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Stock Market Outlook for September 10, 2013

Todays_Markets

Upcoming US Events for Today:

  1. NFIB Small Business Optimism Index for August will be released at 7:30am.   The market expects 95.0 versus 94.1 previous.
  2. Job Opening and Labor Turnover Survey for July will be released at 10:00am.   The market expects 3.9275M versus 3.936M previous.

 

Upcoming International Events for Today:

  1. China Industrial Production for August will be released at 1:30am EST.   The market expects a year-over-year increase of 9.9% versus an increase of 9.7% previous.
  2. China Retail Sales for August will be released at 1:30am EST.   The market expects a year-over-year increase of 13.2%, consistent with the previous report.
  3. Italian Gross Domestic Product for the Second Quarter will be released at 4:00am EST.   The market expects a quarter-over-quarter decline of 0.2%, consistent with the previous report.
  4. Canadian Housing Starts for August will be released at 8:15am EST.   The market expects 190.0K versus 192.8K previous.

 

Recap of Yesterday’s Economic Events:

Event Actual Forecast Previous
CNY Consumer Price Index (YoY) 2.60% 2.60% 2.70%
CNY Producer Price Index (YoY) -1.60% -1.70% -2.30%
JPY Bankruptcies (YoY) -15.30%   -0.09%
JPY Consumer Confidence Index 43 44 43.6
CHF Unemployment Rate 3.00% 3.00% 3.00%
CHF Unemployment Rate s.a. 3.20% 3.20% 3.20%
JPY Eco Watchers Survey: Current 51.2 53.5 52.3
JPY Eco Watchers Survey: Outlook 51.2   53.6
EUR Euro-Zone Sentix Investor Confidence 6.5 -3.5 -4.9
CAD Building Permits (MoM) 20.70% 3.50% -10.60%
USD Consumer Credit $10.437B $12.700B $11.925B
JPY Tertiary Industry Index (MoM) -0.40% -0.50% -0.50%

 

The Markets

Markets surged on Monday, fuelled by strong trade data out of China and easing concerns pertaining to the situation in Syria.   The S&P 500 and Dow Jones Industrial Average gained around one percent on the session as cyclical sectors, such as Materials, Technology, and Industrials, led the market activity; defensive sectors (Staples, Utilities, and Health Care) underperformed the broad market move.   Consumer Staples and Utilities have significantly underperformed equity benchmarks in the midst of the stock market selloff in the month of August, while cyclicals continued to post relative performance gains, a characteristic more typical of a positive trending market rather than a negative trending one.

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The S&P 500 is continuing to follow through with last week’s momentum buy signals.   Short-term resistance offered in the month of August at 1670 was broken during Monday’s positive move, opening the door to a move in the range of 1680 to 1685. The resulting move would fill an open gap of the hourly chart that followed a breakdown recorded mid-August.   Hourly momentum indicators continue to trend positive, suggesting continued buying pressures.   In order to maintain the long-term bullish trend a new daily high is required; without one, selling momentum will increase, sending the market significantly lower.   A number of benchmarks around the globe have already charted a lower intermediate high, including the German DAX and London FTSE; the MSCI World ex-US has charted a double-top.   A stall in the positive long-term trend remains apparent and the odds still favour more aggressive selling pressures ahead as markets enter the peak period of seasonal weakness.

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Today Apple will hold a media event to launch its latest round of gadgets, just in time for the Christmas season.   Consensus expectations suggest that a new iPhone will be announced and possibly a new iPad as well.   Debate continues whether a watch will be seen to compete with Samsung’s new offering.  Given that Apple is the single largest holding within the S&P 500, reaction in shares of Apple (AAPL) could be market moving.   Generally, Apple announcement days have not been favorable for AAPL stock.   Excluding the announcement of the 1st generation of iPhone, which was revolutionary for the company, the stock has declined by an average of 0.59% on announcement days of either the iPhone or iPad.   Largest loss was realized last year when Apple announced the the 4th generation of iPad, as well as iPad Mini; decline on the session was 3.26%, which ballooned to a loss of 11.00% in 30 days following the unveiling.   Analysts were concerned that the cheaper gadget (iPad Mini) would cut into the company’s margins, impacting profitability.   Average return for the S&P 500 Index on either an announcement  or launch day was flat at 0.00%.

Return for shares of Apple (AAPL) on product launch days:

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Return for S&P 500 Index on Apple product launch days:

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Seasonal charts of companies reporting earnings today:

AEPI CWTR FHN  OXM PBY 

Sentiment on Monday, as gauged by the put-call ratio, ended overly bullish at 0.65.   This is the most complacent reading recorded since November of last year.   Readings below 0.70 since 2009 have been very few and most have resulted in significant market sell-offs to follow; a reading of 0.60 was recorded in December of 2009 and a sell-off exceeding 8% followed shortly thereafter; a reading of 0.56 was recorded in April of 2010 and a sell-off exceeding 16% immediately followed; a reading of 0.67 was recorded in July of 2011 and a sell-off exceeding 18% was realized within days of the event.   When investors become complacent, caution is warranted as the risks to the market (of which there are many at present) are ignored.

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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: $13.61 (down 0.15%)
  • Closing NAV/Unit: $13.63 (down 0.01%)

Performance*

2013 Year-to-Date Since Inception (Nov 19, 2009)
HAC.TO 7.17% 36.3%

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

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