November Market Top as Lockdowns Grow

Technical market condition edging into overbought zone:

Stocks are up in Arms over the elections. That is, the ubiquitous Trading Index in financial circles named after Richard Arms in 1967, continues to accurately identify areas of oversold and overbought conditions in the stock market. The Arms Index or TRIN compares a moving average of up and down stocks with up and down equity volume. This Trading Index is a breadth oscillator and has reached overbought and oversold levels slightly ahead of actual peaks and troughs shown here. Current breadth is close to a new overbought profit taking price area for traders which warns against new equity buying and to be ready for selling into early December.

Our core group of proprietary Exec Spec sentiment heavy indicators below continue to lack consensus Buy and Sell readings since April, but currently we are entering a sentiment area that is excessively overbought and the risk of a correction is elevated. While another spurt higher for a few days into the mid 3600’s on the SP is possible, this indicator group hints that downside risk warrants no new buying here as a correction by late November to early December is likely.

After the huge Bull market rebound this spring and summer, technical analysis indicates that market gains will be limited until a more substantial correction occurs. On the downside, Fundamentals support of Fiscal and Monetary guardrails buffer the severity of any stock market corrections of more than 10 to 15% until a Covid free economy can open up in 2021. Our Central Bank will keep interest rates low and print as much liquidity as needed by the economy until a self sustaining economy can bring back full employment and Covid free social mobility.  Any deeper than expected market drops due to a winter of Covid lockdowns will trigger proportionately larger fiscal stimulus efforts to bridge the consumption chasm to a Covid free future. 

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