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Stock Market Outlook for October 15, 2018

While taking an alternate path, the YTD return of the Dow Jones Industrial Average is inline with the average mid-term election year performance.

 

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:

Dolby Laboratories (NYSE:DLB) Seasonal Chart

Dolby Laboratories (NYSE:DLB) Seasonal Chart

Clear Channel Outdoor Holdings Inc. (NYSE:CCO) Seasonal Chart

Clear Channel Outdoor Holdings Inc. (NYSE:CCO) Seasonal Chart

AMC Networks Inc. (NASD:AMCX) Seasonal Chart

AMC Networks Inc. (NASD:AMCX) Seasonal Chart

IGM Financial Inc.  (TSE:IGM) Seasonal Chart

IGM Financial Inc. (TSE:IGM) Seasonal Chart

Shaw Communications Inc. (USA) (NYSE:SJR) Seasonal Chart

Shaw Communications Inc. (USA) (NYSE:SJR) Seasonal Chart

Power Financial Corporation  (TSE:PWF) Seasonal Chart

Power Financial Corporation (TSE:PWF) Seasonal Chart

Walgreens Boots Alliance, Inc. (NYSE:WBA) Seasonal Chart

Walgreens Boots Alliance, Inc. (NYSE:WBA) Seasonal Chart

Sealed Air Corp.  (NYSE:SEE) Seasonal Chart

Sealed Air Corp. (NYSE:SEE) Seasonal Chart

Agilent Technologies Inc. (NYSE:A) Seasonal Chart

Agilent Technologies Inc. (NYSE:A) Seasonal Chart

Strayer Education, Inc. (NASD:STRA) Seasonal Chart

Strayer Education, Inc. (NASD:STRA) Seasonal Chart

Korn Ferry Intl (NYSE:KFY) Seasonal Chart

Korn Ferry Intl (NYSE:KFY) Seasonal Chart

Incyte Corp. (NASD:INCY) Seasonal Chart

Incyte Corp. (NASD:INCY) Seasonal Chart

Advance Auto Parts Inc. (NYSE:AAP) Seasonal Chart

Advance Auto Parts Inc. (NYSE:AAP) Seasonal Chart

Steel Dynamics, Inc.  (NASDAQ:STLD) Seasonal Chart

Steel Dynamics, Inc. (NASDAQ:STLD) Seasonal Chart

WestJet Airlines Ltd.  (TSE:WJA) Seasonal Chart

WestJet Airlines Ltd. (TSE:WJA) Seasonal Chart

Valero Energy Corporation  (NYSE:VLO) Seasonal Chart

Valero Energy Corporation (NYSE:VLO) Seasonal Chart

Varian Medical Systems, Inc.  (NYSE:VAR) Seasonal Chart

Varian Medical Systems, Inc. (NYSE:VAR) Seasonal Chart

CBS Corp. (NYSE:CBS) Seasonal Chart

CBS Corp. (NYSE:CBS) Seasonal Chart

The Bank of New York Mellon Corporation (NYSE:BK) Seasonal Chart

The Bank of New York Mellon Corporation (NYSE:BK) Seasonal Chart

Biogen Idec Inc. (NASDAQ:BIIB) Seasonal Chart

Biogen Idec Inc. (NASDAQ:BIIB) Seasonal Chart

Advanced Semiconductor (NYSE:ASX) Seasonal Chart

Advanced Semiconductor (NYSE:ASX) Seasonal Chart

The Charles Schwab Corporation  (NYSE:SCHW) Seasonal Chart

The Charles Schwab Corporation (NYSE:SCHW) Seasonal Chart

 

 

The Markets

Stocks showed another volatile session on Friday, trading in and out of positive territory throughout the day.  The S&P 500 Index eventually ended the day with a gain of 1.42%, right at its 200-day moving average.  Oversold readings remain intact on the daily chart, however, momentum indicators are attempting to rebound following the past week’s market rout. 

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When the dust settled on the week, the large-cap benchmark showed a loss of 4.11%, intersecting with its rising 50-week moving average.  This was the common theme amongst the major benchmarks as prices reverted to this significant weekly variable level of support.  Momentum indicators on the weekly look of the Dow Jones Industrial Average, Nasdaq Composite, and S&P 500 Index are all rolling over with MACD, RSI, and Stochastics triggering sell signals.  A negative divergence with respect to these indicators is apparent, sending a warning signal of the risks of a longer-term topping pattern.  A significant violation of the 50-week moving average across these benchmarks opens the door to a retracement back to the 200-week average, which on the S&P 500 Index would be around 2300.  This would be very difficult to achieve with the economy and earnings in the US continuing to show significant strength, but, given the sharpness of the drawdown over the past week and a half, a move of this magnitude cannot be discounted.

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Turning to the mid-term election year playbook, although the Dow Jones Industrial Average has taken an alternate path compared to the average trend for this type of year, the outcome as of Thursday’s close is the same.  The blue-chip benchmark was up 1.35% year-to-date through Thursday’s close, which is just shy of the 1.58% gain that is average by this point in the mid-term election year.  The tendency during mid-term years is depressed returns between the middle of April and the end of September, followed by a rally through the last quarter of the year.  An opposite pattern looks to be playing out.  Investors may be pricing in the risks that the Democrats take control of congress, hindering the Trump administration’s ability to enact its business friendly mandate.

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Sentiment on Friday, as gauged by the put-call ratio, ended bearish at 1.16.

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Sectors and Industries entering their period of seasonal strength:

S&P/TSX Capped Industrials Seasonal Chart

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

$SPTIN Monthly Averages

S&P/TSX Capped Consumer Discret Seasonal Chart

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

$SPTCD Monthly Averages

 

 

Seasonal charts of companies reporting earnings today:

Bank of America Corporation (BAC) Seasonal Chart First Defiance Financial Corp. (FDEF) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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