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Stock Market Outlook for September 25, 2018

REITs rolling over right on seasonal cue.

 

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:

Hormel Foods Corporation  (NYSE:HRL) Seasonal Chart

Hormel Foods Corporation (NYSE:HRL) Seasonal Chart

Kronos Worldwide Inc. (NYSE:KRO) Seasonal Chart

Kronos Worldwide Inc. (NYSE:KRO) Seasonal Chart

Griffon Corp. (NYSE:GFF) Seasonal Chart

Griffon Corp. (NYSE:GFF) Seasonal Chart

Copart, Inc. (NASD:CPRT) Seasonal Chart

Copart, Inc. (NASD:CPRT) Seasonal Chart

J.B. Hunt Transport Services (NASD:JBHT) Seasonal Chart

J.B. Hunt Transport Services (NASD:JBHT) Seasonal Chart

ACI Worldwide Inc  (NASDAQ:ACIW) Seasonal Chart

ACI Worldwide Inc (NASDAQ:ACIW) Seasonal Chart

 

 

The Markets

Stocks drifted lower to start the week on headlines that China had cancelled scheduled trade talks with the US and speculation that President Trump may fire Deputy Attorney General Rod Rosentstein.  The S&P 500 Index closed down by around a third of a percent, filling a gap that was opened last week between 2910 and 2920.  A mix of defensive and cyclical sectors were among the laggards as REITs, consumer staples, industrials, and materials fell by well over one percent, suggestive of the ongoing rotation into the end of the quarter.

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Highlighting one of the laggards, the MSCI US REIT Index closed lower by almost 2% on Monday, falling on cue with seasonal norms.  The benchmark has rolled over through the past month as yields pushed higher, bringing a rather abrupt end to the seasonal trade.  Monday’s downdraft gives up the 20 and 50-day moving averages as levels of support, suggesting that they are now in a position of resistance.  The sector has performed very well this summer, gaining through its period of strength in the spring and summer, outperforming the market in the process.  But now that the summer has concluded, a period of seasonal weakness has begun.  The negative period spans from the middle of September through to the middle of November, underperforming the market in the process.  Positive tendencies can re-emerge in the month of December as part of a larger chase for yield into the close of the year.  Equity Clock Subscribers were notified of this pending shift of trend at the end of August as part of the monthly outlook.  To learn more about becoming a subscriber to our service, click on the following link: http://charts.equityclock.com/subscribe

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MSCI US REIT Index Seasonality

$RMZ Relative to the S&P 500
$RMZ Relative to the S&P 500

Monthly Seasonal MSCI US REIT Index

Turning to a gauge of investor leverage in the market, FINRA released its margin debt statistics for the month of August.  The level of margin debt was down by 0.1% last month, which is less severe than the 1.8% decline that is average for the summer month.  The year-to-date change is higher by around 1.5%, firmly below the seasonal average trend that calls for a 5.8% rise through this point in the year.  The weak trend is more indicative of periods of equity market weakness as investors refrain from leveraging their bets.  Despite stocks at all-time high, there remains a healthy degree of pessimism, which from a contrarian could be considered to be a positive attribute.  However, on the flip side of that contrarian argument is the decline in credit balances in customers’ accounts, typically a gauge of short sale activity.  Credit balances are lower by around 8.0% year-to-date, which is a negative divergence compared to the 2.0% rise that is average through the end of August.  So investors are not bold enough to short the market either, despite their pessimism.  Short covering rallies are typically the fuel for some of the contrarian plays that have existed since the conclusion of the last recession.  Seasonally, margin debt and credit balances rise through the remaining months of the year as the market moves higher.

NYSE Margin debt Seasonal Chart

Monthly NYSE Margin debt Data

NYSE Margin debt Seasonal Chart

NYSE Credit balances in margin accounts Seasonal Chart

Sentiment on Monday, as gauged by the put-call ratio, ended close to neutral at 0.98.

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Seasonal charts of companies reporting earnings today:

AAR Corp. (AIR) Seasonal Chart Cintas Corporation (CTAS) Seasonal Chart EnSync, Inc. (ESNC) Seasonal Chart FactSet Research Systems Inc. (FDS) Seasonal Chart IHS Markit Ltd. (INFO) Seasonal Chart IsoRay, Inc. (ISR) Seasonal Chart Jabil Inc. (JBL) Seasonal Chart KB Home (KBH) Seasonal Chart Manchester United Ltd. (MANU) Seasonal Chart Nike, Inc. (NKE) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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