Investors have gone into the US Thanksgiving holiday in a good mood with a combination of more positive vaccine news, the start of a US presidential transition and the nomination of the market-friendly former Fed Chair Janet Yellen to become the Treasury Secretary in a Biden administration sending several indices including the Dow Industrials and the S&P 500 to new all-time highs. It appears at this point that investors are prepared to look past the potential for near-term lockdowns toward longer-term solutions to the COVID problem as some of the most heavily impacted sectors this year were among the leaders this week including hotels, airlines, movie theatres and energy. Even within sectors that have been recovering such as retailers, some of the lagging areas such as department stores took over leadership this week. Retailers may remain in focus over the next few days as we enter what has historically been one of the busiest shopping periods of the year between Black Friday and Cyber Monday. This year, investors may look not only to overall sales levels, but also the split between in-person and online sales amid growing restrictions. Financials have also attracted more attention lately and could again in the coming week, particularly north of the border with the six biggest Canadian banks scheduled to report earnings between December 1 and December 3. Many of the big US banks slowed the growth of (and in some cases outright decreased) loan loss provisions when they reported results back in October, and investors may be watching to see if Canadian banks due the same. Comments about the health of the economy and results from trading/asset management divisions may also attract attention. In addition to retail sales reports, the turn of the month next week also brings a flurry of economic reports including Manufacturing and Service PMI surveys, and monthly payrolls numbers. In this week’s issue of Equity Leaders Weekly, we take a look at the significance of this week’s breakouts in the Dow Jones Industrial Average and the Crude Oil price.
This has been a momentous week for the Dow Jones Industrial Average (DJI.I) which closed above 30,000 for the first time. The Index had paused following a spring/summer rally, but recent breakouts through previous highs and the completing of a bullish Spread Double Top pattern indicate that accumulation has resumed. Even more importantly, the breakout in the Dow Industrials has been confirmed by a breakout to new highs by the Dow Transports a classic bullish Dow Theory signal. Confirmations have also come from breakouts by broader indices including the S&P 500, S&P 400 MidCap, S&P 600 SmallCap and the Russell 2000. Not only are the troops following the generals higher, but recent gains have come from a broad variety of sectors including Industrials, Financials and Consumer Discretionary in addition to catch up plays such as Energy. Next potential upside resistance levels for the Dow Industrials include 30,785, 31,715, and 32,355, all of which are based on vertical and horizontal counts. Initial support appears between 28,700 and 29,000 around a recent breakout point and a 3-box reversal.
Crude oil (CL.F) has staged a major breakout this week, which has also helped to reignite interest in Energy stocks. Reeling from a massive crash and big bounce in the first half of this year, CL.F spent June to November, trading in a range between $36.00 and $44.00.Earlier this month, the oil price started to break down, falling toward $35.00 but in recent weeks, has caught a big tailwind and come under renewed accumulation. In recent weeks, oil has completed several bullish breakouts including a Spread Triple Top, snapped a downtrend line, and regained $45.00, all combining to signal the start of a new uptrend. Initial upside resistance appears in the $50.00 to $51.00 area where a round number, horizontal count and previous column low cluster, followed by $52.90 where a previous support level converges with a horizontal count. Oil may remain active in the coming week with OPEC Plus scheduled to meet on December 1 to discuss potentially postponing production increases which had been planned for January 1.
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