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Stock Market Outlook for September 13, 2017

Could the new iWatch act as the catalyst to kick-start the period of seasonal strength in the Telecom sector?

 

Real Time Economic Calendar provided by Investing.com.

 

**NEW** As part of the ongoing process to offer new and up-to-date information regarding seasonal and technical investing, we are adding a section to the daily reports that details the stocks that are entering their period of seasonal strength, based on average historical start dates.   Stocks highlighted are for information purposes only and should not be considered as advice to purchase or to sell mentioned securities.   As always, the use of technical and fundamental analysis is encouraged in order to fine tune entry and exit points to average seasonal trends.

Stocks Entering Period of Seasonal Strength Today:

  • No stocks identified for today

 

 

The Markets

Stocks traded higher on Tuesday with major benchmarks closing at or near all-time highs.  The S&P 500 Index added around three-tenths of one percent, supported by the rebound in the financial sector as the selloff of safe-haven assets took a toll on treasury prices, thereby lifting yields. On the hourly chart of the large-cap benchmark, a reverse head-and-shoulders pattern projects upside potential towards 2530.  The move higher on the day also takes back a broken level of support presented by a rising trendline that stems back to the 2016 lows.  While not definitive as of yet, we’re looking at the possibility that the break of trend that was recorded in August was nothing but a bear trap, shaking investors out of long positions amidst the rising volatility and uncertainty that dominated market activity.  As highlighted yesterday, the large-cap index was pulled back from the brink when it held the 63% level of stocks trading above 200-day moving averages, a level that has shown to be a major pivot point between a merely weak market and an ugly market.  Momentum indicators on the daily chart continue to negatively diverge from price, maintaining concerns that selling pressures will re-emerge, but the new closing high confirms that the trend of higher-highs and higher-lows remains intact, despite speculation to the contrary.

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Drilling through the sector activity, a couple sectors closed at new all-time highs during the session.  Health care recorded a fractional gain to move closer to the upper limit of a rising trend channel that stems back to the lows of November 2016.  The sector has produced tremendous returns since the period of seasonal strength began on April 25th, gaining over 11% and outperforming the market by over 6%.  The period of strength concludes at the beginning of December, often peaking relative to the market in October.  And the other sector to record a new all-time high is not typically positive at this time of year.  The S&P 500 Materials Sector Index added over seven-tenths of one percent to close above short-term resistance at 350.  The benchmark is similarly in a rising trend channel that peaks around 355.  Seasonally, materials is typically one of the weakest sectors of the market in September, declining by 2.4%, on average, over the period.  However, despite the price tendencies for this last month of the third quarter, the fundamental factors have continued to be conducive to higher prices, including a weak US dollar and strong manufacturing activity.  Price typically enters a period of strength in November, running higher through the new year amidst the peak period for manufacturing activity in the first half of the year.

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Healthcare Sector Seasonal Chart

HEALTHCARE Relative to the S&P 500
HEALTHCARE Relative to the S&P 500

HEALTHCARE Monthly Averages

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Materials Sector Seasonal Chart

MATERIALS Relative to the S&P 500
MATERIALS Relative to the S&P 500

MATERIALS Monthly Averages

But while stocks charted new all-time highs, the event that investors were focussed on was the Apple product launch, which delivered new iPhone, iWatch, and Apple TV devices.  The stock initially traded higher through the event, but quickly sold off once the news was released and investors debated the impact of the new products on the company’s bottom line.  A doji, indecision candlestick at the 20-day moving average was recorded on the chart.  While the iPhone X (10) attracted the most attention, the new Apple Watch was met with fascination, representing the first mainstream wearable computer that can be connected to a cellular network and used without tethering to the iPhone. While shares of Apple and its suppliers have all seen significant gains in anticipation of this event, as is typical, one derivative play may be overlooked.  With yet another device in the apple line-up that will require a separate cellular contract, telecom carriers could benefit as consumers seek to enable the wireless capability of their iPads, iPhones, and, now, iWatches.  The major carriers in the US (AT&T, Verizon, Srpint, and T-Mobile) and Bell (initially) in Canada will service the new product.  The telecom industry enters a period of seasonal strength in the month of September, but, as previously reported, the technical action presents concerns when looking at the telecom ETF (IYZ).  The ETF, while up significantly on Tuesday, recently broke below the lower limit of a descending triangle pattern, a negative setup that projects downside potential towards $26.  Underperformance versus the market has been apparent since the year began.  The sector warrants monitoring as the sales of the iWatch as tallied, a possible catalyst to fade the selling pressures that have weighed upon equity prices.

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Apple Inc.  (NASDAQ:AAPL) Seasonal Chart

AAPL Relative to the S&P 500AAPL Relative to the Sector

AAPL Monthly Averages

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Telecommunications Sector Seasonal Chart

TELECOMMUNICATIONS Relative to the S&P 500
TELECOMMUNICATIONS Relative to the S&P 500

TELECOMMUNICATIONS Monthly Averages

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BCE Inc.  (TSE:BCE) Seasonal Chart

BCE.TO Relative to the S&P 500BCE.TO Relative to the Sector

BCE.TO Monthly Averages

On the economic front, the monthly job openings and labor turnover survey for July showed another strong result on the headline print.  Job openings are indicated to have increased by nine-tenths of a percent to 6.17 million from 6.116 million previous, the first time in the history of the report that two consecutive months have topped six million openings.  Stripping out the seasonal adjustments, openings actually increased by 7.0%, short of the average increase for the month of 10.5%.  The year-to-date change, while at the highs of the year, is back below the average trend, although improvement from last year’s result remains apparent.  As for hires, the 3.8% decline for this first full month of summer is better than the average decline for the month of 4.5%.  The year-to-date gain in this category is inline with the seasonal average trend, a significant improvement from the trend recorded last year that resulted in the weakest calendar year performance since the Great Recession.  Both openings and hires typically peak around this time of year, trending lower through the back half as the busy summer hiring season concludes.  Quits are similarly showing a trend that is vastly improved from last year’s result, although the year to date change is lagging the historical norm.  Quits typically provide a reasonable gauge of the confidence of employees and their ability to transition to new opportunities.  Overall, the report remains indicative of a healthy economy in which employment growth is supporting the broader economic fundamentals.

Job Openings: Total Nonfarm Seasonal Chart

Monthly Job Openings: Total Nonfarm Data

Job Openings: Total Nonfarm Seasonal Chart

Quits: Total Nonfarm Seasonal Chart Hires: Total Nonfarm Seasonal Chart Layoffs and Discharges: Total Nonfarm Seasonal Chart

Sentiment on Tuesday, as gauged by the put-call ratio, ended bullish at 0.84.

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Seasonal charts of companies reporting earnings today:

Applied Genetic Technologies Corporation (AGTC) Seasonal Chart Cracker Barrel Old Country Store, Inc. (CBRL) Seasonal Chart Lakeland Industries, Inc. (LAKE) Seasonal Chart Park City Group, Inc. (PCYG) Seasonal Chart  United Natural Foods, Inc. (UNFI) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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