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Stock Market Outlook for November 7, 2013

Todays_Markets

Upcoming US Events for Today:

  1. Chain Store Sales for October will be released throughout the day.
  2. GDP for the Third Quarter will be released at 8:30am.   The market expects a quarter-over-quarter increase of 2.0% versus an increase of 2.5% previous.
  3. Weekly Jobless Claims will be released at 8:30am.   The market expects Initial Claims to show 335K versus 340K previous.
  4. Consumer Credit for September will be released at 3:00pm.   The market expects $12.0B versus $13.6B previous.

 

Upcoming International Events for Today:

  1. German Industrial Production for September will be released at 6:00am EST.   The market expects a year-over-year increase of 1.0% versus an increase of 0.3% previous.
  2. Bank of England Rate Announcement will be released at 7:00am EST.   The market expects no change at 0.50%
  3. ECB Rate Announcement will be released at 7:45am EST.   The market expects no change at 0.50%.
  4. China Trade Balance for October will be released at 9:00pm EST.   The market expects the trade surplus to show $22.1B versus $15.2B previous.   Imports are expected to show a year-over-year increase of 7.9% versus an increase of 7.4% previous.   Exports are expected to show a year-over-year increase of 2.8% versus a decline of 0.3% previous.

 

Recap of Yesterday’s Economic Events:

Event Actual Forecast Previous
AUD Trade Balance (Australian dollar) -284M -500M -693M
EUR Italian Purchasing Manager Index Services 50.5 51.2 52.7
EUR French Purchasing Manager Index Services 50.9 50.2 50.2
EUR German Purchasing Manager Index Services 52.9 52.3 52.3
EUR Euro-Zone Purchasing Manager Index Services 51.6 50.9 50.9
EUR Euro-Zone Purchasing Manager Index Composite 51.9 51.5 51.5
GBP Industrial Production (MoM) 0.90% 0.60% -1.10%
GBP Industrial Production (YoY) 2.20% 1.80% -1.50%
GBP Manufacturing Production (MoM) 1.20% 1.10% -1.20%
GBP Manufacturing Production (YoY) 0.80% 0.80% -0.20%
EUR Euro-Zone Retail Sales (MoM) -0.60% -0.40% 0.50%
EUR Euro-Zone Retail Sales (YoY) 0.30% 0.60% -0.20%
EUR German Factory Orders n.s.a. (YoY) 7.90% 5.60% 3.10%
EUR German Factory Orders s.a. (MoM) 3.30% 0.50% -0.30%
USD MBA Mortgage Applications -7.00%   6.40%
USD Challenger Job Cuts (YoY) -4.20%   19.10%
CAD Building Permits (MoM) 1.70% 6.00% -20.00%
USD Leading Indicators 0.70% 0.60% 0.70%
GBP NIESR Gross Domestic Product Estimate 0.70%   0.80%
CAD Ivey Purchasing Managers Index s.a. 62.8 52 51.9
USD DOE U.S. Crude Oil Inventories 1577K 2100K 4087K
USD DOE Cushing OK Crude Inventory 991K   2178K
USD DOE U.S. Gasoline Inventories -3755K -400K -1713K
USD DOE U.S. Distillate Inventory -4899K -1500K -3058K

 

The Markets

Peculiar day in the equity markets with the Dow Jones Industrial Average positing strong gains, while the NASDAQ Composite, Russell 2000 Index, and Dow Jones Transportation Average struggled in negative territory throughout the session.   Stocks that have led the market higher throughout the year, as well as recent weeks, saw the greatest losses on the day, while stocks that have lagged recorded substantial gains.   The table below from Bespoke Investment Group details the significant divergence between session winners and losers and the year-to-date performance.   Rotation is clearly apparent as investors book profits in areas of the market that have recorded significant gains and reinvest in areas that have lagged.   The activity on the day also implies that investors are continuing to  become risk averse as consumer staples and utilities lead the market higher, while the riskier small caps and discretionary stocks record losses.   Weakness and risk aversion in equity markets is the norm over the next two weeks with the S&P 500 averaging a decline of 0.65% between now and November 20, based on data from the past 20 years.   Reallocation of portfolios ahead of the end of the year is identified as culprit.   The minor short-term weakness does not typically impact the intermediate-term positive trend that seasonally benefits stocks over the next six months.

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The gain on the Dow Jones Industrial Average pushed the benchmark above significant resistance around 15,700, opening a path to new highs that other benchmarks have realized over recent weeks.   The blue-chip average has underperformed the S&P 500 since mid-April, but early signs of change may be becoming apparent.   The Dow Jones industrial Average typically outperforms the S&P 500 Index throughout the period of seasonal strength for equities, which peaks in May.

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Despite the breakout in the Dow, momentum for many equity benchmarks continues to languish following the substantial run over the past few weeks.   MACD Sell signals have now been recorded on both the Russell 2000 index and the NASDAQ Composite, coincidentally two of the weakest performers on Wednesday.   The S&P 500, meanwhile, appears to be on the verge of a bearish MACD crossover, which would suggest a sell signal for the broad market.   Significant fundamental events over the next couple of days will likely influence whether or not a sell signal is realized.

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Seasonal charts of companies reporting earnings today:

AAON

ACIW

AEE

APA

MT

CQB

CBB

CNK

CDE

FWLT

IT

IGT

MFC

MWW

RIC

ROK

SMG

STWD

THI

THS

WEN

MDRX

JSDA

MCP

PCLN

JOE

DIS

Sentiment on Wednesday, as gauged by the put-call ratio, ended bullish at 0.91.

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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: $13.60 (down 0.22%)
  • Closing NAV/Unit: $13.62 (unchanged)

Performance*

2013 Year-to-Date Since Inception (Nov 19, 2009)
HAC.TO 7.08% 36.2%

* 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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