Nov Setup: Bullish Seasonality, But Watch Breadth & Valuations

TopdownCharts
11-03

Learnings and conclusions from this week’s charts:

  • The S&P500 $S&P 500(.SPX)$ did +2.27% in Oct (6th monthly gain in a row).

  • Following 6-months in a row of gains, another gain is more likely than not.

  • Seasonality is also bullish in November (historically best month of the year).

  • Surging profit margins (for tech) help explain extreme highs in valuations.

  • Profit margins tend to peak before stocks (n.b. no peak observed as yet*).

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Overall, as outlined below, there sure seems to be a statistical slant towards another month of gains in November. Yet never to be satisfied with a 1-sided synopsis: bad breadth, statistical tails, and increasingly expensive valuations suggests you ought not to get too complacent either.

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