NOVEMBER is the second month of Quarter Four. It is the first of six months on the DJIA’s and S&P500’s “best six months” of the trading year and NASDAQ’s first of eight best months. It is also the second-half of Q4’s Earnings Season for Q3’s results.
November 2020 has 19 trading sessions and one public holiday. November tends to start out bullish in the first week and finishes the week stronger. Then it starts to swing a little bit at the start of the second week, ends the second week bullish, starts the third week bullish before another correction ahead of Expiration Friday which is usually quite bullish. The month then tends to become very bullish in the final week before Thanksgiving and closes out the month in very bullish fashion.
In the last decade, November has been bullish eight years out of the ten (on DJIA) with the couple of losses in 2010 (-1.03%) and 2012 (-0.56%). Eight of the last ten years were up including a huge gain in 2016 (+5.31%) and gains of more than 3% in 2013 (+3.39%), 2017 (+3.54%) and 2019. Average gains for the eight years are +2.59%. Last year, October 2019 finished with a handsome +3.35% gain.
The last twenty years’ statistics read a little more different with 14 of the 20 years bullish and 6 of the 20 bearish. The Novembers of 2001 and 2002 were astoundingly bullish in spite of the Dot.com crash, gaining +8.41% and 5.97% respectively.
Average gains during that decade for the years 2001, 2002, 2004, 2005, 2006 and 2009 were +4.92% while average losses were -2.42% for 2000, 2003, 2007 and 2008.
For the two decades (2000 to 2019), average gains have been +3.59% while average losses were -2.69%.
If there is a reason to be optimistic, it would have to be because of the Black Friday/Cyber Monday Christmas Sales which have been the catalyst for starting many a bull run. This year, Black Friday is on 27 November and Cyber Monday is on 30 November.
Traditionally, if the sales of the current year are better than the previous year, the bull run begins. If the sales are worse than the previous year, the market gets volatile and even bearish.
Since its inception in February 1998, the November returns on the SPDR Dow Jones Industrial Average ETF (DIA) have been 77.27% of the time for an average gain of +3.69% while offering 27.27% for a -2.87% declination.
The SPDR S&P 500 Trust’s (SPY) 27 year record for November is 70.37% for an average gain of +3.85% while offering 29.63% for a -2.98% declination.
The sectors for being bullish in November are:
- Homebuilders (XHB, 85.71% for an average gain of +4.04%, average losses at (14.29% of the time) a -14.80% declination, mostly attributed to the 2008 crash) over 22 years since January 1999
- Industrials (XLI, 80.95% at +4.40%, -4.17%) which tells you that the very few times (19.05%) it went down, that downside was very nasty since March 2006
Then come three with similar reliability factors;
- Basic Materials (XLB, 76.19% at +4.92%, -4.20%) since January 1999
- Cyclicals (XLY, 76.19% at +3.96%, -3.94%) since January 1999
- Healthcare (XLV, 76.19% at +3.72%, -3.77%) since January 1999
Telecommunications (IYF) is as bearish as they get in November, 45.00%/55.00% (+3.95%/-3.43%) and not surprisingly so, being one of the most defensive sectors on the list.
The common sense approach that Retail (XRT) tends to do well as a result of Black Friday/Cyber Monday sales in these two months of November and December is actually not accurate and only applies to specific industries within the Retail sector. Overall, XRT is disappointing at 57.14%/42.86% (+5.77%/-5.95%) in November and 50.00%/50.00% (+3.65%/-3.65%) in December.
WEEK 45: 02 TO 06 NOVEMBER 2020
- Sunday, November 01, 2020 – Daylight Saving Time Ends (U.S. Markets will, thereafter, open at 22:30pm SG and MY and close at 05:00am SG and MY)
- The first trading day of November has been down on the DOW 7 of the last 15, last year up (+0.75%).
- Tuesday, November 3rd is Election Day
- Friday, November 5th – FOMC Minutes, Monetary Policy Decision
According to our 5, 10 and 15 year seasonal models for the Benchmark ETFs (DIA, SPY, QQQ):
Benchmarks Indices ($DJIA, $SPX, $COMP) (21 year average) for Week 45:
- $DJIA, $SPX and $COMPQ can be expected to be bullish on Monday and Tuesday, more bullish on Wednesday, extremely bullish on Thursday and quite bullish on Friday.
• • • • •
WEEK 46: 09 TO 13 NOVEMBER 2020
- The second week sees a few mild swings down and up and is mostly divergent and uneventful
- Wednesday, November 11 is Veteran’s Day
According to our 5, 10 and 15 year seasonal models for the Benchmark ETFs (DIA, SPY, QQQ):
Benchmarks Indices ($DJIA, $SPX, $COMP) (21 year average) for Week 46:
- $DJIA is normally bullish on Monday, bearish on Tuesday and Wednesday and bullish again on Thursday and Friday.
- $SPX is expected to be bearish from Monday to Wednesday, then bullish on Thursday and bearish again on Friday.
- $COMPQ is usually bullish on Monday, bearish on Tuesday, bullish on Wednesday and Thursday and bearish on Friday.
• • • • •
WEEK 47: 16 TO 20 NOVEMBER 2020
- Monday before November Expiration has been up on the DOW 11 of the last 16 (last year up +0.40%)
- The week before Thanksgiving has been up on the DOW 20 of the last 27 (2019 up +1.54%)
- November Expiration Friday has been up on the DOW 14 of the last 18 (last year up +0.58%)
According to our 5, 10 and 15 year seasonal models for the Benchmark ETFs (DIA, SPY, QQQ):
Benchmarks Indices ($DJIA, $SPX, $COMP) (21 year average) for Week 47:
- $DJIA ang $SPX are expected to be bullish on Monday and Tuesday, bearish on Wednesday and Thursday and bullish again on Friday.
- $COMPQ is usually bearish on Monday, bullish on Tuesday, bearish on Wednesday then bullish on Thursday and very bullish on Friday.
• • • • •
WEEK 48: 23 TO 27 NOVEMBER 2020
- The week after November Expiration/Thanksgiving Week can get very bullish
- Thursday, 26 November is Thanksgiving Day – Markets are closed
- Friday, 27 November is a Shortened Trading Day – Market will close at 13:00 EST.
According to our 5, 10 and 15 year seasonal models for the Benchmark ETFs (DIA, SPY, QQQ):
Benchmarks Indices ($DJIA, $SPX, $COMP) (21 year average) for Week 48:
- $DJIA, $SPX and $COMPQ can be expected to be quite bullish on Monday, more bullish on Tuesday, bullish on Wednesday (Thursday is a holiday) and quite bullish on Friday (half trading day).
• • • • •
WEEK 49: 30 NOVEMBER TO 04 DECEMBER 2020
- Last trading day of November has been down on S&P 13 of the last 21
- First trading day of December has been up on NASDAQ 21 out of the last 32 but down 8 of the last 13
- The first week of December tends to be flat, divergent and uneventful.
According to our 5, 10 and 15 year seasonal models for the Benchmark ETFs (DIA, SPY, QQQ):
Benchmarks Indices ($DJIA, $SPX, $COMP) (21 year average) for Week 49:
- $DJIA is normally mildly bullish on Monday, bearish on Tuesday and Wednesday, bullish on Thursday and bearish on Friday.
- $SPX is expected to be bearish from Monday to Wednesday, Bullish on Thursday and bearish again on Friday.
- $COMPQ is usually bearish on Monday, bullish on Tuesday and Wednesday and more bullish on Thursday and Friday.
October 2020 Washes Out
Last month …
After marking DFDMs across all the major indices at their highs at the start of week 43, the market fell in weeks 43 and 44. The VIX and the Dollar did the opposite thing.
US Indices – Thursday, 29 October, 2020, AMC (DFDMs in yellow)
On the year-to-date (YTD), DJIA, TRAN and RUT registered negative for the year while SPX, DJT and RUI were very close to being negative YTD by the close of Thursday 29 October. Only NASDAQ showed any real positive value YTD. However, all the benchmarks closed below their respective 50DSMAs with the VIX and the Dollar doing the opposite. The VIX has risen to (overnight) above 40.00.
US Indices – Thursday, 29 October, 2020, AMC
Then, during lunchtime in the Asian session on Friday 30 October, things started falling apart …
The Nikkei 225, Shanghai Composite and the Hang Seng along with most of the other Asian markets closed at or near their lows of the day.
Then the US markets opened deep in the red with the DJIA plunging lower than -500 points before recovering to only lose -157 points in the worst week since March this year.
The indices closed the month in the red with the DJIA and SPX registering their second straight month of losses since February-March this year.
- Dow Jones Industrial Average -7.1% YTD (down for the week -6.4%)
- Nasdaq Composite +21.6% YTD (down for the week -7.1%)
- S&P 500 +1.2% YTD (down for the week -6.1%)
- Russell 2000 -7.8% YTD (down for the week -6.1%)
MACROECONOMIC UPDATE
Singapore joined Japan and Iran as the third country to fall into three negative quarters of YonY growth.
Hong Kong and Saudi Arabia are fourth quarters in negative growth, Argentina are also on four but also eight out of its last nine quarters have been negative. Mexico have five straight negative quarters.
Venezuela has been in negative growth since Q1, 2014 (21 quarters). Their last decline was a -26.8% contraction, the worst in their history.
U.S. (and most of the major European nations) bounced right back with an expected blow-out QonQ growth number …
… however, the YonY contraction persists and is still an ominous number especially when unemployment is still very high.
Last month, I said;
“Although there are more reasons to be bullish, the stand out stat is the January Barometer and the December Low indications which have a 100% accuracy in the last four decades unless the government intervened with stimulus as were the cases in 2003, 2009 and 2012 … Too much noise and very low volumes are never a good mix for the market and its bulls. Once again, caution is the watchword for the month. Take the ride up by all means but be ready to switch opinions because October is never a month to take your eye off the ball.”
The issue with low volumes from September (October Effect) continued into October and into the start of Q3’s earnings season while stimulus talks stalled and remain in doubt. Earnings, while most are beating estimates, have been underwhelming based on the previously revised-down guidance from a quarter ago. Most revenues have fallen in spite of job cuts and draw downs since March this year.
After a few months of decreasing cases, COVID-19 is making it obvious that a second wave could be happening when numbers almost everywhere suddenly increased in October. The spike was serious enough for France and Germany to start locking down their countries while other European nations are working out their own immediate measures.
While the immediate future still looks like a bounce off this October low, the longer term economic health of most of the developed world still looks bleak. The presence of a second coronavirus wave that seems to be steeper and quicker than in February, raises the issue of supply disruptions once again. I don’t think the world can take another round of what happened in Q1 this year.
I’m still unconvinced about buying and will remain bearish until something truly positive comes along. I can’t see that happening in the coming month, not after what we’ve seen on 2020, and I won’t be committing too much to the table until I am sure that most of the silly money is gone. The first test is to wait and see how committed they still are if they buy this dip without cause or concern.
Happy Hunting!!
Copyright© 2020 FinancialScents Pte Ltd
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
• • • • •
Write to conrad@finscents.com for queries and further information
