5 Monster Stock Market Predictions For The Week Of Nov. 29, 2021

The day after Thanksgiving tends to be a great day for stocks, and this time of the year is usually a great time to be fully invested. After all, stocks are cheap, trading at 21 times NTM earnings estimates, the highest levels since the late 1990's.

Never mind that the five-year long-term growth rate for the S&P 500 is at its highest rate since 1985. Never mind that only 368 or the 505 companies in the S&P 500 contribute to that long-term growth, its lowest amount ever, which probably means that the long-term growth rate is entirely and utterly inaccurate.

So now that we have established that valuations in the market are not insanely higher but based on incomplete data, we can rest easy knowing that we have seasonality and passive flows to keep the bull market soaring.

Don’t worry about the Fed that is tapering and may taper even faster, or a market that is tightening financial conditions as a result, or slowing global growth, or even overly inflation GDP growth forecast; none of that matters. We have seasonality.

Until we don’t have seasonality, and it turns against you, then we can say it’s a holiday trading session. There is a lack of liquidity, and the shortened trading session is to blame for the 2.2% decline in the S&P 500 on Friday, Nov. 26.

Sadly, Friday had anything but a liquidity problem; volume for the half-day trading session was off the charts. Nearly 2 million S&P 500 e-minis traded on Friday, which is a lot for a market that closed at 1 p.m. The S&P 500 cash fell to support at 4590 and held that region to finish the day.

Meanwhile, the momentum indicators turned bearish on Friday, with the MACD, advance/decline line, and RSI breaking lower. The index finished close enough to the lower Bollinger band to suggest the index isn’t even oversold yet.

It looks the 2b top was also confirmed by the S&P 500 on Friday, and with an unfilled gap at around $435 on the SPY and the cash SPX, that is probably where this market is heading. That is about 5% lower than where the index and ETF closed on Friday, and given that there was no material reason for the index to go up in October to begin with, there need be no material reason for the index to fall back to 4350 either.

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Disclaimer: Mott Capital Management, LLC is a registered investment adviser. Information ...

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