Prospects of a Santa Rally

Prospects Of A Santa Clause Rally, An Outperforming Sector, Six Outshining And Three Dull Stocks

23 November 2020

S&P-500 Set For A Santa Clause Rally

The 9 November break above the 10 week triangle resistance, which led the S&P-500 index to a new record high at 3646, has confirmed a multi week bullish continuation structure. This sets the stage for a Santa Clause rally in the weeks ahead. Look for the current up leg to extend into the 3785-3945 area, which constitutes the following projections.

3785 - A 161.8% extension of the 24 September (3209) - 12 October (3550) rally, calculated from the 30 October (3234) low
3832 - A 100% projection of the 15 June (2966) - 2 September (3588) rise, measured from the 24 September low (3209)
3945 - A 200% extension of the 24 September (3209) - 12 October (3550) rally, calculated from the 30 October trough (3234). This level also coincides with an approximate triangle breakout objective

The daily MACD remains bullish and the 14 day RSI is in a neutral bullish territory, suggesting the near term market conditions are not overstretched and there is room for a rally extension. On the Southside, look for the former triangle resistance near 3500 to serve as a solid support, ahead of the quartely moving average just above 3400.

But I want more!!!

Here is one sector outperforming the S&P-500

Industrials Sector Index / S&P500 Relative Performance (Ratio) Chart

The Industrial Sector Index and S&P 500 Index ratio (relative performance) reached a 20 year low amid Coronavirus crises earlier this year. The subsequent seven month consolidation phase has constructed a triangle reversal pattern, which was recently confirmed upon the breakout. Furthermore, the ratio is now holding above the yearly average band for the first time in eighteen months and the MACD buy signal is well intact. This sets a stage for the Industrial Sector/S&P-500 ratio to extend further in the coming weeks and months.

Since early 2020 crash, the S&P-500 Industrials Sector has been in a steady uptrend. However, we notice, the uptrend has been gaining momentum recently. This bodes perfectly with the breakout we noted on the relative performance chart above. Potential is for the current rally to extend up to 15%-20% to test the channel resistance in the 819-882 target area, which consists of Fibonacci projections and the 6 month bull channel resistance. Upon any near term dips, the quarterly average and the bull channel support in the 680-660 should buoy the sector index.

S&P-500 Industrials Sector Index Chart

Six best performing stocks within the Industrials Sector

General Electric (GE)

The General Electric Stock has broken above the key resistance and the yearly average, confirming a bullish chart structure. Initial scope is towards $13, ahead of a move towards $20 in due course.

Deere & Co (DE)

Deere and Company stock price has bee in a secular uptrend and has been outperforming the broader markets and the Industrials sector index for a number of years. Currently the price is within a bull channel. Initial scope is towards &290 ahead of a longer term price target near $350

Traine Technologies (TT)

Traine technologies stock has been one of the solid performers since the March 2020 crash. The stock remains withina bull channel with inital scope towards $180, then possibly higher. The $133-$123 area serves as a solid support and should buoy the price upon any near term weakness.

Xylem Inc (XYL)

The Xylem Inc stock price has seen some impressive price recovery since the market crach earlier this year. The recent break above the former 2020 record high and the subsequent break above the long term uptrend resistance (dotted line) implies bulls are in full control and the stock price has a significant upside potential.

Caterpillar Inc (CAT)

The Caterpiller is one of the outstanding stocks within the Industrials sector universe. The stock was quik to recover following the early 2020 market crash and it has been making new record highs since then. While the channel support and the quarterly moving average just above $150 guards the downside, look for an upside extension towards the projected channel resistance currently near $220.

Parker Hannifin (PH)

Parker Hannifin is another strong performer within the Industrials sector. The stock has started to climb to new record highs after the recent few months of flat price action. This may be a precursur to some wild upside moves in the near future. Nvertheless, the stock is in a long term uptrend and has been consistantly outperforming the Industrials sector index, whgich in turn is outshining the S&P-500 index.

Three stocks in the Industrials Sector to avoid

Northrop Grumman (NOC)

The Northrop Grumman stock price has so far failed to keep up with the other buoyant stocks within the Industrials sector. The share price lacks any bullish momentum and it is below it's key yearly and quarterly averages.

Lockheed Martin (LMT)

While the broader market has seen some remarkable rallies, the Lockheed Martin stock price remains depressed, directionless and lacks any bullish momentum. At the present moment charts do not exhibit any promising outlook.

Roper Technologies (ROP)

Roper technologies showed some remarakable performance right after the March 2020 crash. However, since mid-August the stock price has lost its momentum. It is underperforming rest of the sectorand remains in a bear channel. Best avoided for nor now at least.

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