The market uptrend that started in early October, after the markets reached a deeply oversold condition, continues into November despite a complicated political and fiscal situation in Europe and with the US economy facing sluggish growth & double dip recession fears.
Developed economies are striving to "kick the can" as much as they can to avoid a massive develeraging that would stunt growth and raise unemployment for a long time.
As I highlighted last week, the powerful bounce that lead to a historic rally in October made most world markets reach extreme short term overbought conditions. Last week almost 90% of the assets in the market monitor were overbought and over 90% of the SPX stocks were trading over their 50 day MA.
After short but powerful sell off early this week, most world markets are back to a neutral condition as you can see in this week´s market monitor.
Despite the sell off, markets held support and it seems the current up trend will continue. Indexes bounced on Wednesday and Thursday and had a low volume sell off on Friday that closed near the highs.
The current technical uptrend still remains healthy if you look at the charts of the S&P 500 and Nasdaq Composite.
Another positive that is in place for equities is that bullish seasonality is at its peak. Here we can observe a chart of the historical returns of the S&P 500 and from November till the end of the year the index tends to show its best performance.
Sentiment has become more bullish since the market bottom in October. Back then it was extremely negative and comparable to important historic bottoms. Bulls are now a larger percentage when compared to bears but way off extremes that tend to signal important tops.
This week's macro calendar doesn't have data releases that are extremely relevant but a lot of the FED's members will speak. The market will probably be sensible to their comments regarding a future QE3.
The focus will probably remain in European headlines on how effective the measures taken by the EU avoid contagion to other countries are working out.
Bottom Line: I remain cautiously bullish and focused only in the few good setups of stocks with great fundamentals.