Over the past week the Covid 19 Vaccine seems to be coming to the market so to speak. This news ha led to a rotation in the markets. The Mega Tech companies that have outperformed this past year until October, with this Vaccine news, the market is looking past the pandemic and the sectors that have been depressed are now recovering. These Mega Tech stocks are consolidating around this level. Volatility will remain in the markets until the population is immunized. Please keep a level head when initiating trades this week and for the rest of the year.
J. P. Morgan
A good question to ask right now: Is the economy slowing down? Are investors complacent? We here at the Options Edge are cautiously bullish.
This week is the dreaded Quadruple witching week. Noting that the index, futures, stocks, stock futures are all expiring this week. 4 times a year this can mean elevated options premiums. The Fed will also make its final decision of the year on interest rates this week.
As stated, before we are not out of the woods yet. The economy is slowing, again. Here are some reasons
- TSA throughput dropped sharply after Thanksgiving.
- Widespread use of lockdowns.
- The Nov jobs report – low number of job adds since the spring.
- Weekly claims data spiked to levels last seen in September.
So why is the market trending up? Vaccine and stimulus. News that show hope of normalcy is what the market is looking at these days. Caution is the word of the week. Remember two years ago we had a big drop in December right around Christmas. Use pull backs to rotate out of some tech and into sectors that have a better range to move up when the economy begins to really improve.
Happy Monday. Good Luck out there this week.
Global Spotlight
Brexit negotiations progress. In recent days the European Union and the United Kingdom have been unusually optimistic about their trade talks, suggesting a deal may be drawing closer.
The G-20 leaders’ virtual summit. The Nov. 21-22 summit occurs amid great uncertainty, as host Saudi Arabia’s yearlong G-20 presidency culminates during a global economic recovery that may be losing steam as the COVID-19 pandemic resurges and the future of coordinated government support remains unclear.
China and the outgoing Trump administration reach out to key Asia-Pacific players amid the U.S. presidential transition. U.S. National Security Adviser Robert O’Brien on Nov. 20-21 will visit Vietnam followed by a visit to the Philippines.
Stratfor.com
Economic Calendar
Briefing.com has a good U.S. economic calendar for the week. Here are the main U.S. releases.
- Industrial production
- Retail sales
- Import prices
- Flash mfg. and services PMIs
- FOMC meeting
- Housing starts
Briefing.com
Last Weeks Numbers
Review Last weeks numbers here.
Once again, Juan Luque provides us with some words of wisdom from the Incline trading desk:
The S&P 500 Index finished this week down 0.96% amid uncertainty of additional stimulus and increased Covid-19 virus cases. The Energy sector continues being the big winner moving strongly along the improving quadrant with almost a 20% return in the last month. It finished 1.14% up this week accompanied by a 0.10% return for the Communication Services as the only two sectors that were up in the week. The Financials sector is entering the Leading quadrant despite being down slightly for the week. Utilities continues losing momentum and is fast approaching the weakening quadrant with over a 6% loss in the last month.
Earnings
Source I/B/E/S data from Refinitiv
Aggregate Estimates and Revisions
- 20Q3 earnings are expected to be -6.1% from 19Q3. Excluding the energy sector, the earnings growth estimate is -1.9%.
- Of the 499 companies in the S&P 500 that have reported earnings to date for 20Q3, 84.4% have reported earnings above analyst expectations. This compares to a long-term average of 65% and prior four quarter average of 73%.
- 20Q3 revenue is expected to be -0.9% from 19Q3. Excluding the energy sector, the growth estimate is 2.4%.
- During the week of Dec. 14, eight S&P 500 companies are expected to report quarterly earnings.
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