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Stock Market Outlook for October 26, 2018


Signs of selling exhaustion appearing, hinting of a near-term rebound attempt.
 

 

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:

Icahn Enterprises L.P. (NASD:IEP) Seasonal Chart

Icahn Enterprises L.P. (NASD:IEP) Seasonal Chart

Marvell Technology Group, Ltd. (NASD:MRVL) Seasonal Chart

Marvell Technology Group, Ltd. (NASD:MRVL) Seasonal Chart

Copart, Inc. (NASD:CPRT) Seasonal Chart

Copart, Inc. (NASD:CPRT) Seasonal Chart

ProAssurance Corp. (NYSE:PRA) Seasonal Chart

ProAssurance Corp. (NYSE:PRA) Seasonal Chart

Chicago Bridge & Iron Co. (NYSE:CBI) Seasonal Chart

Chicago Bridge & Iron Co. (NYSE:CBI) Seasonal Chart

Health Management Systems (NASD:HMSY) Seasonal Chart

Health Management Systems (NASD:HMSY) Seasonal Chart

American Software, Inc. (NASD:AMSWA) Seasonal Chart

American Software, Inc. (NASD:AMSWA) Seasonal Chart

Hewlett-Packard Company (NYSE:HPQ) Seasonal Chart

Hewlett-Packard Company (NYSE:HPQ) Seasonal Chart

 

The Markets

Stocks rebounded on Thursday, retracing much of the loss realized amongst major US equity benchmarks during the previous session.  The S&P 500 Index gained 1.86%, trading within the range established by Wednesday’s selloff.  Momentum stocks in the technology, consumer discretionary, and communications services sectors led the rally as defensive bets that acted as an area of refuge in recent days traded flat to lower.  Evidence of downside exhaustion has become apparent, potentially setting the stage for a rebound attempt.  On the hourly chart of the large-cap benchmark, while momentum indicators remain in bearish territory, positive divergences have become apparent since the previous low charted mid-month.  The benchmark continues to show a short-term trend of lower-lows and lower-highs, but the framework to a standard A-B-C correction looks to have been fulfilled.  Further confirmation is required to conclude that we are moving beyond a negative short-term path, however.  Seasonally, broad market benchmarks in developed nations tend to trade higher from around the end of October through the end of the year and the recent selloff presents enticing opportunities to gain equity exposure prior to this favourable time of year ahead.

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On the economic front, a report on durable goods orders is suggesting that the manufacturing industry in the US may now be cooling.  The headline print indicated that durable goods orders increased by 0.8% in September, surpassing analyst estimates calling for a 1.5% decline in the month.  Stripping out the seasonal adjustments,  the Value of Manufacturers’ New Orders for Durable Goods Industries actually increased by 0.9%, which is weaker than the 6.5% increase that is average for September.  The year-to-date change now sits 5.2% above average, which is still one of the best performances of this economic cycle.  Orders of defense aircraft had a significant impact as results jumped a whopping 214.2% compared to the month prior.  The average gain in this category for September is 47.2%.  Elsewhere, strength remains evident in orders for computers and related industries, which is now trending 16.7% above the seasonal norm through the month of September.  As for the areas of weakness in the report, machinery and electrical equipment orders showed very rare declines in the month, hinting that the tariff war may be taking a toll.  Both of these categories had been trending well above average prior to this result, but September’s decline puts the year-to-date pace in a below average position at a time when they should be seeing peak in activity ahead of the fourth quarter.  Overall, there is indication that the once red-hot manufacturing industry is cooling, which could pour more fuel on the fire for market participants that believe we are on the precipice of a recession.  Seasonally, durable goods orders tends to fade into the fourth quarter as activity shifts away from production and more towards spending.  For a breakdown of the results, the charts are available in the database at https://charts.equityclock.com/u-s-durable-goods-orders.

Value of Manufacturers' New Orders for Durable Goods Industries Seasonal Chart

Monthly Value of Manufacturers' New Orders for Durable Goods Industries Data

Value of Manufacturers' New Orders for Durable Goods Industries: Transportation Equipment: Defense Aircraft and Parts Seasonal Chart

Sentiment on Thursday, as gauged by the put-call ratio, ended bearish at 1.03.

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Sectors and Industries entering their period of seasonal strength:

Forest Products Industry Seasonal Chart
S5FRST Index Relative to the S&P 500S5FRST Index Relative to the Sector

S5FRST Index Monthly Averages

 

 

Seasonal charts of companies reporting earnings today:

Aon plc (AON) Seasonal Chart Autoliv, Inc. (ALV) Seasonal Chart Barnes Group, Inc. (B) Seasonal Chart Cabot Oil & Gas Corporation (COG) Seasonal Chart Charter Communications, Inc. (CHTR) Seasonal Chart Colgate-Palmolive Company (CL) Seasonal Chart Dr. Reddy's Laboratories Ltd (RDY) Seasonal Chart Granite Construction Incorporated (GVA) Seasonal Chart Moody's Corporation (MCO) Seasonal Chart Phillips 66 (PSX) Seasonal Chart Portland General Electric Company (POR) Seasonal Chart Provident Financial Services, Inc (PFS) Seasonal Chart Roper Technologies, Inc. (ROP) Seasonal Chart Royal Bank Scotland plc (The) (RBS) Seasonal Chart Ryder System, Inc. (R) Seasonal Chart Tenneco Inc. (TEN) Seasonal Chart The Goodyear Tire & Rubber Company (GT) Seasonal Chart Ventas, Inc. (VTR) Seasonal Chart Virtus Investment Partners, Inc. (VRTS) Seasonal Chart Weyerhaeuser Company (WY) Seasonal Chart WisdomTree Investments, Inc. (WETF) Seasonal Chart Zimmer Biomet Holdings, Inc. (ZBH) Seasonal Chart

 

S&P 500 Index

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TSE Composite

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