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Stock Market Outlook for March 8, 2013

Todays_Markets

Upcoming US Events for Today:

  1. The Employment Situation for February will be released at 8:30am.   The market expects the Non-Farm Payrolls to increase by 171K versus 157K previous.   Private Payrolls are expected to increase by 195K versus 166K previous.   The unemployment rate is expected to tick down to 7.8% from 7.9% previous.
  2. Wholesale Trade for January will be released at 10:00am.   The market expects a month-over-month increase of 0.4% versus a decline of 0.1% previous.

 

Upcoming International Events for Today:

  1. German Industrial Production for January will be released at 6:00am EST.   The market expects a year-over-year decline of 1.0% versus a decline of 1.1% previous.
  2. Canadian Housing Starts for February will be released at 8:15am EST.   The market expects 172,000 versus 160,577 previous.
  3. Canadian Labour Force Survey for February will be released at 8:30am EST.   The market expects employment to gain by 8,000 versus a decline of 21,900 previous.   The Unemployment Rate is expected to tick up to 7.1% versus 7.0% previous.
  4. China Consumer Price Index for February will be released at 8:30pm EST.   The market expects a year-over-year increase of 2.9% versus an increase of 2.0% previous.   Producer Price Index is expected to show a year-over-year decline of 1.5% versus a decline of 1.6% previous.

 

Recap of Yesterday’s Economic Events:

Event Actual Forecast Previous
AUD Trade Balance (Australian dollar) -1057M -500M -688M
JPY Bank of Japan Rate Decision 0.10% 0.10% 0.10%
JPY Leading Index 96.3 96.1 93.2
JPY Coincident Index 92 92.8 92.3
CHF Unemployment Rate 3.40% 3.40% 3.40%
CHF Unemployment Rate s.a. 3.10% 3.10% 3.10%
EUR German Factory Orders s.a. (MoM) -1.90% 0.60% 1.10%
EUR German Factory Orders n.s.a. (YoY) -2.50% 1.60% -1.90%
GBP Bank of England Rate Decision 0.50% 0.50% 0.50%
GBP BOE Asset Purchase Target 375B 375B 375B
USD Challenger Job Cuts (YoY) 7.00%   -24.40%
USD RBC Consumer Outlook Index 47.1   49.5
EUR European Central Bank Rate Decision 0.75% 0.75% 0.75%
EUR ECB Deposit Facility Rate 0.00% 0.00% 0.00%
USD Trade Balance -$44.4B -$42.6B -$38.1B
CAD International Merchandise Trade (Canadian dollar) -0.24B -0.60B -0.33B
USD Non-Farm Productivity -1.90% -1.60% -2.00%
USD Unit Labor Costs 4.60% 4.30% 4.50%
CAD Building Permits (MoM) 1.70% 5.30% -10.40%
USD Initial Jobless Claims 340K 355K 347K
USD Continuing Claims 3094K 3120K 3091K
USD EIA Natural Gas Storage Change -146 -131 -171
USD Household Change in Net Worth $1174B   $1722B
USD Consumer Credit $16.151B $14.700B $15.100B
NZD Manufacturing Activity 0.00%   1.70%
NZD Manufacturing Activity Volume s.a. (QoQ) 1.50%   2.50%
JPY Gross Domestic Product (QoQ) 0.00% 0.10% -0.10%
JPY Gross Domestic Product Annualized 0.20% 0.20% -0.40%
JPY Nominal Gross Domestic Product (QoQ) -0.30% -0.30% -0.40%
JPY Gross Domestic Product Deflator (YoY) -0.70% -0.60% -0.60%
JPY Current Account Total (Yen) -Â¥364.8B -Â¥611.5B -Â¥264.1B
JPY Adjusted Current Account Total (Yen) ¥364.6B ¥112.2B ¥114.7B
JPY Trade Balance – BOP Basis (Yen) -Â¥1479.3B -Â¥1512.3B -Â¥567.6B
JPY Current Account Balance (YoY) -19.90% 31.00% -199.40%

 

The Markets

Markets continued to push higher on Thursday as better than expected jobless claims helped fuel the continuation of the breakout rally.   Initial Claims fell by 7,000 in the most recent week, better than the expected 11,000 increase forecasted by analysts.   The four-week average, a less volatile read of this weekly economic statistic, also declined by 7,000 to 348,750, the lowest since March 2008, prior to the “death-grip” caused by the recent recession.   The market has received a series of better than expected economic reports in the US over recent weeks, lifting the market off of the late February lows and influencing key benchmarks to new highs, despite the uncertainties surrounding the sequester.

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Equity benchmarks continued to chart new multi-year or all-time highs on Thursday, maintaining the firmly positive trend that has been intact since the November lows.   Treasury yields in the US followed suit with the 10-year yield pushing toward 2.1%, the highest level since last April as investors favour equities over fixed income.   Yields continue to breakout above a long-term declining trendline that became evident in early 2011 as risk aversion and the Fed’s monetary policies pushed the cost of borrowing to historically low levels.   Target yield on the 10-year note, assuming a correction back to the long-term (multi-decade) trend is at 4.0%.   As assets start to flow out of the bond market and potentially into stocks, this target is easily attainable over the long-term.

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With new all-time highs in equity benchmarks, such as the Dow Jones Industrial Average, the question has been posed “How do markets react at new all-time highs?”   Typically when you take away points of reference, as would be implied by a breakout to new all-time highs, trend following becomes much more important than trying to define horizontal levels of support and resistance.   Historically, as the DJIA has broken out of multi-year trading ranges, above resistance, to new highs, strong gains (positive trends) have resulted.   It still has yet to be seen whether the market can breakout from its current long-term trading range, potentially setting the stage for a long-term rally, similar to that of the late 90’s.   Markets are currently over 13 years into its present 16 year cycle, suggesting that equities are relatively close to the end of what has been classified as “the lost decade.”   Assuming the 16 year pattern holds true, equities may be on the verge of a tremendous multi-year bull market.   The question is, will it happen from present levels or will markets correct first?   Despite the breakout to new all-time highs in the Dow, the S&P 500 has yet to breakout to new highs and above the long-term trading range.   This breakout above the previous trading range is key.   Previous breakouts since 1900 have resulted in substantial, near parabolic moves that can last for years as investor enthusiasm returns to the market.   Just under 3 years left in the present cycle, implying a few more years of volatile markets, but it could always end early.   If you’re unfamiliar with the 16 year cycle, watch the video clip of Tech Talk’s Don Vialoux discussing the subject back in 2010.

DJIA Histrical

Seasonal Charts of companies reporting earnings today are as follows:

ANN CCL FL

Sentiment on Thursday, as gauged by the put-call ratio, ended bullish at 0.83.   Investors continue to offset out-of-the-money put options as we near the quarterly expiration date next Friday, pushing call volumes, relative to puts, higher in the process.   The problem is that the less hedged the market becomes, the more vulnerable portfolios are to “shocks”.   Expect further covering of negative bets into next week.

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S&P 500 Index

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TSE Composite

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Horizons Seasonal Rotation ETF (TSX:HAC)

  • Closing Market Value: $13.41 (up 0.37%)
  • Closing NAV/Unit: $13.37 (up 0.18%)

Performance*

2013 Year-to-Date Since Inception (Nov 19, 2009)
HAC.TO 5.11% 33.7%

* performance calculated on Closing NAV/Unit as provided by custodian 

Click Here to learn more about the proprietary, seasonal rotation investment strategy developed by research analysts Don Vialoux, Brooke Thackray, and Jon Vialoux.

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