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Stock Market Outlook for February 6, 2018

S&P 500 Index entering a range of longer-term support between 100 and 200-day moving averages.

 

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:

Philip Morris Intl Inc. (NYSE:PM) Seasonal Chart

Philip Morris Intl Inc. (NYSE:PM) Seasonal Chart

Loblaw Companies Limited  (TSE:L) Seasonal Chart

Loblaw Companies Limited (TSE:L) Seasonal Chart

Sprint Nextel Corporation  (NYSE:S) Seasonal Chart

Sprint Nextel Corporation (NYSE:S) Seasonal Chart

ConocoPhillips  (NYSE:COP) Seasonal Chart

ConocoPhillips (NYSE:COP) Seasonal Chart

FTI Consulting, Inc. (NYSE:FCN) Seasonal Chart

FTI Consulting, Inc. (NYSE:FCN) Seasonal Chart

 

 

The Markets

A very weak session for stocks saw major benchmarks fall to the lowest levels of the year.  The Dow Jones industrial Average recorded the largest ever point decline in a single session, falling around 1600 points at the lows of the day.  Not even rising 50-day moving averages was able to lessen the selling pressures that gripped markets; the S&P 500 Index, Dow Jones Industrial Average, and Nasdaq Composite all closed below this intermediate level of support.  Looking at the S&P 500 Index, the benchmark is back within the trading range that it broke out of following the passage of tax legislation back in December.  A break of trendline support below could cause some damage to the intermediate trend as investors aggressively unwind positions that resulted in the parabolic rise in stocks to start the year.

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During panic periods, such as this, it is often best to take a broad view of the state of the market rather than react to the short-term fluctuation.  Market benchmarks continue to maintain a trend of higher-highs and higher-lows.  Major moving averages (50 and 200-day) are still pointing higher.  No significant points of resistance exist overhead.  For the most part, signs of risk aversion are not yet apparent (consumer staples underperformed consumer discretionary through Monday’s selloff).  Momentum and breadth indicators have yet to suggest anything detrimental  for stocks on a longer-term scale.  As of present, the market action still resembles a simple unwind of the parabolic move that was apparent across the charts over the past couple of months.  Stocks had charted some of the most overbought readings on record in recent weeks and sentiment indicators also reached extremes.  This combined with weaker seasonal tendencies in the month of February following the peak of earnings season in January made it very difficult for stocks to find that next marginal buyer, leading to the realization of the risks that we had been highlighting for some time now.  For the S&P 500 Index, the 100-day moving average is not far below at 2633 and the 200-day now sits at 2533, both probable levels to provide support to the longer-term trend of market benchmarks beyond any short-term weakness.

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Sentiment on Monday, as gauged by the put-call ratio, still managed to finish bullish at 0.92.  The put-call ratio has been just one of many gauges that have indicated the overly bullish bias of investors to start the year, suggesting a reversion to the mean for stocks was likely.  Ideally, a move in the put call ratio to levels well above 1 have historically provided the best risk-reward entry points, such as what we saw at the end of 2017, just before major benchmarks charted their best January return in 25 years.  So while Monday’s action was certainly that of panic, investor sentiment has yet to be shaken, something that is best to see before taking advantage of beaten up equity positions.

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Seasonal charts of companies reporting earnings today:

AECOM (ACM) Seasonal Chart Akamai Technologies, Inc. (AKAM) Seasonal Chart Allergan plc. (AGN) Seasonal Chart AmerisourceBergen Corporation (Holding Co) (ABC) Seasonal Chart Anadarko Petroleum Corporation (APC) Seasonal Chart Archer-Daniels-Midland Company (ADM) Seasonal Chart Becton, Dickinson and Company (BDX) Seasonal Chart BP p.l.c. (BP) Seasonal Chart Cerner Corporation (CERN) Seasonal Chart Chipotle Mexican Grill, Inc. (CMG) Seasonal Chart Cummins Inc. (CMI) Seasonal Chart Dunkin' Brands Group, Inc. (DNKN) Seasonal Chart Emerson Electric Company (EMR) Seasonal Chart Gartner, Inc. (IT) Seasonal Chart General Finance Corporation (GFN) Seasonal Chart General Motors Company (GM) Seasonal Chart Gilead Sciences, Inc. (GILD) Seasonal Chart Laboratory Corporation of America Holdings (LH) Seasonal Chart Lennox International, Inc. (LII) Seasonal Chart Microchip Technology Incorporated (MCHP) Seasonal Chart NETGEAR, Inc. (NTGR) Seasonal Chart Owens-Illinois, Inc. (OI) Seasonal Chart Pioneer Natural Resources Company (PXD) Seasonal Chart Plains All American Pipeline, L.P. (PAA) Seasonal Chart S&P Global Inc. (SPGI) Seasonal Chart Spirit Airlines, Inc. (SAVE) Seasonal Chart Transdigm Group Incorporated (TDG) Seasonal Chart Walt Disney Company (The) (DIS) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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