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Stock Market Outlook for November 16, 2018

Despite strength in retail sales, stocks in the industry are not performing according to seasonal norms.

 

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:

Speedway Motorsports, Inc. (NYSE:TRK) Seasonal Chart

Speedway Motorsports, Inc. (NYSE:TRK) Seasonal Chart

Veeco Instruments, Inc. (NASD:VECO) Seasonal Chart

Veeco Instruments, Inc. (NASD:VECO) Seasonal Chart

Treasury Metals (TSE:TML) Seasonal Chart

Treasury Metals (TSE:TML) Seasonal Chart

Gold Fields Limited (ADR) (NYSE:GFI) Seasonal Chart

Gold Fields Limited (ADR) (NYSE:GFI) Seasonal Chart

 

 

The Markets

Stocks closed higher on Thursday in what amounted to a massive reversal on the session.  The S&P 500 Index closed higher by 1.06%, reversing a loss of approximately the same margin at the lows of the day.  The large-cap benchmark bounced from around gap support between 2685 and 2700 to close around the 20-day moving average.  Market participants are attempting to peg a low as details begin to emerge pertaining to trade negotiations between the US and China in the run-up to the meeting of top officials at the G20 at the end of the month.  Cyclical stocks were the leaders on the day with technology, materials, industrials, financials, and energy posting gains topping one percent.  Consumer staples, utilities, and REITs traded lower as investors unwind defensive bets.  The re-emergence of risk-on sentiment is conducive to fuelling the market higher, assuming it can overcome some of the adverse headlines that have been taking their toll on stocks for the past many weeks.

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On the economic front, a report on retail trade showed strength in the aggregate result.  Headlines showed that retail sales increased by 0.8% in October, surpassing analyst estimates that called for a 0.5% rise.  Stripping out the seasonal adjustments, total retail sales actually increased by 5.1%, which is firmly above the 3.0% increase that is average for this time of year.  The year-to-date change is now running 1.9% above the seasonal average trend, which is the best pace through this point in the year since 2014.  While headlines focussed on the influence of high gasoline prices on the overall tally, strength appears fairly broad based with many categories showing above average gains in the month.  Home furnishings, electronics, and health/personal care stores recorded increases that were above the average change at this point in the year.  Of concern, however, is the most discretionary category in the report, food services and drinking places.  Sales in this category increased  by 1.7%, which is around half of the 3.6% increase that is average for this time of year.  The growth in restaurant sales has been struggling for the past few years, suggesting concerns pertaining to the strength of the discretionary budgets of Americans.  Seasonally, retail sales spike in November and December as consumers open their wallets for presents during the end of year holiday season.  For a complete breakdown of the results, the charts are available in the database at https://charts.equityclock.com/u-s-retail-trade-sales.

Retail Trade: Total Seasonal Chart

Monthly Retail Trade: Total Data

Despite the strength in retail sales, the retail ETF (XRT) traded lower on the day as investors reacted to earnings from various industry constituents.  The ETF has pulled back from resistance at its 50-day moving average in recent days and is now back below its 200-day moving average.  Negative momentum divergences with respect to RSI and MACD have been in place throughout the summer.  Seasonally, the industry typically rises, on average, through the Black Friday shopping day in the US; 75% of Octobers and 80% of Novembers have been positive for the industry.  Thus far, prices have failed to respect seasonal norms.

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Retail Industry Seasonal Chart
S5RETL Index Relative to the S&P 500S5RETL Index Relative to the Sector

S5RETL Index Monthly Averages

Also released on Thursday were business sales and inventories for September.  We have uploaded those results to the database, accessible at https://charts.equityclock.com/u-s-business-inventories-and-sales.

Total Business Sales Seasonal Chart

Total Business Inventories Seasonal Chart

Turning to the manufacturing economy, surveys out of Philadelphia and New York suggest that conditions remain strong.  The Philadelphia Manufacturing Business Outlook Survey showed +3.2 (NSA) for November, which is firmly above the –2.1 that is average for this time of year.  The Empire State Survey showed +4.4 for November, well above the –4.3 level that has been the norm for this time of year over the past 15 years.  Positive results indicate expansion, while negative results indicate contraction.  Both indicators are down from the highs charted in the spring, following their average seasonal patterns that typically result in contractionary results during the colder winter months.

Philadelphia Manufacturing Business Outlook Survey Seasonal Chart

Empire State General Business Conditions Index Seasonal Chart

Sentiment on Thursday, as gauged by the put-call ratio, ended bullish at 0.85.  The ratio hit an overly bearish high of 1.50 in the morning hours as the broader market sold off, but these negative bets were quickly reversed into the close.

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Seasonal charts of companies reporting earnings today:

Frontline Ltd. (FRO) Seasonal Chart Helmerich & Payne, Inc. (HP) Seasonal Chart Viacom Inc. (VIAB) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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