November 2020

Announcements

(1) Don't forget to check out StockCharts.com's Cyber Monday special, where you can get 16 months of their service for the price of 12. It's only one day and I know many of our EarningsBeats.com members are also StockCharts.com members as well.

(2) An EB Monthly Seasonality Report was sent out over the weekend. Hopefully, you've been able to check that out. In concert with that report, we have an annotated December Seasonality ChartList that's available on our website for you to download into your StockCharts.com account (you must be at least an Extra member, however, to download ChartLists).

Executive Market Summary

• Futures were mixed as we opened the final trading day of November
• The NASDAQ has shown relative strength today, although all of our major indices are lower (the NASDAQ is approaching "even" as I write this)
• Zoom Video Communication (ZM, +1.79%) will be reporting its latest quarterly results after the closing bell today; this could certainly impact many of the growth names that benefited from stay-at-home orders in 2020
• Technology (XLK, +0.68%) is the only sector in positive territory today
• Energy (XLE, -3.91%) and financials (XLF, -1.51%) are weighing on U.S. equities
• Computer hardware ($DJUSCR, +3.20%) and the XLK are getting a lift from Apple (AAPL, +3.46%)
• The 10-year treasury yield ($TNX) is flat after disappointing economic news was reported this morning
• Gold ($GOLD, -0.24%) has rebounded from earlier lows; it seems to be responding much more to VIX movements than it is to dollar movements

Market Outlook

Industrials (XLI) showed tremendous leadership in November and I don't believe it's ended. However, we are seeing some profit taking in this area, so I thought I'd take a quick look at the daily chart for key short-term support:

The green arrow points to the rising 20 day EMA, currently at 85.66. Then there's also gap support at 85.76, so I'd expect to see some buyers show up if the XLI were to fall back into this area. Should stock prices weaken further in December, I've drawn two additional support levels to watch from an intermediate-term perspective. The bottom panel highlights the excellent relative strength of industrials vs. the S&P 500.

Sector/Industry Focus

Semiconductors ($DJUSSC) have an interesting trading pattern that I want to share with you. First, let's look at the current channel on a daily chart, which is quite bullish:

I love semiconductors and they've been market leaders for a long time, but there is one thing to consider based on seasonality. First, let me show you the seasonality numbers, relative to the S&P 500:

For each calendar month, the number at the bottom represents the average outperformance/underperformance of the DJUSSC vs. the S&P 500. If we add up the first month of each calendar quarter (Jan, Apr, July, and Oct), we get outperformance of 3.7%. The second month of each calendar quarter (Feb, May, Aug, and Nov) adds up to 3.8% outperformance. But note the final month of each calendar quarter (Mar, Jun, Sep, and Dec). Those added up total -3.2%. It's as if semis perform very well as they approach their earnings reports and continue to perform well just after their earnings reports. But that third month tends to see the profit taking. December starts tomorrow, so we shouldn't be shocked if semiconductors pause for a few weeks. It's just something to keep in mind.

ChartLists/Strategies

The December seasonality ChartList is now available for download on our website. Here are 3 of our 20 December favorites, both potentially at interesting buy points:

ARE:

MAS:

REG:

Let me be clear. I'm not a huge fan of trading stocks solely because of seasonal tendencies. The three stocks above have different technical reasons for a potential buy, but all have been downtrending relative to their peers. I don't currently own any of these.

Earnings Reports

Here are the key earnings reports for the next two days, featuring stocks with market caps of more than $10 billion. I also include a few select companies with market caps below $10 billion. Finally, any portfolio stocks that will be reporting results are highlighted in BOLD. If you decide to hold a stock into earnings, please understand the significant short-term risk that you are taking. Please be sure to check for earnings dates for any companies you own or are considering owning.

Monday, November 30:

ZM, ATHM, ADNT

Tuesday, December 1:

CRM, BNS, BMO, VEEV, LU, TCOM, HPE, NTAP, MOMO, BOX, HOME

Economic Reports

November Chicago PMI: 58.2 (actual) vs. 59.2 (estimate)

October pending home sales: -1.1% (actual) vs. +2.0% (estimate)

Happy trading!

Tom