(11/23/20) The Ongoing Bull Market Trend

Last week we posted a slight loss in the QQQ, DIA, & SPY and slight gain (.48%) in the NYSE and 2.08% gain in the Russell 2K IWM. The weekly loss in the SPY was half of last week’s gains and we did not close below the prior week’s lows, states John Person of PersonsPlanet.com.

All the major averages are well above the monthly open print. This suggests we only underwent a pullback in an ongoing bull market trend. I have stated before and believe we could see a mild pullback, though we can “gyrate and rotate higher now through year's end.” This belief was and is based on my longer-term technical work.

Thanks to the fundamental news in the last two weeks of pharmaceutical companies’ announcements. Especially after last Monday’s news that Pfizer applied for FDA approval for a Covid vaccine. Another company, Moderna suggested their work is days, if not weeks, away from submission to the FDA. These companies along with Eli Lilly and Regeneron are providing breakthroughs in both therapeutic treatments and vaccines. That is the great news, and the world should be thanking President Trump for initiating Operation Warp Speed. The bad news is the vaccines will not be ready for a nationwide distribution for several months, if not the end of Q1 of 2021. That means Americans will be subjected to both voluntary and mandatory lockdowns in certain cities and States.

That’s not good news economically in the near term, especially for small business and particularly restaurants ahead of the Christmas holiday shopping season. However, I still stand by my comments for the past few weeks that I am more confident to buy specific companies, but once again I will reiterate… “at good price points and “fair valuations,”

Technically speaking:

1.) Weekly Persons Pivots remains with bullish outlook (blue above gold) in SPY, QQQ, IWM, DIA, & NYSE.

2.) The 10-day ATR continued to decline last week.

3.) The OBV readings from daily and weekly are supportive in SPY and very supportive for the IWM.

4.) Breath analysis supported last week’s move with a new high in the weekly AD readings in NYSE & IWM.

5.) The daily McClellan Oscillator is near less overbought, the weekly readings remain above the zero line.

6.) All the major averages closed greater than the prior week’s lows and are all way above the monthly open print.

This week, I would hope to see a lower open and higher close by Monday if not by “Tuesday turn around.” Seasonally speaking, the day before and the day after Thanksgiving tend to be strong as well as end of month and into the first week of December. If we see follow-through weakness on Monday, pay close attention to how the market trades near the weekly Persons Pivot support levels (351.50 in SPY). This should provide a good spot for entering long positions in the stock index ETFs.

One more interesting “decoupling” event taking place is the relationship between Utilities (XLU), bonds (30 year), and the dollar. An interesting observation to point out, the last time this occurred was around the 2016 election. I will look to monitor this in the days and weeks to come as it would be disturbing to see a further decline in the dollar. It would suggest lower rates to come in 2021 as the market anticipates a more negative yield curve and/or money exiting the US, which may not be that bullish for US equities next year. This might be one reason the emerging market ETF (EEM) has been very strong and breaking out to new highs lately.

Here is the current positions we have taken and prices I am looking to add to our trading accounts.

Current positions:

Option Strategy: Long Morgan Stanley (MS) March 19th Exp. 55/65 bull call spread paid $2.45.
Option Strategy: Long SPDR S&P 500 (SPY) Jan. 15th Exp. 362 / 372 bull call spread paid $3.85.
Option Strategy: long Nikola (NKLA) Jan. 15th Exp. 30 strike call paid 3.45.
Option Strategy: long Overstock.com (OSTK) Jan. 15th Exp. 70/85 bull call spread, paid 3.70.
Long full position in Junior Gold Miners (GDXJ) avg. price $41.46 with Dec.18th exp. 51 Put (partial collar).
Long full position in Walgreens (WBA) $39.22 using Jan. $32.50 put option in lieu of stop.
Long 50% position in Marathon Petroleum Corp. (MPC) $36.58, working orders to add 50% at $35.94, stops at 34.21.
Long 50% position in Jet Blue (JBLU) $14.15, working orders to add 50% at $14.22, stop at $12.43.
Long 50% position in Phillips Van Heusen (PVH) at $78.30, working orders to add 50% at $72.94, stops at $67.41.
Long 50% position in Dell Computers (DELL) at $67.68, working orders to add 50% at $66.38, stops at $63.31.
Long 50% position in Schlumberger (SLB) at $19.80, working to add 50% at $19.38, stops at $17.62.