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Link for this issue: https://tradingdiary.incrediblecharts.com/2020-10-17-markets.php
 

S&P 500, Stoxx selling pressure

First, please read the Disclaimer.

There is so much political noise leading up to the election that we will try to stick to the hard data.

Daily new COVID-19 cases in the US are rising, reaching 69,160 on Friday.

USA: Daily New COVID-19 Cases

Total persons claiming unemployment benefits remains high, at 25.3 million. That is 16.6% of the Feb 2020 workforce, or almost one in six workers, on unemployment.

Total Claims for Unemployment Benefits

The S&P 500 is holding above support at 3400 but bearish divergence on Twiggs Money Flow continues to warn of selling pressure. Hopes for a stimulus deal are fading and we expect another test of support at 3200.

S&P 500

In Europe, declining Money Flow on the DJ Euro Stoxx 600 warns of similar selling pressure. Breach of support at 350 would indicate another test of primary support at 270.

DJ Euro Stoxx 600

Conclusion

A stimulus deal would help to support current stock prices but this grows increasingly unlikely as the November election approaches. Our long-term outlook for the S&P 500 and Stoxx 600 in Europe is bearish. A COVID-19 resurgence is expected to exacerbate already high levels of unemployment and, with declining benefits, would be likely to cause an economic contraction.

Quote for the Week

This decade is strewn with examples of bright people who thought they built a better mousetrap that could consistently extract abnormal returns from the financial markets. Some succeed for a time. But while there may occasionally be mis-configurations among market prices that allow abnormal returns, they do not persist.

~ Alan Greenspan

Disclaimer

Colin Twiggs is director of The Patient Investor Pty Ltd, an Authorised Representative (no. 1256439) of MoneySherpa Pty Limited which holds Australian Financial Services Licence No. 451289.

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