The recent consolidation in Gold may be ending, leading to the next uptick following this summer’s breakout from a massive bottoming pattern.

Stock Market Outlook for December 4, 2019

The recent consolidation in Gold may be ending, leading to the next uptick following this summer’s breakout from a massive bottoming pattern.

Real Time Economic Calendar provided by Investing.com.

*** Stocks highlighted are for information purposes only and should not be considered as advice to purchase or to sell mentioned securities. As always, the use of technical and fundamental analysis is encouraged in order to fine tune entry and exit points to average seasonal trends.

Stocks Entering Period of Seasonal Strength Today:

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Gildan Activewear, Inc. (TSE:GIL.TO) Seasonal Chart

United Corp.s Ltd. (TSE:UNC.TO) Seasonal Chart

Turquoise Hill Resources Ltd. (TSE:TRQ.TO) Seasonal Chart

Utah Medical Products, Inc. (NASD:UTMD) Seasonal Chart

Chartwell Retirement Residences (TSE:CSH/UN.TO) Seasonal Chart

Viacom Inc – Class B (NASD:VIAB) Seasonal Chart

Redwood Trust, Inc. (NYSE:RWT) Seasonal Chart

Cogeco, Inc. (TSE:CGO.TO) Seasonal Chart

Upcoming BNN Appearance:

I will be on BNN’s Market Call Tonight at 6:00pm ET today (Wednesday, December 4th) taking your calls on Technical Analysis and Seasonal Investing. CALL TOLL-FREE 1-855-326-6266, EMAIL marketcall@bnnbloomberg.ca, or TWEET @MarketCall.

The Markets

Stocks sold off on Tuesday following comments from Donald Trump who indicated that he may want to delay a trade deal with China until after the election. The S&P 500 Index closed down by two-thirds of one percent, which was half of the loss that was recorded at the lows of the session. The large-cap benchmark gapped below its rising 20-day moving average during the session, placing this previous short-term level of support in a position of resistance. As noted in our previous report, the benchmark triggered a number of sell signals on Monday, setting the market up technically for a pullback of some sort. That pullback is now underway. The key hurdle to watch on the downside is previous resistance around 3025, any levels above which would warrant a bullish bias in stocks through year end. In the Seasonal Advantage Portfolio that we manage in partnership with CastleMoore, we took profits in 30% of our equity positions on Monday and are now looking for opportunities to redeploy our cash in positions that have fallen in value.

With a trade deal once again in doubt, defense was back in favour on Wall Street. Utilities and REITs were the few sectors to close in the green on Tuesday. Treasury bonds caught a bid, propelling the widely traded 20+ Year Treasury ETF (TLT) to levels back above its 50-day moving average. And gold bounced from a short-term bottoming pattern, adding almost 1% on the day. Cyclical sectors of energy, industrials, consumer discretionary, and financials, on the other hand, saw losses in excess of one percent. We’ve been suggesting that the boat was likely to tilt back in a defensive manner for the past few weeks as complacency and bullish sentiment is corrected. The catalyst to obtain this shift has been achieved. In recent months, many of these defensive areas had merely consolidated gains achieved in the summer, suggesting hesitation amongst investors to give up on bearish bets. We included Gold as an enticing trade in our monthly report sent out to subscribers at the end of November. The trade just got that much more appealing with the re-escalation of market uncertainties. Subscribe now and we’ll send you our monthly outlook, which contains insight on how to position your portfolio for the month ahead.

One of the proxies of investor risk-sentiment that we like to refer to pertains to the action in the bond market, particularly the relative performance of junk bonds relative to investment grade corporates. The ratio between the two ETFs that track these segments of the bond market has been in decline for over a year, even breaking below significant support in the summer. Over the past few months, the ratio rebounded back to that broken horizontal support and has since been rejected, leading to the continuation of the trend of lower-lows and lower-highs. Not only is this ratio an indicator of risk sentiment in the bond market, but it also applies well to the risk sentiment of the equity market, often acting as a leading indicator to broad market moves. Obviously, investor hesitation to accumulate these riskier bets speaks poorly of companies that have their debt relegated to junk status, mainly those in cyclical sectors. We’ll continue monitoring this indicator accordingly.