Stock Market Outlook for February 8, 2013
Upcoming US Events for Today:
- The Trade Balance for December will be released at 8:30am. The market expects -$46.0B versus -$48.7B previous.
- Wholesale Inventories for December will be released at 10:00am. The market expects an increase of 0.4% versus an increase of 0.6% previous.
Upcoming International Events for Today:
- China Consumer Price Index for January will be released at 12:30am EST. The market expects a year-over-year increase of 1.9% versus an increase of 2.5% previous. China PPI is expected to show a year-over-year decline of 1.7% versus a decline of 1.9% previous.
- German Trade Balance for December will be released at 2:00am EST. The market expects 14.8B versus 14.5B previous.
- Canadian Housing Starts for January will be released at 8:15am EST. The market expects 195.0K versus 198.0K previous.
- Canadian Labour Force Survey for January will be released at 8:30am EST. The market expects a net change in employment of 5.0K versus 31.2K previous. The unemployment rate is expected to tick higher to 7.2% from 7.1% previous.
- Canadian Trade Balance for December will be released at 8:30am EST. The market expects -1.45B versus -1.96B previous.
Recap of Yesterday’s Economic Events:
|AUD Employment Change||10.4K||6.0K||-3.8K|
|AUD Unemployment Rate||5.40%||5.50%||5.40%|
|AUD Full Time Employment Change||-9.8K||-13.9K|
|JPY Leading Index||93.4||93.6||92|
|JPY Coincident Index||92.7||92.6||90.2|
|GBP Industrial Production (MoM)||1.10%||0.90%||0.20%|
|GBP Industrial Production (YoY)||-1.70%||-2.00%||-2.40%|
|GBP Manufacturing Production (MoM)||1.60%||0.80%||-0.30%|
|GBP Manufacturing Production (YoY)||-1.50%||-2.40%||-2.00%|
|EUR German Industrial Production s.a. (MoM)||0.30%||0.20%||-0.20%|
|EUR German Industrial Production n.s.a. and w.d.a. (YoY)||-1.10%||-0.50%||-3.10%|
|GBP Bank of England Rate Decision||0.50%||0.50%||0.50%|
|GBP BOE Asset Purchase Target||375B||375B||375B|
|EUR European Central Bank Rate Decision||0.75%||0.75%||0.75%|
|CAD New Housing Price Index (MoM)||0.20%||0.10%||0.10%|
|CAD New Housing Price Index (YoY)||2.30%||2.20%||2.20%|
|USD Non-Farm Productivity||-2.00%||-1.40%||3.20%|
|USD Unit Labor Costs||4.50%||3.00%||-2.30%|
|CAD Building Permits (MoM)||-11.20%||5.00%||-14.50%|
|USD Initial Jobless Claims||366K||360K||371K|
|USD Continuing Claims||3224K||3197K||3216K|
|GBP NIESR Gross Domestic Product Estimate||0.00%||-0.30%|
|USD EIA Natural Gas Storage Change||-118||-127||-194|
|USD Consumer Credit||$14.595B||$14.000B||$15.905B|
|JPY Trade Balance – BOP Basis (Yen)||-Â¥567.6B||-Â¥560.6B||-Â¥847.5B|
|JPY Current Account Balance (YoY)||-199.40%||-154.30%||-276.40%|
Markets drifted lower on Thursday, impacted by a stronger US dollar following comments from ECB President Mario Draghi who indicated that risks to the Euro-Zone economy remain to the downside. Draghi commented on the recent rise in the Euro and the negative impacts resulting on the European economy, stating “we will certainly want to see if the appreciation, if sustained, alters our risk assessment as far as price stability is concerned.” The ECB held steady on its already accommodative policy, forecasting “a gradual recovery in the second part of this year.” The Euro fell by almost 1% putting upward pressure on the US Dollar and downward pressure on risk assets, such as commodities. The European currency remains within a positive intermediate trend channel and major moving averages continue to point higher, suggesting further appreciation in the currency ahead. The effect of a stronger Euro would put downward pressure on the US Dollar, allowing risk assets priced in the domestic currency to flourish.
As noted yesterday, momentum indicators, such as MACD and RSI, for the broad equity markets have started to roll over, suggesting that some caution is warranted as the market attempts to consolidate and/or correct. The NYSE Summation index, another momentum indicator, is confirming the declining momentum, rolling over from a peak at the end of January. Certain instances have revealed that this gauge of momentum is a leading indicator of market strength/weakness, peaking and troughing well before that of the market. The gauge is just one indicator for your technical tool-chest and should not be taken in isolation as a signal to buy or sell. The Summation index showed similar signs of curling lower this time last year, peaking in February and trending lower until June. The market, however, continued to push gradually higher until the end of March/beginning of April, even with negative divergences becoming evident for a number of momentum indicators. So there continues to be a number of similarities to last year’s market activity, which suggests that the gains may not be over just yet; no significant indications have been revealed that the strongly positive market trend has peaked.
Risk aversion continues to be prominent within the market activity as investors take some risk off the table. As pointed out earlier this week, defensive equities (Consumer Staples, Health Care, and Utilities) are outperforming the broad market, while cyclicals are showing signs of lagging. The bond market is getting in on this defensive action as well, rotating from high-yield junk bonds to investment grade corporates. Investors are clearly taking risk down, booking profits from the strong market trend over the past few months and rotating into assets that will protect portfolio gains. Many of the bullish trends had become significantly overbought over the past month and the recent retracements are already making healthy progress in correcting a very stretched condition. Seasonal weakness in the month of February could lead to some appealing entry points for the remainder of the six month positive seasonal trend that peaks in May.
Sentiment on Thursday, as gauged by the put-call ratio, ended bearish at 1.03. The chart of the ratio is suggesting a change in trend from that of a negative (bullish) trend to a positive (bearish) trend as investors seek the safety of put-options in order to protect portfolio positions. The more bearish investors become in puts, the less downside risk is presented as it mitigates the pressure to sell stocks.
S&P 500 Index
Chart Courtesy of StockCharts.com
Chart Courtesy of StockCharts.com
Horizons Seasonal Rotation ETF (TSX:HAC)
- Closing Market Value: $13.31 (down 0.37%)
- Closing NAV/Unit: $13.36 (down 0.32%)
|2013 Year-to-Date||Since Inception (Nov 19, 2009)|
* performance calculated on Closing NAV/Unit as provided by custodian
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