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Stock Market Outlook for January 9, 2018

Searching for signs of investor euphoria.

 

Real Time Economic Calendar provided by Investing.com.

 

*** 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:

AVX Corp. (NYSE:AVX) Seasonal Chart

AVX Corp. (NYSE:AVX) Seasonal Chart

Bruker Corp. (NASD:BRKR) Seasonal Chart

Bruker Corp. (NASD:BRKR) Seasonal Chart

Regal Entertainment Group (NYSE:RGC) Seasonal Chart

Regal Entertainment Group (NYSE:RGC) Seasonal Chart

Watsco, Inc. (NYSE:WSO) Seasonal Chart

Watsco, Inc. (NYSE:WSO) Seasonal Chart

Cinemark Holdings Corp. (NYSE:CNK) Seasonal Chart

Cinemark Holdings Corp. (NYSE:CNK) Seasonal Chart

Hasbro, Inc.  (NYSE:HAS) Seasonal Chart

Hasbro, Inc. (NYSE:HAS) Seasonal Chart

Firan Technology Group (TSE:FTG) Seasonal Chart

Firan Technology Group (TSE:FTG) Seasonal Chart

Shoe Carnival, Inc. (NASD:SCVL) Seasonal Chart

Shoe Carnival, Inc. (NASD:SCVL) Seasonal Chart

The Jean Coutu Group (PJC) Inc. (TSE:PJC.A) Seasonal Chart

The Jean Coutu Group (PJC) Inc. (TSE:PJC.A) Seasonal Chart

Boyd Gaming Corporation  (NYSE:BYD) Seasonal Chart

Boyd Gaming Corporation (NYSE:BYD) Seasonal Chart

La-Z-Boy Incorporated  (NYSE:LZB) Seasonal Chart

La-Z-Boy Incorporated (NYSE:LZB) Seasonal Chart

Canadian National Railway Company  (TSE:CNR) Seasonal Chart

Canadian National Railway Company (TSE:CNR) Seasonal Chart

CarMax, Inc  (NYSE:KMX) Seasonal Chart

CarMax, Inc (NYSE:KMX) Seasonal Chart

Total SA (ADR) (NYSE:TOT) Seasonal Chart

Total SA (ADR) (NYSE:TOT) Seasonal Chart

The Children's Place, Inc. (NASD:PLCE) Seasonal Chart

The Children’s Place, Inc. (NASD:PLCE) Seasonal Chart

Kohl's Corporation  (NYSE:KSS) Seasonal Chart

Kohl’s Corporation (NYSE:KSS) Seasonal Chart

Africa Oil (TSE:AOI) Seasonal Chart

Africa Oil (TSE:AOI) Seasonal Chart

Peyto Exploration (TSE:PEY) Seasonal Chart

Peyto Exploration (TSE:PEY) Seasonal Chart

Jack in the Box Inc.  (NASDAQ:JACK) Seasonal Chart

Jack in the Box Inc. (NASDAQ:JACK) Seasonal Chart

 

 

The Markets

Stocks maintained their relentless climb on Monday as investors added to their equity exposure ahead of the start of the fourth quarter earnings season.  The S&P 500 Index added close to two-tenths of one percent, holding in overbought territory.  Support at 20 and 50-day moving averages is now 2% to 4% below present levels, defining the near term risks should a pullback become apparent.  Sector performance was generally mixed with utilities and health care bookending the day’s return.

At this point, with major market indices turning slightly parabolic in recent weeks, the near-term risk reward has to be questioned.  Through the remainder of January and into February, the return set for major market benchmarks tends to be mixed, gyrating around the release of earnings.  As benchmarks hold at all-time highs, signs of euphoria should be sought in order to gauge the risk of a more pronounced decline.  The change in the NYSE margin debt helps with this endeavour.  For November, NYSE Margin debt was higher by 3.5% versus the month prior, over double the average increase for the month of 1.6%.  Year-to-date, this gauge of leverage is running 7.8% above average.  While certainly representative of investor optimism, the gauge is still below levels that would be consider euphoric, as would be apparent if margin debt was running over 20% above the seasonal norm.  It is within these euphoric scenarios that the stability of the market is questionable, often leading to a flood of selling as investors bring allocations back inline with risk tolerances.  Meanwhile, credit balances are running 10.4% below average, arguably a testament to the fact that short selling activity has been diminished in the midst of the rising tape.  While investor optimism could shift on any given catalyst, there is little to suggest, by this measure, that the market is vulnerable to a pounced decline.

NYSE Margin debt Seasonal Chart

Monthly NYSE Margin debt Data

NYSE Margin debt Seasonal Chart

NYSE Credit balances in margin accounts Seasonal Chart

As for the gauge of investor sentiment that we regularly highlight, the put-call ratio is back to concerning levels, falling to the lowest level in the past year.  You may notice the spike in the put-call level in the days prior to the last trading day of 2017 as investors hedged portfolios for the new month and year ahead, perhaps anticipating a bout of profit taking pressures.  When the selling pressures failed to materialize given the strength surrounding the Santa Claus rally period, investors were forced to cover, leading to this melt-up in stocks over recent days.  This fuel is now exhausted and Monday’s reading of 0.65 is indicative of complacency as investors, once again, lean too far in one direction.  Keep in mind that complacency on its own does not preclude a market pullback, but its does make the market vulnerable over the short term as positions are rebalanced.  The last time the put-call ratio was this low was last April, which presented a bit of a soft patch for stocks until support around the 50-day moving average was achieved.  Watch your levels of support below; while nothing suggests anything significantly detrimental for stocks, near-term pullback risks are becoming elevated.

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Seasonal charts of companies reporting earnings today:

Acuity Brands Inc (AYI) Seasonal Chart  Schnitzer Steel Industries, Inc. (SCHN) Seasonal Chart Simulations Plus, Inc. (SLP) Seasonal Chart Synnex Corporation (SNX) Seasonal Chart VOXX International Corporation (VOXX) Seasonal Chart WD-40 Company (WDFC) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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