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Stock Market Outlook for October 10, 2018

Performance of two key cyclical sectors highlights the concern that investors have with the global 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:

Cypress Semiconductor (NASD:CY) Seasonal Chart

Cypress Semiconductor (NASD:CY) Seasonal Chart

Ur-Energy (TSE:URE) Seasonal Chart

Ur-Energy (TSE:URE) Seasonal Chart

Crown Castle Intl Corp. (NYSE:CCI) Seasonal Chart

Crown Castle Intl Corp. (NYSE:CCI) Seasonal Chart

Morgan Stanley  (NYSE:MS) Seasonal Chart

Morgan Stanley (NYSE:MS) Seasonal Chart

CMS Energy Corporation  (NYSE:CMS) Seasonal Chart

CMS Energy Corporation (NYSE:CMS) Seasonal Chart

Identive Group (NASD:INVE) Seasonal Chart

Identive Group (NASD:INVE) Seasonal Chart

Chemed Corp. (NYSE:CHE) Seasonal Chart

Chemed Corp. (NYSE:CHE) Seasonal Chart

Lattice Semiconductor Corp. (NASD:LSCC) Seasonal Chart

Lattice Semiconductor Corp. (NASD:LSCC) Seasonal Chart

Owens-Illinois, Inc.  (NYSE:OI) Seasonal Chart

Owens-Illinois, Inc. (NYSE:OI) Seasonal Chart

ASML Holding NV (NASD:ASML) Seasonal Chart

ASML Holding NV (NASD:ASML) Seasonal Chart

Investors Title Co. (NASD:ITIC) Seasonal Chart

Investors Title Co. (NASD:ITIC) Seasonal Chart

 

 

The Markets

Stocks closed lower on Tuesday as investors continue to monitor the activity in the bond market as yields hit multi-year highs.  The S&P 500 Index shed just over a tenth of a percent, continuing to hug its rising 50-day moving average.  Short-term downside risks are to 2850, which is the lower limit of the rising intermediate trend channel.

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Below the surface of the broader market, the action in some of the cyclical sectors was particularly ugly.  The S&P 500 Materials Sector benchmark fell 3.4% on Tuesday as investors took their cues from specialty materials company PPG.  The company warned that it is being hurt by rising raw material and oil costs.  Investors priced in the risk that other companies will show similar impacts when they report earnings in the weeks ahead.  The materials sector benchmark is trading around the lows of the year, now firmly below its 200-day moving average, which is showing signs of rolling over.  The move also falls below the lower limit of a rising long-term trend channel, which has been intact since the manufacturing recession of 2015/2016.  A stronger dollar, tariff wars, and the America First agenda of the US has taken a toll on companies that conduct business globally, such as PPG, warranting greater scrutiny over the international exposure of these domestically based companies.  A break below 345 on the materials sector benchmark would project a measured move lower to 310, or another 10% below present levels.  The period of seasonal strength for materials stocks is from the end of November through the beginning of May.

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Materials Sector Seasonal Chart

MATERIALS Relative to the S&P 500
MATERIALS Relative to the S&P 500

MATERIALS Monthly Averages

Also being hit were transportation stocks, which continue to be impacted by higher oil prices.  The Dow Jones Transportation Average fell 1.85%, moving further below 20 and 50-day moving averages.  Next major point of support is the 200-day moving average, closer to 10,800.  Seasonally, transportation stocks typically perform well between October 2nd and December 8th, moving higher as the price of oil rolls over.  But with concerns pertaining to the impact of Iranian oil supplies coming offline and the hurricane that is moving through the Gulf, the price of oil has remained elevated, despite seasonal tendencies calling for the contrary.  In the shoulder season, as we are in now, oil stockpiles typically rise as the production of gasoline falls.  Early indications of this have been revealed in recent weeks, so it may be difficult to sustain the advance in an environment when the days of supply of both oil and gas are above average and oil stockpiles are rising.  As a result, weakness in transportation stocks could prove to be a buying opportunity once the negative momentum abates.

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Dow Jones Transportation Average Seasonality

$TRAN Relative to the S&P 500

Monthly Seasonal Dow Jones Transportation Average

Sentiment on Tuesday, as gauged by the put-call ratio, ended close to neutral at 0.94.

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Sectors and Industries entering their period of seasonal strength:

Technology Sector Seasonal Chart

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

TECHNOLOGY Monthly Averages

S&P/TSX Capped Financial Index Seasonal Chart

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

$SPTFS Monthly Averages

 

 

Seasonal charts of companies reporting earnings today:

Fastenal Company (FAST) Seasonal Chart  VOXX International Corporation (VOXX) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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