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Stock Market Outlook for October 12, 2018

S&P 500 Index breaking below long-term rising trend channel, raising concerns over the longer-term path for stocks.

 

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:

NICE Ltd. (NASD:NICE) Seasonal Chart

NICE Ltd. (NASD:NICE) Seasonal Chart

Progenics Pharmaceuticals (NASD:PGNX) Seasonal Chart

Progenics Pharmaceuticals (NASD:PGNX) Seasonal Chart

Domtar Corp. (NYSE:UFS) Seasonal Chart

Domtar Corp. (NYSE:UFS) Seasonal Chart

 

 

The Markets

Another day of red for major equity benchmarks around the globe as investors react to a plethora of concerns, including rate fears and trade tensions.  The S&P 500 Index shed 2.06%, crashing below its 200-day moving average, a major hurdle that has typically supported previous declines.  The last time the benchmark closed this solidly below the 200-day moving average was in 2016 amidst the earnings and manufacturing recession.  The drawdown also violates the long-term rising trend channel that originates from the 2016 low, raising serious concerns pertaining to the longer-term trend of higher-highs and higher-lows.  The large-cap benchmark is presently the most oversold according to the 14-day Relative Strength Index since August 8th of 2011, following an almost 7% plunge in one session.  Back then, stocks rallied over the month that followed, then hit their ultimate low for the year in October.  Bottom line is that a tradable low could be near, but the more telling sign for the market will not be where the benchmark finds a near-term bottom, but rather where investors are pegging levels of resistance overhead.  Resistance at major moving averages, whether it be the 200, 100, or 50-day, could constrain the period of seasonal strength for stocks between the end of October and the beginning of May.  Investors in the Seasonal Advantage Portfolio benefitted from a tail-end seasonal rally in gold and gold miners on Thursday, which significantly hedged the portfolio against market weakness.  Looking for us to manage your portfolio using our proprietary strategy?  Email us at seasonalportfolio@equityclock.com.

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On the economic front, a report on CPI alleviated fears that inflation is running hot, which would have warranted a more aggressive stance by the Fed.  The headline print of September’s Consumer Price Index indicated a 0.1% increase for the month, which is half of the average increase that was expected by analysts.  The year-over-year rate now stands at +2.3%, which is down firmly from the +2.7% rate seen in the last report.  Stripping out the seasonal adjustments, the results were consistent with the headline print, up 0.1%, which is half of the average increase for this time of year.  The year-to-date change is now at +2.4%, which is below the 20-year average increase through the first three quarters of 2.6%.  Excluding food and energy, the 1.9% year-to-date pace is almost a tenth of a percent above the seasonal norm, a notable shift from the 0.3% below average pace seen by this point last year.  Parsing the categories, the report is fairly mixed with weakness in food/beverages, medical care, and recreation offsetting strength in apparel, transportation, and technology.  Technology continues to stand out in the report and not for the reason you may expect.  The prices of hardware and services are essentially flat year-to-date, which is a divergence from the declining trend that is average.  Strong demand for technology products this year is keeping prices supported.  Also standing out in the report is a substantial decline in the price of used cars and trucks, which fell by 4.2% in the month.  This is the largest September decline on record, well below the 0.7% average decline for this last month of the third quarter.  The result puts the year-to-date change down by 0.7% on the year, a full 2% below the seasonal average trend.  But yet, the price of new vehicles remains elevated at 0.5% above the seasonal norm.  This will inevitably create competition for new car sales as used cars show better vales.  Seasonally, new car prices tend to rise through the last quarter of the year as new models are brought to showroom floors, while used vehicles tend to fall in value through the winter months.  Overall, inflationary pressures look to have alleviated in recent months, which should allow the Fed plenty of room to enact its normalization policy.  Seasonally, aggregate CPI tends fall through the last quarter of the year as energy commodities trade lower.  For a complete breakdown of the results and to find the seasonality for a wide range of consumer products, the charts are available in the database at https://charts.equityclock.com/u-s-consumer-price-index-cpi-producer-price-index-ppi

Consumer Price Index for All Urban Consumers: All Items Seasonal Chart

Monthly Consumer Price Index for All Urban Consumers: All Items Data

Consumer Price Index for All Urban Consumers: All Items Less Food and Energy Seasonal Chart CPI - Information technology, hardware and services Seasonal ChartCPI - New and used motor vehicles Seasonal Chart CPI - New vehicles Seasonal Chart

Also released on Thursday was the latest petroleum status report from the Energy Information Administration.  The EIA indicated that oil inventories rose by 6.0 million barrels last week, while gasoline increased by 1.0 million barrels.  The result pushed the days of supply of oil to 24.6, now three days above average for this time of year, while the days of supply of gasoline ticked higher to 25.7, which is almost 2 days above the seasonal norm.  Gasoline is now sitting with the highest days of supply for this time of year in over two decades and producers are responding to this bloated state. Production of gasoline is down to one of the lowest levels of the year and the year-to-date change has now converged with its seasonal norm after remaining elevated above it through much of the year.  So while demand from producers may be less in the near future, the new record high level of production of oil is not helping the situation on either side.  Seasonally, domestic oil production typically dips into September and October amidst hurricane season, but this tendency has remained absent this year.

Weekly U.S. Days of Supply of Crude Oil excluding SPR  (Number of Days) Seasonal Chart

Weekly U.S. Days of Supply of Crude Oil excluding SPR (Number of Days) Seasonal Chart

Weekly U.S. Ending Stocks excluding SPR of Crude Oil Seasonal ChartWeekly U.S. Field Production of Crude Oil Seasonal ChartWeekly U.S. Commercial Crude Oil Imports Excluding SPR Seasonal Chart

Weekly U.S. Days of Supply of Total Gasoline  (Number of Days) Seasonal Chart

Weekly U.S. Days of Supply of Total Gasoline (Number of Days) Seasonal Chart

Weekly U.S. Ending Stocks of Total Gasoline Seasonal Chart Weekly U.S. Refiner and Blender Adjusted Net Production of Finished Motor Gasoline Seasonal Chart Weekly U.S. Product Supplied of Finished Motor Gasoline Seasonal Chart

The price of oil and gas reacted severely negative following the result, falling below its rising 20-day moving average.  Rising trend channel support comes in around $69.  Seasonally, the price of oil typically trades lower through early December.

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Crude Oil Futures (CL) Seasonal Chart

Sentiment on Thursday, as gauged by the put-call ratio, ended bearish at 1.21.

 

 

 

 

 

Sectors and Industries entering their period of seasonal strength:

Telecommunications Sector Seasonal Chart

TELECOMMUNICATIONS Relative to the S&P 500
TELECOMMUNICATIONS Relative to the S&P 500

TELECOMMUNICATIONS Monthly Averages

 

 

Seasonal charts of companies reporting earnings today:

Citigroup Inc. (C) Seasonal Chart FIRST REPUBLIC BANK (FRC) Seasonal Chart J P Morgan Chase & Co (JPM) Seasonal Chart PNC Financial Services Group, Inc. (The) (PNC) Seasonal Chart Wells Fargo & Company (WFC) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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