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Stock Market Outlook for February 27, 2018

Margin debt continuing its trend of above average gains.

 

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:

Oneok, Inc. (NYSE:OKE) Seasonal Chart

Oneok, Inc. (NYSE:OKE) Seasonal Chart

Dorman Products, Inc. (NASD:DORM) Seasonal Chart

Dorman Products, Inc. (NASD:DORM) Seasonal Chart

CenterPoint Energy, Inc.  (NYSE:CNP) Seasonal Chart

CenterPoint Energy, Inc. (NYSE:CNP) Seasonal Chart

 

 

The Markets

Stocks pushed higher on Monday as treasury yields continued to take a breather, pulling back from multi-year highs set lest week.  The yield on the 10-year note moved slightly away from the psychologically important 3% level that all investors had an eye on and the 30-year bond fell back from horizontal resistance at 3.2%.  The S&P 500 Index gained 1.18%, continuing to take back the losses that were recorded at the start of the month.  The benchmark remains around 3.4% below the all-time peak recorded one-month ago.  Meanwhile, the technology sector has recouped all off the correction decline as investors revert back to the momentum names that have been significant beneficiaries of the bull market rally over the past couple of years.  The S&P 500 Technology Sector Index moved slightly above its late January peak to chart a new all-time high.  Outperformance versus the market remains evident.  Seasonally, the period between mid-February and mid-April is typically a softer time for technology stocks, underperforming the market on average as positive catalysts through the the end of the first quarter are typically few.  Developer conferences into the spring typically reignite strength in the sector between mid-April and mid-July.  While negative divergences with respect to MACD and RSI suggest buying pressures may be waning, the long and intermediate-term trends, as gauged by the direction of 50 and 200-day moving averages remain positive.

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Technology Sector Seasonal Chart

TECHNOLOGY Relative to the S&P 500
TECHNOLOGY Relative to the S&P 500

TECHNOLOGY Monthly Averages

On the economic front, a report on new homes sales continued the trend of disappointing datapoints for the month of January.  The headline print indicated that sales of new homes fell by 7.8% to a seasonally adjusted annual rate of 593,000.  Analysts had forecasted a rate of 640,000.  Stripping out the seasonal adjustments, sales in this segment of the housing market actually fell by 2.2%, negatively diverging from the 6.5% average gain for the first month of the year, based on the past 20 periods.  The result follows a strong 2017 when sales were higher by 15.4%, showing the best result since 2012.  A giveback in the month of January, although rare, may still warrant a pass.  The concern is that if sales fail to materialize in the ramp-up to the spring home buying season between February and April that something more detrimental could be implied.  Parsing through the report, weakness was focussed on the homes completed and homes not started categories, both of which showed results that were well below average.  Sales of new homes completed recorded a drop of 21.1%, the second largest percentage drawdown to start the year on record.  Sales of new homes under construction, meanwhile, showed an above average change for the month.  Perhaps no surprise given the weakness in sales, inventory levels expanded, pushing the months of supply from 5.5 to 6.1.  Six months has typically been the dividing line between a buyers and sellers market.  This put pressure on prices, which fell by 4.1% to start the year, much more than the average January decline of 0.3%.  Housing has typically acted as a leading indicator to periods of economic weakness, therefore reports ahead will be closely scrutinized to determine whether the weakness in new home sales is just an isolated event, perhaps a lull before the tax reform boost, or whether something more is at play (eg. raising rates smothering activity).  Traders have become accustomed in recent days to reports missing the consensus analyst estimate, but the underlying results suggested they were correct to ignore the seasonally adjusted headline result.  This is the first report where the weakness in the headline print is matched by weakness in the underlying, non-adjusted result.

New Home Sales Seasonal Chart

Monthly New Home Sales Data

New Home Sales Seasonal Chart

New Home Sales - Not Started Seasonal Chart New Home Sales - Under Construction  Seasonal Chart New Home Sales - Completed Seasonal Chart Median Sales Price for New Houses Sold Seasonal Chart

Also released on Monday was the latest statistics on margin debt, providing insight as to how leveraged investors were in the month of January.  According to FINRA, margin debt increased to another record high in the first month of 2018, rising by 3.6% to $665.7 Billion.  The average change in margin debt at this time of year is 2.5%.  While above average, the result is less than the gain recorded across major benchmarks in the month, easing concerns that investors are overly leveraged to this rising tape, a scenario that could lead to a more detrimental downturn than what has already been realized.  This gauge of complacency has been rising above average for the past year, but has yet to suggest anything overly ominous for the path of stocks ahead.

NYSE Margin debt Seasonal Chart

NYSE Credit balances in margin accounts Seasonal Chart

Sentiment on Monday, as gauged by the put-call ratio, ended bullish at 0.93.

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Seasonal charts of companies reporting earnings today:

AAON, Inc. (AAON) Seasonal Chart ACADIA Pharmaceuticals Inc. (ACAD) Seasonal Chart AMAG Pharmaceuticals, Inc. (AMAG) Seasonal Chart Amedisys Inc (AMED) Seasonal Chart American Public Education, Inc. (APEI) Seasonal Chart American Tower Corporation (REIT) (AMT) Seasonal Chart Aqua America, Inc. (WTR) Seasonal Chart AutoZone, Inc. (AZO) Seasonal Chart B&G Foods, Inc. (BGS) Seasonal Chart Bank Of Montreal (BMO) Seasonal Chart Bank of Nova Scotia (The) (BNS) Seasonal Chart Big 5 Sporting Goods Corporation (BGFV) Seasonal Chart  Carter's, Inc. (CRI) Seasonal Chart Discovery Communications, Inc. (DISCA) Seasonal Chart Eaton Vance Corporation (EV) Seasonal Chart El Paso Electric Company (EE) Seasonal Chart Endo International plc (ENDP) Seasonal Chart ENSCO plc (ESV) Seasonal Chart EOG Resources, Inc. (EOG) Seasonal Chart Express Scripts Holding Company (ESRX) Seasonal Chart Extended Stay America, Inc. (STAY) Seasonal Chart Frontier Communications Corporation (FTR) Seasonal Chart Genco Shipping & Trading Limited (GNK) Seasonal Chart Heico Corporation (HEI) Seasonal Chart  Imax Corporation (IMAX) Seasonal Chart Intrepid Potash, Inc (IPI) Seasonal Chart Jazz Pharmaceuticals plc (JAZZ) Seasonal Chart Lumber Liquidators Holdings, Inc (LL) Seasonal Chart Macy's Inc (M) Seasonal Chart Mallinckrodt plc (MNK) Seasonal Chart Marriot Vacations Worldwide Corporation (VAC) Seasonal Chart Nabors Industries Ltd. (NBR) Seasonal Chart Papa John's International, Inc. (PZZA) Seasonal Chart Perrigo Company (PRGO) Seasonal Chart R.R. Donnelley & Sons Company (RRD) Seasonal Chart Range Resources Corporation (RRC) Seasonal Chart Rogers Corporation (ROG) Seasonal Chart Sempra Energy (SRE) Seasonal Chart Steven Madden, Ltd. (SHOO) Seasonal Chart The Priceline Group Inc. (PCLN) Seasonal Chart Toll Brothers, Inc. (TOL) Seasonal Chart VALE S.A. (VALE) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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