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Stock Market Outlook for September 12, 2013

Todays_Markets

Upcoming US Events for Today:

  1. Weekly Jobless Claims will be released at 8:30am.   The market expects Initial Claims to show 330K versus 323K previous.
  2. Import and Export Prices for August will be released at 8:30am.
  3. The Treasury Budget for August will be released at 2:00pm

 

Upcoming International Events for Today:

  1. ECB Publishes its Monthly Report at 4:00am EST.
  2. Euro-Zone Industrial Production for July will be released at 5:00am EST.   The market expects no change (0.0%) on a month-over-month basis versus an increase of 0.7% previous.
  3. Canadian New House Price Index for July will be released at 8:30am EST.   The market expects a year-over-year increase of 1.9% versus an increase of 1.8% previous.

 

Recap of Yesterday’s Economic Events:

Event Actual Forecast Previous
EUR German Consumer Price Index (YoY) 1.50% 1.50% 1.50%
EUR German Consumer Price Index (MoM) 0.00% 0.00% 0.00%
EUR German Consumer Price Index – EU Harmonised (MoM) 0.00% 0.00% 0.00%
EUR German Consumer Price Index – EU Harmonised (YoY) 1.60% 1.60% 1.60%
GBP Claimant Count Rate 4.20% 4.30% 4.30%
GBP Jobless Claims Change -32.6K -21.0K -36.3K
GBP ILO Unemployment Rate (3M) 7.70% 7.80% 7.80%
GBP Employment Change (3M/3M) 80K 55K 69K
USD MBA Mortgage Applications -13.50%   1.30%
USD Wholesale Trade Sales (MoM) 0.10% 0.50% 0.40%
USD Wholesale Inventories 0.10% 0.30% -0.20%
USD DOE U.S. Gasoline Inventories 1658K -1000K -1827K
USD DOE U.S. Distillate Inventory 2586K 600K 549K
USD DOE U.S. Crude Oil Inventories -219K -2100K -1836K
USD DOE Cushing OK Crude Inventory -639K   -1829K
NZD Reserve Bank of New Zealand Rate Decision 2.50% 2.50% 2.50%
JPY Japan Buying Foreign Bonds (Yen) -Â¥66.5B   -Â¥530.9B
JPY Machine Orders (MoM) 0.00% 2.40% -2.70%
JPY Machine Orders (YoY) 6.50% 7.70% 4.90%
JPY Japan Buying Foreign Stocks (Yen) Â¥38.1B   Â¥65.6B

 

The Markets

And make that number 7: stocks gained for a seventh straight session on Wednesday despite a significant drop in shares of Apple, a stock that has typically been the most influential stock in the S&P 500 and NASDAQ.   The S&P 500 Index is just one positive session short of matching the longest string of gaining sessions of the year.   The large cap index is attempting to push through a level of resistance at 1685, next reaching toward the all-time highs and significant resistance just below 1710.   Momentum indicators are continuing to follow through with last week’s momentum buy signal and evidence of a peak has yet to be realized.   The 20-day moving average continues to point lower, suggesting that the grip of the recent negative down draft in equity indices has yet to be released.   Seasonal tendencies for stocks turn firmly negative on September 16; average loss for the S&P 500 Index over the three weeks to follow is 2.5%.

The headline news on Wednesday was the drop in shares of Apple, which shed 5.44% by the closing bell.   The plunge erased the breakout move from August of this year in which the stock traded above an 80-point trading range that stretched back to March.   The stock subsequently became overbought in the month of August and has now confirmed a lower short-term high in just the past couple of days.   Seasonal tendencies have just turned sharply lower as the stock typically realizes a corrective phase following early September product announcements, similar to Tuesday’s event.   The downturn typically runs through to the start of October when the period of seasonal strength for Technology begins, lifting stocks through the holiday season.   The Technology SPDR ETF, of which Apple is the largest holding at 15%, is hinting of a double top at $32.42; negative intermediate momentum divergences suggest waning buying pressures, which could result in a downturn should resistance at $32.42 fail to be broken.   The period of seasonal strength for the Technology sector runs from October 9th through to January 17th.

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Apple Inc.  (NASDAQ:AAPL) Seasonal Chart

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Technology Sector Seasonal Chart

Over the last two sessions, the Dow Jones Industrial Average has been on a tear, gaining 1.75% and outperforming the S&P 500 by three-quarters of a percent.   The outperformance comes as Dow Jones announced a change to the composition of the widely followed benchmark. Alcoa (AA), Hewlett-Packard (HPQ), and Bank of America (BAC) will be dropped while Nike (NKE), Visa (V), and Goldman Sachs (GS) will be added as of the close on September 20.   Funds that track the blue-chip benchmark will be forced to liquate the three stocks that are being removed and purchase the three stocks that are being added, either on or around September 20th, an event that should certainly add to the volumes, and potential volatility, surrounding quadruple witching, which occurs on the same day.   The week ahead of similar index changes since 1930 has seen the benchmark trade higher, on average, by almost nine-tenths of a percent.   Positive results ahead of the 24 changes over the past 73 years have been realized in 75% of occurrences.   Averages show that the day before and the day of the event are fairly neutral with flat returns typical and no significant change to the frequency of positive results.   However, while the benchmark typically posts fairly robust gains prior to the event, losses are more typical in the 30 days that follow; average decline for the Dow Jones Industrial Average reaches 1.50% with just 42% of instances showing a positive result 30 days after.  Of course, the negative period that follows falls right within the negative seasonal period for stocks, which runs through to third quarter earnings season in October.

Dow Jones Industrial Average Change Date One Week Prior to Change 30 Days Following Change
9/14/2012 1.86% -1.56%
6/8/2009 3.09% -6.84%
9/22/2008 -0.29% -20.58%
2/19/2008 0.88% -2.01%
11/21/2005 0.75% 0.36%
4/8/2004 1.18% -3.46%
1/27/2003 -5.31% -2.72%
11/1/1999 2.48% 1.38%
3/17/1997 -0.93% -5.02%
5/6/1991 0.91% 3.03%
3/12/1987 0.51% 3.08%
10/30/1985 0.32% 7.81%
8/30/1982 1.63% 4.06%
6/29/1979 -0.07% -0.39%
8/9/1976 0.14% 1.07%
6/1/1959 1.43% -0.03%
7/3/1956 1.13% 5.44%
3/4/1939 2.28% -11.37%
11/20/1935 4.12% -6.40%
8/13/1934 -0.53% -0.46%
8/15/1933 4.30% 7.38%
5/26/1932 -7.03% -8.68%
7/18/1930 5.14% -4.40%
1/29/1930 3.33% 4.46%
Average Return: 0.89% -1.49%

Seasonal charts of companies reporting earnings today:

BRC KR LULU NTWK OCC RFIL TRR ALOG CHKE CRDS ULTA UNFI

Sentiment on Wednesday, as gauged by the put-call ratio, ended bullish at 0.92.   The sentiment gauge is attempting to rebound from the most complacent level of the year at 0.65, however, risks remain elevated that a market shock will impact the overly bullish bias of equity investors.

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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: $13.53 (unchanged)
  • Closing NAV/Unit: $13.55 (up 0.13%)

Performance*

2013 Year-to-Date Since Inception (Nov 19, 2009)
HAC.TO 6.53% 35.5%

* 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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