U.S. Equity Weekly Fundamental Forecast: Near-Term Gains Still Possible

US Equity Weekly Fundamental Forecast: Neutral

  • Seasonality studies of the last 5, 10 and 20 years show that November is one of the best months of the year for US equities, with the second half of the month producing the majority of the gains during the month.
  • U.S. stock markets may continue to trade higher in the near term as long as U.S. Treasury yields — and Fed bullish ratings — don’t resume their ascent.
  • The IG Customer Opinion Index suggests that US stocks have a short-term bullish bias.

Recommended by Christopher Vecchio, CFA

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US stocks week in review

It was an exceptionally strong week for U.S. equity markets as decelerating price pressures, according to the October U.S. Inflation Report, eased concerns that the Reserve would continue to aggressively hike rates. federal. United States S&P500 rebounded by +5.8%, the United States, very tech Nasdaq 100 gained an impressive +8.65%, and the US small-cap focused Russell 2000 added +4.52%. The combined pullback in short-term US Treasury yields and volatility measures proved key to the rebound in global and US equity markets.

Seasonality favors gains in US stock markets

The first two weeks of November produced rapid gains for US stock markets, in line with historical trends. Seasonality studies going back 5, 10 and 20 years show November is a very strong month for equities. The seasonal pattern, especially heading into the second half of the month, can help provide a strong tailwind during a period when the fundamental backdrop has not changed significantly.

US S&P 500Seasonality: DAILY TIMETABLE (20-year average) (CHART 1)

Source: EquityClock.com

US Nasdaq 100Seasonality: DAILY TIMETABLE (20-year average) (CHART 2)

Source: EquityClock.com

US Russell 2000 Seasonality: DAILY CALENDAR (average over 20 years) (GRAPH 3)

Source: EquityClock.com

With US real GDP tracking at +4% annualized in 4Q’22 according to the Atlanta Fed’s GDPNow growth tracker, coupled with resilient earnings (69% of S&P 500 companies reported a positive EPS surprise and 71% reported a positive earnings surprise, per FactSet), there is reason to believe that U.S. stock markets may continue to trade higher in the near term. The fact is that many fund managers underperformed in 2022, so there may be a tendency to “chase” the markets higher at the end of the year.

Economic calendar week ahead

The mid-November turn promises a relatively lighter U.S. economic calendar, given that the past two weeks have already seen the November Fed meeting, October U.S. jobs report and US GDP report. October US inflation. There are only two “high” releases in the next few days, but the schedule still calls for a steady stream of information Monday through Thursday.

– On Monday, November 14, Tyson Foods will release its premarket results. Fed Governor Brainard will deliver a speech at 4:30 p.m. GMT.

– On Tuesday, November 15, Walmart and Home Depot will release their premarket earnings. The October US Producer Price Index (PPI) is due at 13:30 GMT. Boston Fed Chairman Cook will deliver a speech at 14 GMT. Fed Vice Chairman Barr will testify at 15 GMT.

– On Wednesday, November 16, Lowe’s, TJX Companies and Target will release their premarket earnings. Weekly US mortgage application data will be released at 12:00 GMT. The October US retail sales report will be released at 13:30 GMT. US industrial production figures for October are due at 14:15 GMT. New York Fed President Williams will deliver a speech at 2:50 p.m. GMT. September’s data on US business stocks and November’s NAHB US housing market index will be released at 15 GMT. Fed Vice Chairman Barr will continue his testimony at 15 GMT. Fed Governor Waller will deliver a speech at 7:35 p.m. GMT. US long-term ICT net flow figures for September will be released at 21 GMT. NVIDIA and Cisco Systems will release their after-hours earnings.

– On Thursday, November 17, Alibaba Group will release its pre-market earnings. October US building permits and housing starts are due at 1330 GMT, as are weekly US unemployment claims figures and the Philadelphia Fed US manufacturing index. States in November. Fed Governor Bowman will deliver a speech at 2:15 p.m. GMT, followed by Fed Governor Jefferson at 3:40 p.m. GMT.

– On Friday, November 18, JD.com will release its pre-market results. The October US Conference Board Leading Index will be released at 15 GMT, as will the October US Existing Home Sales report.

Recommended by Christopher Vecchio, CFA

Trading Forex News: The Strategy

US S&P 500 PRICE VERSUS NET COT NON-TRADE POSITIONING: DAILY TIMETABLE (November 2020 to November 2022) (CHART 4)

Next, a look at positioning in the futures market. According to COT data from the CFTC, for the week ended November 8, speculators reduced their net short positions in U.S. S&P 500 futures to 138,734 contracts from 197,860 net short contracts held the previous week. Considering the strong rally that took place after the close of the previous reporting period, it is likely that there will be a dramatic reduction in net shorts in the next report.

CUSTOMER SENTIMENT INDEX IG: US S&P 500 PRICE FORECAST (November 11, 2022) (CHART 5)

US 500: Retail trader data shows 50.55% of traders are net long with a ratio of long to short traders of 1.02 to 1. The number of net long traders is 1.30% lower than yesterday and 20.07% lower than last week, while the number of net-short traders is 0.82% lower than yesterday and 23.98% higher than this week last.

We generally take a contrarian view of crowd sentiment, and the fact that traders are net long suggests that US 500 prices may continue to decline.

Still, traders are net less long than yesterday and compared to last week. Recent shifts in sentiment warn that the current US 500 price trend may soon reverse higher despite traders staying sharp.

Recommended by Christopher Vecchio, CFA

Characteristics of Successful Traders

— Written by Christopher Vecchio, CFA, Senior Strategist

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