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Stock Market Outlook for November 5, 2018

Wages negatively diverged from its seasonal norm in October, alleviating concerns of a hot number by year-end.

 

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:

FalconStor Software, Inc. (NASD:FALC) Seasonal Chart

FalconStor Software, Inc. (NASD:FALC) Seasonal Chart

KMG Chemicals, Inc. (NYSE:KMG) Seasonal Chart

KMG Chemicals, Inc. (NYSE:KMG) Seasonal Chart

Alamo Group, Inc. (NYSE:ALG) Seasonal Chart

Alamo Group, Inc. (NYSE:ALG) Seasonal Chart

York Water Co. (NASD:YORW) Seasonal Chart

York Water Co. (NASD:YORW) Seasonal Chart

Capstead Mortgage Corp. (NYSE:CMO) Seasonal Chart

Capstead Mortgage Corp. (NYSE:CMO) Seasonal Chart

American Equity Investment Life (NYSE:AEL) Seasonal Chart

American Equity Investment Life (NYSE:AEL) Seasonal Chart

Aquila Resources (TSE:AQA) Seasonal Chart

Aquila Resources (TSE:AQA) Seasonal Chart

Eastern Platinum (TSE:ELR) Seasonal Chart

Eastern Platinum (TSE:ELR) Seasonal Chart

Lancaster Colony Corp. (NASD:LANC) Seasonal Chart

Lancaster Colony Corp. (NASD:LANC) Seasonal Chart

Territorial Bancorp Inc. (NASD:TBNK) Seasonal Chart

Territorial Bancorp Inc. (NASD:TBNK) Seasonal Chart

Exchange Income (TSE:EIF) Seasonal Chart

Exchange Income (TSE:EIF) Seasonal Chart

Hormel Foods Corporation  (NYSE:HRL) Seasonal Chart

Hormel Foods Corporation (NYSE:HRL) Seasonal Chart

TransForce Inc (TSE:TFII) Seasonal Chart

TransForce Inc (TSE:TFII) Seasonal Chart

 

 

The Markets

Stocks traded lower on Friday as investors reacted to a strong employment report and ongoing headline pertaining to trade with China.  The S&P 500 Index shed two-thirds of one percent, reversing early morning gains that saw a move towards the benchmark’s now declining 200-day moving average.  Gap support in the range of 2685 to 2700 is the hurdle on the downside.  It may take a catalyst to break the market one way or the other.  A bullish crossover with respect to MACD was realized during Friday’s session, suggesting a renewed buy signal, however, momentum indicators, for the most part, remain in bearish territory.

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As for the week, the 2.42% return on the large-cap benchmark is the best weekly result since March as stocks show signs of trying to find a low around present levels. Weekly momentum indicators are attempting to curl higher following the sell signals that were triggered closer to the beginning of October.  The rising 50-week moving average, almost equivalent to the 200-day moving average, remains the hurdle overhead.

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On Friday, a deluge of economic data provided plenty of catalysts to move the market.  The most scrutinized datapoint was the nonfarm payroll report in the US.  The headline print indicated that payrolls increased by 250,000 last month, surpassing forecasts calling for an increase of 190,000.  The unemployment rate remained unchanged at 3.7% and average hourly earnings ticked higher by 0.2% to a year-over-year rate of 3.1%.  Stripping out the seasonal adjustments, payrolls actually increased by 1.015 million, or 0.7%, which is better than the 0.5% increase that is average for the month of October. The result elevates the year-to-date change to two-tenths of one percent above the seasonal average trend, regaining the pace that was apparent before the impact of Hurricane Florence in September.  Parsing the details, manufacturing employment showed a very rare increase in payrolls for the month as workers were added in the wood products, machinery, computer, electronics, automobile, and chemical industries. Truck transportation continues to rise well above its seasonal average trend as employers attempt to solve the capacity issue with respect to transporting goods in this strong economy.  Waste management employment is showing similar above average strength.  It has been said that a strong economy produces a lot of garbage and the demand for labour in this industry is indicative of an economy that is by no means in the dump.  Among the laggards, the change in retail payrolls is falling short of its seasonal norm as auto dealers cut back on hiring activity.  However, strength remains apparent at electronics, gasoline, and general merchandise stores, implying a healthy read-through to the holiday season.  November and December is a big hiring period for retailers as they prepare for the surge in holiday spending.  Also setting the stage for holiday spending activity is the uptick in courier hiring, which is showing a stronger trend than last year.  Courier hiring surges in the months ahead as online purchases are shipped across the world. 

Total Nonfarm Seasonal Chart

Monthly Total Nonfarm Data

As for wages, Average Hourly Earnings of Production and Nonsupervisory Employees actually declined by 0.2% in October, which is a rare negative divergence compared to the 0.3% rise that is average for the period.  The year-to-date change now sits at +2.9%, which alleviates concerns that we may see a calendar year increase in wages in the upper 3% range by the end of the year.  Seasonally, wages rise by 0.2%, on average, in both November and December.  Overall, this was a healthy report that provided signs of strong employment growth without an overly hot wage number.  This should have otherwise fuelled strength in stocks following the result, but with investors hinged on China trade headlines, the employment report took a back seat.  Seasonally, total payrolls grow by 0.3%, on average, in November, then flatline into the end of the year as hiring activity wanes.  For a complete breakdown of the results, the charts are available in the database at https://charts.equityclock.com/u-s-employment-situation.

Average Hourly Earnings of Production and Nonsupervisory Employees: Total Private Seasonal Chart

North of the border, Statscan released employment data for Canada.  The headline print indicated that employment increased by 11,200 in October, missing the forecast calling for a rise of 17,000.  The unemployment rate ticked lower by one-tenth to 5.8%, in part due to a contraction in the labour force.  Stripping out the seasonal adjustments, employment actually increased by 17,300, or 0.1%, which is inline with the average change for October.  The year-to-date change in employment is now higher by 1.1%, which is half of the average change by this point in the year.  Full-time employment is running eight-tenths of one percent below average, while part-time employment is running 2.4% below the seasonal norm.  Meanwhile, unemployment is running 1.9% above average through the end of October.  The employment situation in Canada certainly appears weak.  Unlike the US, utilities employment is an area of strength, showing gains that are well above average, while manufacturing employment is an area of weakness.  Business, building and other support services and transportation and warehousing were the bright spots in the report, showing gains in the month when declines are the norm.  Overall, compared to the US, there is very little to be excited about this report, which continues to show strain amidst the the gravitation of activity toward the US amidst the more favourable tax environment.  Seasonally, employment in Canada tends to decline into the winter as economic activity wanes amidst the colder weather.  For a complete breakdown of the report, the charts are available in the database at https://charts.equityclock.com/canada-labour-force-survey

Canada Employment Seasonal Chart

Canada Employment full-time Seasonal Chart Canada Employment part-time Seasonal Chart Canada Unemployment Seasonal Chart

As for other economic data, we have uploaded seasonal charts pertaining to US and Canada International Trade and US Factory Orders to the seasonal chart database, accessible via the links below:

U.S. Factory Orders

Value of Manufacturers' New Orders for All Manufacturing Industries Seasonal Chart

U.S. International Trade Data

US International Trade - Exports Seasonal ChartUS International Trade - Imports Seasonal Chart

Canada International Merchandise Trade (Exports & Imports)

Total Exports of all merchandise Seasonal ChartTotal Imports of all merchandise Seasonal Chart

Sentiment on Friday, as gauged by the put-call ratio, ended bullish at 0.93.

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Seasonal charts of companies reporting earnings today:

Alaska Communications Systems Group, Inc. (ALSK) Seasonal Chart American States Water Company (AWR) Seasonal Chart American Vanguard Corporation (AVD) Seasonal Chart  Aqua America, Inc. (WTR) Seasonal Chart Ascent Capital Group, Inc. (ASCMA) Seasonal Chart Avis Budget Group, Inc. (CAR) Seasonal Chart   Cabot Corporation (CBT) Seasonal Chart Carrizo Oil & Gas, Inc. (CRZO) Seasonal Chart Del Frisco's Restaurant Group, Inc. (DFRG) Seasonal Chart Diamond Offshore Drilling, Inc. (DO) Seasonal Chart Douglas Dynamics, Inc. (PLOW) Seasonal Chart FMC Corporation (FMC) Seasonal Chart Franco-Nevada Corporation (FNV) Seasonal Chart Howard Hughes Corporation (The) (HHC) Seasonal Chart Infinity Pharmaceuticals, Inc. (INFI) Seasonal Chart International Flavors & Fragrances, Inc. (IFF) Seasonal Chart Loews Corporation (L) Seasonal Chart Luminex Corporation (LMNX) Seasonal Chart Lydall, Inc. (LDL) Seasonal Chart Manitowoc Company, Inc. (The) (MTW) Seasonal Chart Marriott International (MAR) Seasonal Chart Mistras Group Inc (MG) Seasonal Chart Mosaic Company (The) (MOS) Seasonal Chart Mylan N.V. (MYL) Seasonal Chart Nutrien Ltd. (NTR) Seasonal Chart Oasis Petroleum Inc. (OAS) Seasonal Chart Occidental Petroleum Corporation (OXY) Seasonal Chart Pacific Gas & Electric Co. (PCG) Seasonal Chart Rent-A-Center Inc. (RCII) Seasonal Chart SeaWorld Entertainment, Inc. (SEAS) Seasonal Chart Sysco Corporation (SYY) Seasonal Chart Tenet Healthcare Corporation (THC) Seasonal Chart The Andersons, Inc. (ANDE) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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