Tension in the Air- October 2nd, 2020

I was excited to see the indexes rally this week as my charts were leaning that way last week. I was disappointed in the Nasdaq 100 rally failing all day Friday while other areas of the market pushed up. Utilities, REITS, financials and even energy started to rally. Crude oil is down hard, but the oil co’s rallied on Friday? The only sector to end the week in the red was energy – the un-love continues. We have young solar companies with bigger market caps than XOM. Suncor is near the COVID lows with crude $30 higher.

The market flinched a little on news of COVID in the oval office. The same
response happened in Britian with Boris. We’ll see if it continues. Best wishes to the President’s family to get through the illness quickly.

With the election only 30 days away, October is earnings season and that seems to be where the focus is next. The financials charts can’t get any tighter as the KBE is tucked up against the downsloping trend line. Be prepared for earnings from JPM, BAC on the 13th. WFC, C, USB on the 14th. Can they start to rally into the reports this week? Utilities and REIT’s also had big moves on Friday. I’ll be watching to see if this is a rotation towards the defensives.

Regarding breadth, we finally had some nice correlations. Stocks up easily
outpaced the stocks down. The S&P 1500 advance/decline percentage broke the down trend, Bullish Percent data bounced as expected, McClellan Oscillators turned up into positive territory and my strength indicators bounced nicely, signalling the strong potential that the bottom is in.

While Oil struggled (down another 8%), gasoline, heating oil and Natural Gas also dropped. Gold and Silver rallied, but the miners lagged the metal performance, which is a cautionary condition for me. In currencies, the US dollar pulled back 0.8%.

Summary: The tech names are consolidating and look ready to run. Friday’s large cap tech pause was odd. I am looking for financials
to rally into the earnings cycle. Lots of action in the renewables space. Sign up for the EV newsletter on the website.

Let’s jump into the charts. Click on the image below to view the full newsletter in PDF format.