which were heavy on Semiconductors. How do they compare with NVDA?

Join us live on Mondays at Noon ET by registering to attend at https://us06web.zoom.us/webinar/register/WN_D6iAp-C1S6SebVpQIYcC6g

We love doing the free trading room, but we do have to make a living! Contemplate getting a subscription to the DP Alert which sets the table for all of your trades! Click to subscribe now! https://www.decisionpoint.com/products.html

Use coupon code: DPTRIAL2 to get two free weeks of any subscription!

01:33 Trump Rally vs. Reagan Rally

06:21 Market Overview

14:41 Magnificent Seven

21:15 Sector Rotation and Small-Caps

29:42 Symbol Requests

Introducing the new Scan Alert System!

Delivered to your email box at the end of the market day. You’ll get the results of our proprietary scans that Erin uses to pick her “Diamonds in the Rough” for the DecisionPoint Diamonds Report. Get all of the results and see which ones you like best! Only $29/month! Or, use our free trial to try it out for two weeks using coupon code: DPTRIAL2. Click HERE to subscribe NOW!

Learn more about DecisionPoint.com:

Watch the latest episode of the DecisionPointTrading Room on DP’s YouTube channel here!

Try us out for two weeks with a trial subscription!

Use coupon code: DPTRIAL2 Subscribe HERE!

Technical Analysis is a windsock, not a crystal ball. –Carl Swenlin

(c) Copyright 2024 DecisionPoint.com

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.

DecisionPoint is not a registered investment advisor. Investment and trading decisions are solely your responsibility. DecisionPoint newsletters, blogs or website materials should NOT be interpreted as a recommendation or solicitation to buy or sell any security or to take any specific action.

Helpful DecisionPoint Links:

Trend Models

Price Momentum Oscillator (PMO)

On Balance Volume

Swenlin Trading Oscillators (STO-B and STO-V)

ITBM and ITVM

SCTR Ranking

Bear Market Rules

Enjoying these HUGE rallies is much easier when you have confidence the stock market is in a secular bull market and heading higher. It also helps when you enter a period of historical strength – the absolute best strength that we see anytime throughout the calendar year. This combination can be extremely powerful and we saw that combo result in surging U.S. equity prices last week. If we look at a daily RRG that includes our major indices and all sectors, you’ll see where the relative strength was:

I highlighted the relationship between consumer discretionary (XLY) and consumer staples (XLP) and you can see rather clearly the direction that each was headed on a relative basis last week. I’ll get to the significance of that in just a second, but I want to first highlight ALL of the areas in the leading and weakening quadrants. Remember, even those stocks in the weakening quadrant show relative strength. Leaders will sometimes pause in this quadrant before returning to the leading quadrant. This RRG highlights the areas of strength over the past few days (since Election Day):

If you’re a momentum trader, the above RRG is your cheat sheet.

There are plenty of trading strategies and scans to uncover solid opportunities. One very simple scan to consider is:

This is a scan of small and mid cap industrials stocks with average volume recently over 200,000 shares and excellent relative strength, at least based on StockCharts Technical Rank (SCTR) scores.

This scan returned 46 stocks, which is quite manageable, in my opinion. Here are the 10 returned having the highest SCTR scores:

These charts all look great, but many are very extended and overbought currently. I’d prefer keeping them on a Watch List and waiting for a pullback to perhaps rising 20-day EMAs before entering. Instead of buying companies with extended charts, here’s one that just made a key breakout:

ERJ is one of the best stocks in its industry group – aerospace ($DJUSAS). I believe it’s important to stick with industry leaders while their relative strength is in an uptrend. Once that reverses, it’s time to find new leaders.

We’ve been planning for this type of rotation to small caps, mid caps, financials, and industrials, and our two key portfolios, Model and Aggressive, illustrate beautifully the difference it makes when you’re positioned perfectly:

Our current quarter runs from August 19th through November 19th. We “draft” equal-weighted stocks in each portfolio every 90 days, which we’ll be doing again in a little over a week. Our Model Portfolio has TRIPLED the S&P 500 over the past 3 months and more than doubled the S&P 500 over the past 6 years. The Aggressive Portfolio, which typically invests in small and mid cap stocks, has absolutely exploded higher this quarter as these asset classes have become preferred groups. It’s on the verge of quadrupling the S&P 500 return. 25% return in a quarter goes a LONG way in helping you meet your financial goals.

Currently, the new leaders are as I spelled out earlier. You MUST take advantage of these opportunities when they present themselves. Next Saturday, November 16th, at 11:00am ET, I’m hosting a 100% FREE webinar, “Capitalizing on Small Cap and Mid Cap Strength”. CLICK HERE to register NOW and save your seat. Seating will be limited, so don’t miss out!

Happy trading!

The markets continued to stay tentative over the past five days while continuing to trade with a weak undertone. The Nifty digested the reaction to the US election outcome. There were two days of a strong technical rebound; this was sold into subsequently which kept Nifty in a broadly defined range. The trading range was wider; the Nifty oscillated in a 721-point range. Volatility cooled off; the India VIX declined by 6.95% to 14.47 through the week. Following a ranged trade with a weak underlying bias, the headline index closed with a net weekly loss of (-156.15) points or (-0.64%).

The markets are not out of the woods as yet from a technical perspective. The Nifty has violated the 20-week MA which currently stands at 24775. This level also coincides with an extended trendline which initially acted as a support but now acts as a resistance. Below this point, there are other several resistance levels as well. The 100-day MA is placed at 24709 and a short-term 20-day MA is placed at 24486. All these combined, the Nifty has created a 250-point resistance zone between 24500-24750 levels. This would mean that all technical rebounds will start facing turbulence the moment the index this zone. The resistance levels have been dragged lower. On the downside, major pattern support exists at 23800; if this is violated, it will make the markets weaker than what they are today. This keeps the Nifty in a broad, but well-defined trading zone.

Monday is likely to see a quiet start to the week. The levels of 24300 and 24485 are likely to act as probable resistance points for Nifty. The supports come in at 23960 and 23800 levels. The trading range is likely to stay wider than usual.

The weekly RSI stands at 49.50; it stays neutral and does not show any divergence against the price. The weekly MACD is bearish and stays below its signal line.

The pattern analysis of the weekly charts suggests that the Nifty remains in a corrective downward trajectory. The recent downward move has also dragged the resistance levels lower for the Index. Presently, the markets have multiple resistance levels nestled in the zone of 24500-24750. With the immediate pattern support existing at 23800, the Nifty remains in this wide but well-defined trading zone.

All and all, the markets are likely to see intermittent technical rebounds over the coming days. However, it would be important to be mindful of the fact that a sustained rally is unlikely so long as Nifty does not move past the 24500-24750 zone. Until this zone is taken out, Nifty is unlikely to see any runaway rally. Therefore, during all such technical rebounds, as and when they occur, it would be crucially important to mindfully protect the gains at higher levels. Rather than giving such rebounds a mindless chase, it would be necessary to vigilantly guard positions at higher levels. The markets remain susceptible to selling pressure at higher levels. A cautious outlook is advised for the coming week.

Sector Analysis for the coming week

In our look at Relative Rotation Graphs®, we compared various sectors against CNX500 (NIFTY 500 Index), which represents over 95% of the free float market cap of all the stocks listed.

Relative Rotation Graphs (RRG) show that the Financial Services index has rolled inside the leading quadrant. The Nifty IT, Services Sector, and the Pharma indices are also inside the leading quadrant. These groups are likely to continue to relatively outperform the broader Nifty 500 Index.

The Nifty Consumption index has rolled inside the weakening quadrant. Besides this, the FMCG and the MidCap 100 indices are also inside the weakening quadrant and may continue giving up on their relative performance.

The Nifty Auto, Commodities, Energy, Media, Infrastructure, Realty, and PSE indices are inside the lagging quadrant. These groups may relatively underperform the broader markets.

The PSU Bank Index has rolled inside the improving quadrant. The Nifty Metal and the Nifty Bank Index are also inside the improving quadrant. They may continue bettering their relative performance against the broader markets.

Important Note: RRG™ charts show the relative strength and momentum of a group of stocks. In the above Chart, they show relative performance against NIFTY500 Index (Broader Markets) and should not be used directly as buy or sell signals.  

Milan Vaishnav, CMT, MSTA

Consulting Technical Analyst

www.EquityResearch.asia | www.ChartWizard.ae

In this StockCharts TV video, Mary Ellen presents a deep dive into last week’s sharp rally in the markets. She highlights what areas could perform best under a Trump administration and how to spot a pullback. She takes a close look at the “New Economy” and how best to capitalize.

This video originally premiered November 8, 2024. You can watch it on our dedicated page for Mary Ellen on StockCharts TV.

New videos from Mary Ellen premiere weekly on Fridays. You can view all previously recorded episodes at this link.

If you’re looking for stocks to invest in, be sure to check out the MEM Edge Report! This report gives you detailed information on the top sectors, industries and stocks so you can make informed investment decisions.

Another packed week for the stock market has come to a close. The broader stock market indexes broke out of their sideways trading range with the S&P 500 ($SPX), Nasdaq Composite ($COMPQ), and Dow Jones Industrial Average ($INDU) closing the week out at record levels.

The US election results and the Federal Reserve’s decision to cut interest rates by 25 basis points are now in the rearview mirror. When Jerome Powell took the podium on Thursday, he made it clear that the Federal Open Market Committee (FOMC) remains focused on their dual mandate of maximum employment and price stability.

Bond Market Action Is Key

The 10-Year US Treasury Yield Index ($TNX) closed at 4.31% on Friday, which is significantly higher than its September low of 3.61%. Bond prices, which move inversely to yields, fell due to possible economic growth and inflation under the new administration.

The weekly chart of the iShares 20+ Year Treasury Bond ETF (TLT) may be flirting with its 50-week simple moving average (SMA), but it’s trending to the downside. For as long as economic growth, inflation, and a widening budget deficit remains in play, bonds are likely to continue trading at low levels.

CHART 1. WEEKLY CHART OF THE ISHARES 20+ YEAR TREASURY BOND ETF (TLT). Bonds have been struggling of late and is likely to remain low for a while.Chart source: StockCharts.com. For educational purposes.

Volatility in stocks and bonds have also declined. Bond volatility measured by the MOVE Index ($MOVE) which is displayed in the lower panel in the above chart, fell significantly this week. This is an important indicator to monitor, as it can give an early signal of a turn in market action.

The Cboe Volatility Index ($VIX) also fell and closed just below 15 for the week. On Wednesday, the VIX fell over 20%, which shows that going into the elections, there was uncertainty among investors. Once the election results were known, the anxiety dissipated, as seen by the action in the VIX.

With an upward trend in stocks and a low VIX, investors are in a sweet spot. There’s no reason to be bearish now unless some unknown event resurfaces, which is always a possibility. If you’re holding long positions, hang on to them, but when there’s a pullback, use it as an opportunity to add more positions. Or maybe you’ve made enough profits, and you want to sell some of your positions. It all depends on your financial objectives and risk tolerance level.

Small-Cap Stocks Getting Saucy

Small-cap stocks have been interesting this week. After breaking out of a sideways trading range, the S&P 600 Small Cap Index ($SML) had a massive upside breakout (see chart below). The long green candle followed by the two small body days could end up being a Rising Three Methods candlestick pattern. The fourth and fifth days need to form before the pattern is confirmed. So save this chart to your ChartLists and see what happens Monday and Tuesday next week. 

CHART 2. DAILY CHART OF THE S&P 600 SMALL CAP INDEX ($SML). After breaking out of a sideways trading range, $SML had a massive upside move. This move could continue depending on how the daily bars play out in the next two trading days.Chart source: StockCharts.com. For educational purposes.

Market breadth continues to favor a bullish move, with 77% of the $SML stocks trading above their 50-day moving average. The Advance-Decline Percent is relatively stable.

Taking a Cue from the US Dollar

There have been some sharp moves in the US dollar. The US Dollar Index ($USD), which tracks the US dollar against a basket of major currencies, spiked on Wednesday, pulled back on Thursday, and resumed its uptrend on Friday (see the chart below). This move is based on anticipating tariffs, which will strengthen the US dollar.

CHART 3. US DOLLAR INDEX ($USD) SPIKES. The rise in the US Dollar Index is in anticipation of tariffs on imported goods. Monitor it closely for early indications of shifts in stock market action.Chart source: StockCharts.com. For educational purposes.

The US dollar is another chart to monitor closely. Like the $MOVE, $USD can give an early indication of shifts in market action.

Next week, we will receive some key inflation data coming out, although they may not impact the market much. The market has probably already priced in inflation expectations.

If you want to be notified of new articles published in the ChartWatchers blog, sign up on this page.

End-of-Week Wrap-Up

S&P 500 up 4.66% for the week, at 5995.54, Dow Jones Industrial Average up 4.61% for the week at 43,988.99; Nasdaq Composite up 5.74% for the week at 19,286.78$VIX down 31.72% for the week, closing at 14.94Best performing sector for the week: Consumer DiscretionaryWorst performing sector for the week: Consumer StaplesTop 5 Large Cap SCTR stocks: Applovin Corp. (APP); Summit Therapeutics (SMMT); Redditt Inc. (RDDT); Palantir Technologies (PLTR); Ubiquiti, Inc. (UI)

On the Radar Next Week

October Consumer Price Index (CPI)October Producer Price Index (PPI)Powell and other Fed member speechesOctober Retail Sales

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

First of all, for those of you looking for a new video this week, I have intentionally skipped it because I didn’t want to make a video right before such an important event with much uncertainty.

After the elections, which were obviously eventful, I wanted to see what the market’s reaction would be and let the dust settle down before diving into any analysis, which might have been too preoccupied and presumptuous too early.

However, it’s now Friday, the end of the week, and we have a little more color on how markets have responded to the election results.

It’s time to see what the sector rotation is telling us and how the chart of the S&P 500 has changed—because it has definitely changed!

The S&P 500’s Post-Election Reversal

If you look at that chart right now with the annotations, which were the cornerstone of my view, I have to say that it was a little conservative going into the elections. This has now pretty much turned around.

On the chart, a very clear island reversal is now visible.

We have the gap down on the 31st of October, followed by three more or less sideways days, which took SPY to a low of just around 567.

On November 5th, election day, the market closed at the high, followed by a massive gap up the day after.

It was not only a gap up but also a move above the S&P 500’s all-time highs.

So we have a massive gap up. We have an island reversal, which completed just above pretty important support around 565, and we now already have two days of good follow-through.

That is a strong sign. This market wants to go higher, at least in the near term.

If we switch to the weekly chart for SPY, those mild divergences between the RSI and price and the MACD and price are still visible, but the price action itself is so strong that it cannot and should not be negated.

So, at least in the near term, this market wants to go higher. For now, corrections holding above support around 585 (the former peak) should be regarded as buying opportunities.

Reversals In Sector Rotation

On the relative rotation graph for the 11 S&P sectors above, I have intentionally set the tail length at six trading days. That means that each tail has seven nodes, and the 4th node, so the middle one, is the 5th November.

This allows us to see the 3 days leading up to election day and then the 3 days after election day.

As you can see, most of the tails have continued to travel in the direction they were already heading.

The most prominent ones are consumer discretionary and communication services, which entered and moved further into the leading quadrant.

On the other side is the utility sector, which accelerated further into the lagging quadrant.

Sectors with Notable Changes

I want to highlight a few sectors that really changed direction, where we saw a change in detail before and after election day.

The two sectors with the most prominent changes are financials and health care.

This first RRG shows the tails for both sectors ending on the 5th of November.

Financials Sector (XLF)

If we zoom in on the tail for XLF, you can see that it ended November 5th just inside the weakening quadrant. It just crossed over from leading to weakening.

And then, in the 3 days after November 5th, it completely reversed course and is now almost back into the leading quadrant.

Health Care Sector (XLV)

The same sort of move is visible on the other side of the chart for the healthcare sector, XLV.

On November 5th, XLV had just crossed into the improving quadrant and was on a positive heading.

In the 3 days after, the sector completely reversed course and is now back into the lagging quadrant at a negative heading.

XLP and XLRE rolling over

Other sectors where we see a change in the course of the tail are consumer staples, which was inside the improving quadrant but hooked back down, rolled over, and is now back into the lagging quadrant, and real estate, which was also inside the improving quadrant but rolled over and is now accelerating into the lagging quadrant.

The technology sector changed course a bit, but not as clearly as the other sectors.

It is still right around the 100 level on the RS ratio scale and very close to the benchmark without a very clear direction.

The Big Winners Post-Election

I think the biggest winners from these election results with good potential going forward are consumer discretionary, XLY, and Communication Services, XLC.

XLY is obviously led by TSLA, which is distorting the performance of the consumer discretionary sector with an almost 27% gain in 3 days. But consumer discretionary stocks have picked up roughly between 3% and 7% across the board, which still indicates strength.

The communication services sector is slightly more evenly spread out and has a good base and a good foundation to move higher and push further into the leading quadrant.

Conclusion

All in all, the market as a whole seems to have reversed its course. After only a very mild corrective move, it has now started a new up leg in the existing uptrend.

The sectors that have come out on top are consumer discretionary and communication services, followed by financials.

All 3 are on the right-hand side of the RRG, either already inside the leading quadrant or almost there, and traveling at a positive RRG heading.

On the opposite side, the sectors with a less favorable outlook are health care, consumer staples, and utilities.

Overall, the sector rotation has now shifted from defense back to offense.

#StayAlert, and have a great weekend. –Julius

The risk-on sentiment has returned to the stock market. Stocks traded significantly higher ahead of the open on Wednesday after former President Trump’s victory. With the uncertainty of the election results out of the way, investors were ready to pile back into equities. All broader US equity indexes saw strong upside movement, and the Cboe Volatility Index ($VIX) fell, closing at around 16 (see screenshot of the Market Overview Dashboard Panel below).

FIGURE 1. THE STOCKCHARTS MARKET OVERVIEW DASHBOARD PANEL. All equity indexes closed significantly higher, while the VIX dropped.Image source: StockCharts.com. For educational purposes.

The stock market had priced in a Trump victory, but investors were clearly waiting for the result before adding more positions, although we saw signs of a head start on Tuesday ahead of the results. The strong upside move was apparent during the trading day, and the indexes closed near their highs.

The biggest gainer was the S&P 600 Small Cap Index ($SML), which closed higher by 6.09%. Its big move is worth studying more closely, since it broke out of a trading range it has been in since mid-September (see daily chart below).

FIGURE 2: DAILY CHART OF THE S&P 600 SMALL CAP INDEX. The index broke through its trading range and gapped up. Market breadth is also positive.Chart source: StockCharts.com. For educational purposes.

The percentage of S&P 600 stocks trading above their 50-day moving average is at a healthy 78%, and the advances vs. declines also show increasing market breadth.

What’s behind the move in small-cap stocks? A boost in financial stocks. Financial stocks comprise a large fraction of $SML, and, with the possibility of deregulation and tax cuts on the horizon, the small-cap index spiked. 

Financials Sector Leads

Financials were the leading sector in Wednesday’s trading. The StockCharts MarketCarpets of the Financials sector clearly show that many banks saw strong gains.

FIGURE 3. BANKS SAW LARGE PERCENTAGE INCREASES IN THEIR STOCK PRICE.Image source: StockCharts.com. For educational purposes.

This is clear in the chart of the KBW Bank Index ($BKX). Its performance relative to the S&P 500 ($SPX) jumped to 25.8%.

FIGURE 4. BANK STOCKS RISE. Wednesday’s massive surge is worth monitoring, as it could benefit bank stocks. Chart source: StockCharts.com. For educational purposes.

It may be worth considering adding bank stocks to your portfolio, especially when they pull back and until interest rates rise.

Crypto, US Dollar, Yields Rally

Cryptocurrencies are also rallying. $BTCUSD has broken out of its consolidation pattern with momentum (see weekly chart below).

FIGURE 5. BITCOIN SOARS. Bitcoin to US Dollar broke out of its consolidation pattern and the MACD shows rising momentum.Chart source: StockCharts.com. For educational purposes.

The moving average convergence/divergence (MACD) indicates bullish momentum as the MACD line crosses above the signal line.

The US dollar and Treasury yields spiked after Trump’s victory. This move could be in anticipation of an inflationary environment ahead. If inflation rises, the Fed may have to pivot and raise rates. We’ll probably not hear anything about that in Jerome Powell’s presser on Thursday. Still, it’ll be one to listen to, especially for clues of what could be in store for December. If bond prices continue to fall (bond prices move opposite to yields), expect a tapering in interest rate cuts by the Fed.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.