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Stock Market Outlook for January 24, 2018

Percent of stocks trading above 200-day moving averages still well below levels that preceded previous market peaks.

 

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:

Crane Co.  (NYSE:CR) Seasonal Chart

Crane Co. (NYSE:CR) Seasonal Chart

Uni-Pixel, Inc. (NASD:UNXL) Seasonal Chart

Uni-Pixel, Inc. (NASD:UNXL) Seasonal Chart

T-Mobile US, Inc. (NASD:TMUS) Seasonal Chart

T-Mobile US, Inc. (NASD:TMUS) Seasonal Chart

Coach, Inc. (NYSE:COH) Seasonal Chart

Coach, Inc. (NYSE:COH) Seasonal Chart

Diamond Offshore Drilling, Inc.  (NYSE:DO) Seasonal Chart

Diamond Offshore Drilling, Inc. (NYSE:DO) Seasonal Chart

Flowserve Corporation  (NYSE:FLS) Seasonal Chart

Flowserve Corporation (NYSE:FLS) Seasonal Chart

Caterpillar Inc.  (NYSE:CAT) Seasonal Chart

Caterpillar Inc. (NYSE:CAT) Seasonal Chart

 

 

The Markets

Stocks closed higher for a third straight session on Tuesday as earnings optimism kept investors leaning on the buy button.  The S&P 500 Index added just over two-tenths of one percent, maintaining a parabolic path that has become increasingly stretched above levels of support at major moving averages.  The large-cap benchmark is now around 13% above its 200-day moving average, something not seen since early 2011.  Back then, stocks carved out a massive topping pattern in the months thereafter, eventually breaking below the 200-day moving average later that year as the debt-ceiling crisis led to a abrupt downturn in stocks.  Certainly, there are no hints of a topping pattern (yet) as we saw back then.

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But while the value of the benchmark itself is stretched above its 200-day moving average, the percent of stocks trading above this major moving average is nowhere near the extremes witnessed during the 2011 market peak.  The breadth indicator reached a high of 93.6% in the early spring of 2011 before turning lower, eventually bottoming out around 9% in August of that year.  Presently 82.4% of stocks are above this long-term pivot point.  This rather subdued level compared to previous market highs can be attributed to the ongoing rotation that has been apparent for many months, from defensives into cyclicals, and now away from interest sensitive sectors.  This has allowed investors to find opportunities to keep the momentum of the market moving higher.

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And on the topic of rotation, the interest rate sensitive sectors were the flavour of the day on Tuesday, topping the leaderboard as interest rates ticked slightly lower.  The iShares Real Estate ETF (IYR) gapped higher by 1.38% while the SPDR Utilities Sector ETF (XLU) was higher by 0.96%. Both have broken longer-term rising trendline support, suggesting the path of least resistance over the intermediate term may be lower.  Both ETFs had become very oversold in recent days, exhausting their selling pressures and leading to Tuesday’s snap-back.  Seasonally, these bond proxies remain in a period of seasonal weakness through the end of February, at which point they tend to strengthen into the spring. 

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iShares Dow Jones US Real Estate (ETF) (NYSE:IYR) Seasonality

IYR Relative to the S&P 500
IYR Relative to the S&P 500

Monthly Seasonal iShares Dow Jones US Real Estate (ETF) (NYSE:IYR)

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Utilities Sector Seasonal Chart

UTILITIES Relative to the S&P 500
UTILITIES Relative to the S&P 500

UTILITIES Monthly Averages

On the economic front, CASS Information Systems released their freight index for the month of December.  Shipping volumes are indicated to have fallen by 0.3%, which is a fraction of the 4.5% average decline for the last month of the calendar year.  Expenditures, meanwhile, were higher by 0.3%, diverging from the 3.2% average decline for the month.  The results put the shipping and expenditure benchmarks 6.9% and 12.2%, respectively, above average for the calendar year, the best performance since 2010 and 2011.  Shipping activity is a key gauge of the health of the economy and the results through the fourth quarter are certainly indicative of good things for the year that is now upon us.  Seasonally, shipping activity typically ramps up in February, trending higher through the spring as industrial production gets back up to pace following the winter slowdown.

Cass Freight Index: Shipments  Seasonal Chart

Monthly Cass Freight Index: Shipments  Data

Cass Freight Index: Shipments Seasonal Chart

Cass Freight Index: Expenditures Seasonal Chart

Sentiment on Tuesday, as gauged by the put-call ratio, ended overly bullish at 0.64.  This is the lowest level in over a year and obviously raises flags as complacency is implied.

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Seasonal charts of companies reporting earnings today:

Abbott Laboratories (ABT) Seasonal Chart AMERIPRISE FINANCIAL SERVICES, INC. (AMP) Seasonal Chart Amphenol Corporation (APH) Seasonal Chart Baker Hughes, a GE company (BHGE) Seasonal Chart Briggs & Stratton Corporation (BGG) Seasonal Chart Celestica, Inc. (CLS) Seasonal Chart Cohen & Steers Inc (CNS) Seasonal Chart Comcast Corporation (CMCSA) Seasonal Chart Crown Castle International Corporation (CCI) Seasonal Chart Discover Financial Services (DFS) Seasonal Chart Dolby Laboratories (DLB) Seasonal Chart Ethan Allen Interiors Inc. (ETH) Seasonal Chart F5 Networks, Inc. (FFIV) Seasonal Chart Ford Motor Company (F) Seasonal Chart General Dynamics Corporation (GD) Seasonal Chart General Electric Company (GE) Seasonal Chart Illinois Tool Works Inc. (ITW) Seasonal Chart Las Vegas Sands Corp. (LVS) Seasonal Chart Legg Mason, Inc. (LM) Seasonal Chart Norfolk Souther Corporation (NSC) Seasonal Chart Northern Trust Corporation (NTRS) Seasonal Chart  Novartis AG (NVS) Seasonal Chart Progressive Corporation (The) (PGR) Seasonal Chart Raymond James Financial, Inc. (RJF) Seasonal Chart Rockwell Automation, Inc. (ROK) Seasonal Chart Royal Caribbean Cruises Ltd. (RCL) Seasonal Chart Stanley Black & Decker, Inc. (SWK) Seasonal Chart Teradyne, Inc. (TER) Seasonal Chart United Rentals, Inc. (URI) Seasonal Chart United Technologies Corporation (UTX) Seasonal Chart Varian Medical Systems, Inc. (VAR) Seasonal Chart W.W. Grainger, Inc. (GWW) Seasonal Chart Whirlpool Corporation (WHR) Seasonal Chart Xilinx, Inc. (XLNX) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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