Weekly Elementary US Shares Forecast: Bullish
- For merchants who’ve been embracing the ‘purchase the dip’ mentality, it might be the case that now that the November choices expiry is within the rearview mirror, the all-clear sign has been given.
- Seasonality research going again 20-years present that the ultimate two weeks of November, coupled with the beginning of December, mark the interval of the yr when US fairness markets are inclined to rally probably the most aggressively.
- The IG Client Sentiment Indexmeans thatUS shares have a bullish bias within the near-term.
US Shares Week in Overview
It was a combined week for US fairness markets, a typical prevalence presently of the yr. The US S&P 500 added a mere +0.35%, whereas the tech-heavy US Nasdaq 100 gained +2.36%, and the small-cap targeted US Russell 2000 misplaced -2.80%. Whereas November has been the perfect month of the yr for US shares in current reminiscence, it simply so occurs that the center two weeks of the month have a tendency to supply sideways/consolidative worth motion.
Seasonality Favors Speedy Upside in US Fairness Markets
For merchants who’ve been embracing the ‘purchase the dip’ mentality, it might be the case that now that the November choices expiry is within the rearview mirror, the all-clear sign has been given.
The week of the Thanksgiving vacation in america in addition to the next week have traditionally produced sturdy good points for US fairness markets, in what’s the starting of the colloquial interval referred to as the ‘Santa Claus rally.’
Seasonality research going again 20-years present that the ultimate two weeks of November, coupled with the beginning of December, mark the interval of the yr when US fairness markets are inclined to rally probably the most aggressively, per information gathered from EquityClock.com.
US S&P 500 Seasonality: DAILY TIMEFRAME (20-year common) (CHART 1)
US Nasdaq 100 Seasonality: DAILY TIMEFRAME (20-year common) (CHART 2)
US Russell 2000 Seasonality: DAILY TIMEFRAME (20-year common) (CHART 3)
With US actual GDP monitoring above +8% annualized in 4Q’21 per the Atlanta Fed GDPNow development tracker, in addition to a continued sturdy company earnings surroundings per steering issued in the newest spherical of earnings experiences, there are good causes to imagine that the subsequent leg larger in US inventory markets is across the nook.
Financial Calendar Week Forward
It’s no shock that the truncated Thanksgiving vacation week will see a lowered financial calendar. Importantly, US fairness markets are closed on Thursday, whereas Friday will see a restricted session with markets closing at 13 EST/18 GMT.
– On Monday, November 22, the October US Chicago Fed nationwide exercise index shall be launched forward of the money fairness open, whereas October US present dwelling gross sales shall be made public 30-minutes after buying and selling begins.
– On Tuesday, November 23, the November US Markit manufacturing PMI flash shall be reported 15-minutes after the money fairness open.
– On Wednesday, November 24, there’s a information deluge as reporting businesses are closed thereafter in recognition of the Thanksgiving vacation. Forward of the money fairness open, weekly US MBA mortgage purposes and weekly US jobless claims figures shall be launched, as will the October US sturdy items orders report, the second estimate for 3Q’21 US GDP, and the October US commerce stability.
US S&P 500 PRICE VERSUS COT NET NON-COMMERCIAL POSITIONING: DAILY TIMEFRAME (November 2020 to November 2021) (CHART 4)
Subsequent, a glance at positioning within the futures market. In line with the CFTC’s COT information, for the week ended November 16, speculators elevated their net-long US S&P 500 futures positions to 110,617 contracts, up from the 100,245 net-lengthy contracts held within the week prior. The futures market is holding close to 52-week highs established three weeks in the past.
IG CLIENT SENTIMENT INDEX: US S&P 500 PRICE FORECAST (November 19, 2021) (CHART 5)
US 500: Retail dealer information exhibits 38.47% of merchants are net-long with the ratio of merchants brief to lengthy at 1.60 to 1. The variety of merchants net-long is 1.34% decrease than yesterday and a couple of.31% decrease from final week, whereas the variety of merchants net-short is 1.24% larger than yesterday and 5.55% larger from final week.
We sometimes take a contrarian view to crowd sentiment, and the actual fact merchants are net-short suggests US 500 costs could proceed to rise.
Merchants are additional net-short than yesterday and final week, and the mixture of present sentiment and up to date modifications provides us a stronger US 500-bullish contrarian buying and selling bias.
— Written by Christopher Vecchio, CFA, Senior Strategist