Contact | RSS Feed

Stock Market Outlook for February 5, 2018

Stocks fall despite better than expected reports on the economy.

 

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:

Tower International Inc. (NYSE:TOWR) Seasonal Chart

Tower International Inc. (NYSE:TOWR) Seasonal Chart

J&J Snack Foods Corp. (NASD:JJSF) Seasonal Chart

J&J Snack Foods Corp. (NASD:JJSF) Seasonal Chart

PPG Industries, Inc.  (NYSE:PPG) Seasonal Chart

PPG Industries, Inc. (NYSE:PPG) Seasonal Chart

The Progressive Corporation  (NYSE:PGR) Seasonal Chart

The Progressive Corporation (NYSE:PGR) Seasonal Chart

PepsiCo, Inc.  (NYSE:PEP) Seasonal Chart

PepsiCo, Inc. (NYSE:PEP) Seasonal Chart

Greif Bros. Corp. (NYSE:GEF) Seasonal Chart

Greif Bros. Corp. (NYSE:GEF) Seasonal Chart

V.F. Corporation  (NYSE:VFC) Seasonal Chart

V.F. Corporation (NYSE:VFC) Seasonal Chart

Regions Financial Corporation  (NYSE:RF) Seasonal Chart

Regions Financial Corporation (NYSE:RF) Seasonal Chart

Newell Rubbermaid Inc.  (NYSE:NWL) Seasonal Chart

Newell Rubbermaid Inc. (NYSE:NWL) Seasonal Chart

Hanesbrands Inc. (NYSE:HBI) Seasonal Chart

Hanesbrands Inc. (NYSE:HBI) Seasonal Chart

Textron Inc.  (NYSE:TXT) Seasonal Chart

Textron Inc. (NYSE:TXT) Seasonal Chart

The Goodyear Tire & Rubber Company  (NYSE:GT) Seasonal Chart

The Goodyear Tire & Rubber Company (NYSE:GT) Seasonal Chart

The Allstate Corporation (NYSE:ALL) Seasonal Chart

The Allstate Corporation (NYSE:ALL) Seasonal Chart

VMware Inc. (NYSE:VMW) Seasonal Chart

VMware Inc. (NYSE:VMW) Seasonal Chart

Allegheny Technologies Incorporated (NYSE:ATI) Seasonal Chart

Allegheny Technologies Incorporated (NYSE:ATI) Seasonal Chart

TreeHouse Foods Inc. (NYSE:THS) Seasonal Chart

TreeHouse Foods Inc. (NYSE:THS) Seasonal Chart

 

 

The Markets

Stocks dipped to close out the week as investors reacted to the now parabolic decline in bond prices.  The S&P 500 Index shed 2.12%, breaking below its 20-day moving average for the first time since November.  The buying pressures that charted the parabolic trend since the passage of tax legislation in the US has quickly alleviated and trendlines look poised to be tested.  Previous rising trendline resistance around 2700 provides a logical retracement point, bringing order and sustainability back to the trend of higher-highs and higher-lows.  Seasonally, February is the weakest month of the six month positive trend for stocks.

image

Stocks weakened alongside bonds on Friday, creating a bit of a panic scenario as there were few places to hide in the market decline.  The iShares 7-10 year treasury bond ETF (IEF) has quickly fulfilled the downside target of a head-and-shoulders topping pattern, now showing a move lower that has parabolic characteristics.  Another longer-term head-and-shoulders pattern has downside implications for the ETF to $92, should previous support around $102 be broken.  The ETF may need to retrace the recent declines first to to chart more of a sustainable path lower.  Seasonally, bonds are in the weakest time of year through the month of April, resulting in higher yields as investors adopt a more risk-on approach.

image

10 Year U.S. Treasury Notes Futures (TY) Seasonality
CME_TY1 Relative to the S&P 500CME_TY1 Relative to the Sector

Monthly Seasonal 10 Year U.S. Treasury Notes Futures (TY)

The moves in equity and bond markets follow the release of January’s Non-Farm Payroll report, which came in above expectations.  The headline print indicated that 200,000 jobs were added last month, edging out estimates that called for an increase of 175,000.  The unemployment rate remain unchanged at 4.1% and average hourly earnings increased by 0.3%, inline with estimates.  Stripping out the manipulation, I mean adjustments, payrolls actually declined by 3.1 million, or 2.1%, which is precisely inline with the average change for the first month of the year.  The change in total private payrolls was a tenth of a percent better than the seasonal norm.  Areas of the economy dependent on the strength of the manufacturing sector continue to be the bright spot with manufacturing employment specifically showing a change for January that is three-tenths of a percent above the normal change.  Areas that concentrate on materials and machinery that contribute to the manufacturing process are underpinning this strength, including a very rare January increase in machinery manufacturing employment.  Turning to the areas that you would expect to show declines coming out of the holiday season, mainly those pertaining to the consumer, retail trade is showing a much better than average decline in January, down by 3.5%.  The average decline for this category in the first month of the year is 4.7%.  Electronics and non-store (online) retailers appear to be supporting this strength.  Couriers that delivered a number of those online purchases over the holidays, meanwhile, saw their payrolls decline by more than average, down by 17.2%, close to double the 9.8% average drop.  This is part of an evolving shift in the seasonal pattern of courier hires as a greater number of workers are brought on temporarily around the holidays, only to be laid off when the calendar flips to the new year.  Overall, signs of strength in the key economic drivers, those pertaining to businesses and the consumer, remain intact.  Even though employment is a lagging economic indicator, the confidence that businesses are expressing bodes well for activity through the year ahead.  For a complete breakdown of the report, the seasonal charts can be accessed via the chart database at http://charts.equityclock.com/u-s-employment-situation.

Total Nonfarm Seasonal Chart

Monthly Total Nonfarm Data

As for wages, despite the bonuses and wage increases that were announced following the passage of the tax bill in December, the change in average hourly earnings was actually less than the year prior when president Trump was just taking his spot in the top office.  Average Hourly Earnings of Production and Nonsupervisory Employees increased by nine-tenths of one percent, short of the 1.4% increase reported in the first month of last year.  The result was also the weakest start to the year since 2014.  Despite this minor trivialization of this gauge of employee income, January’s gain was two-tenths of a percent above average, which shows that employees are in demand and employers are willing to pay to attract the talent required.  Last year, despite the strong start out of the gates, hourly earnings essentially flat lined through the middle of 2017, eventually ending the year with almost half of the average calendar year gain.  It will be interesting to see if this year can buck the trend that we saw last year as inflationary pressures pick up.

http://charts.equityclock.com/seasonal_charts/economic_data/CEU0500000008_seasonal_chart.PNG

Elsewhere in the economy, a report on factory orders capped off a strong year for manufacturing activity.  The headline print indicated that factory orders increased by 1.7% in December, better than the 1.5% increase forecasted by analysts.  Stripping out the seasonal adjustments, the Value of Manufacturers’ New Orders for All Manufacturing Industries actually increased by 2.8%, which is short of the average increase for December of 3.3%.  Tallying up the year as a whole, the 7.3% increase in factory orders is the best since 2011, firmly above the 2.6% average gain, based on data from the past 20 years.  But with this strength in manufacturing activity has also been strong growth in inventories, which are higher by 4.1% for the calendar year.  The average increase is 2.1%.  This continues to pose a concern as a lack of sell-through could lead to margin compression, thereby threatening the profitability of companies in future quarters.  The dollar remains low, supportive of exports, and take home pay for Americans is higher, with the help of recently enacted tax legislation, therefore the threat of this demand problem is not an immediate risk, but further data is required to determine how the money flows in this new tax era.

Value of Manufacturers' New Orders for All Manufacturing Industries Seasonal Chart

Monthly Value of Manufacturers' New Orders for All Manufacturing Industries Data

Value of Manufacturers’ New Orders for All Manufacturing Industries Seasonal Chart

Value of Manufacturers' Total Inventories for All Manufacturing Industries  Seasonal Chart Value of Manufacturers' Shipments for All Manufacturing Industries  Seasonal Chart Value of Manufacturers' New Orders for Nondurable Goods Industries  Seasonal Chart Value of Manufacturers' Shipments for Nondurable Goods Industries  Seasonal Chart Value of Manufacturers' Total Inventories for Nondurable Goods Industries Seasonal Chart Value of Manufacturers' New Orders for Consumer Goods: Consumer Nondurable Goods Industries  Seasonal Chart Value of Manufacturers' Shipments for Nondurable Goods Industries: Chemical Products: Pharmaceuticals and Medicines  Seasonal Chart Value of Manufacturers' Inventories, by Stage of Fabrication: Finished Goods for Nondurable Goods Industries: Petroleum and Coal Products  Seasonal Chart Value of Manufacturers' Shipments for Nondurable Goods Industries: Paper Products: Pulp, Paper, and Paperboard Mills  Seasonal Chart Value of Manufacturers' Total Inventories for Nondurable Goods Industries: Beverage and Tobacco Products: Beverages  Seasonal Chart Value of Manufacturers' Shipments for Nondurable Goods Industries: Chemical Products: Pesticides, Fertilizers, and Other Agricultural Chemicals  Seasonal Chart Value of Manufacturers' Shipments for Nondurable Goods Industries: Petroleum and Coal Products  Seasonal Chart Value of Manufacturers' Shipments for Nondurable Goods Industries: Beverage and Tobacco Products: Tobacco  Seasonal Chart Value of Manufacturers' Shipments for Nondurable Goods Industries: Petroleum and Coal Products: Petroleum Refineries  Seasonal Chart Value of Manufacturers' Shipments for Nondurable Goods Industries: Beverage and Tobacco Products: Beverages  Seasonal Chart

Sentiment on Friday, as gauged by the put-call ratio, ended surprisingly bullish at 0.88.  Typically, on days like Friday, investors will hedge portfolio positions by way of puts, but this clearly did not occur.  Instead, the bias remains focussed on upside call options, which could be suggestive of a market that has more bulls than bears, but are unwilling to stick their neck out by buying the actual securities, instead buying the derivatives.  It may take an overly bearish read to suggest that the selling in stocks is finally complete.

image

 

 

Sectors and Industries entering their period of seasonal strength:

Dow Jones Transportation Average Seasonality

$TRAN Relative to the S&P 500

Monthly Seasonal Dow Jones Transportation Average

 

 

Seasonal charts of companies reporting earnings today:

Arconic Inc. (ARNC) Seasonal Chart Badger Meter, Inc. (BMI) Seasonal Chart Booz Allen Hamilton Holding Corporation (BAH) Seasonal Chart Bristol-Myers Squibb Company (BMY) Seasonal Chart Church & Dwight Company, Inc. (CHD) Seasonal Chart Cirrus Logic, Inc. (CRUS) Seasonal Chart Everest Re Group, Ltd. (RE) Seasonal Chart Fabrinet (FN) Seasonal Chart GW Pharmaceuticals Plc (GWPH) Seasonal Chart Hess Corporation (HES) Seasonal Chart Leggett & Platt, Incorporated (LEG) Seasonal Chart Macerich Company (The) (MAC) Seasonal Chart National Oilwell Varco, Inc. (NOV) Seasonal Chart Nutrien Ltd. (NTR) Seasonal Chart Randgold Resources Limited (GOLD) Seasonal Chart Skyworks Solutions, Inc. (SWKS) Seasonal Chart Sysco Corporation (SYY) Seasonal Chart

 

 

S&P 500 Index

image

image

 

 

TSE Composite

image

image

 

Sponsored By...
Seasonal Advantage Portfolio by CastleMoore

Comments are closed.