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Stock Market Outlook for November 28, 2018

This gauge of risk sentiment could be suggesting the conclusion to the risk-off trend in 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:

RCI Hospitality, Holdings (NASD:RICK) Seasonal Chart

RCI Hospitality, Holdings (NASD:RICK) Seasonal Chart

Hooker Furniture Corp. (NASD:HOFT) Seasonal Chart

Hooker Furniture Corp. (NASD:HOFT) Seasonal Chart

Just Energy Group (TSE:JE) Seasonal Chart

Just Energy Group (TSE:JE) Seasonal Chart

Mcdermott Intl, Inc. (NYSE:MDR) Seasonal Chart

Mcdermott Intl, Inc. (NYSE:MDR) Seasonal Chart

DHX Media (TSE:DHX-B) Seasonal Chart

DHX Media (TSE:DHX-B) Seasonal Chart

Biglari Holdings Inc. (NYSE:BH) Seasonal Chart

Biglari Holdings Inc. (NYSE:BH) Seasonal Chart

Boardwalk REIT  (TSE:BEI.UN) Seasonal Chart

Boardwalk REIT (TSE:BEI.UN) Seasonal Chart

Andersons, Inc. (NASD:ANDE) Seasonal Chart

Andersons, Inc. (NASD:ANDE) Seasonal Chart

 

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The Markets

Stocks managed to punch out gains on Tuesday as investors bought into the early morning weakness.  This welcome shift away from escalating selling pressures into the weakness saw stocks close at the highs of the day, something that has also been somewhat of an anomaly in the past month and a half.  The S&P 500 Index gained a third of one percent, moving further into the open gap around 2685.  A catalyst still may be required to break this barrier overhead.  Going into the end of the month and into the new, stocks typically have an upward bias as investors peel back on negative bets in the final days of the monthly reporting period.

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Gains on Tuesday were led by consumer staples and utilities, which may be part of that window-dressing trade as investor pad portfolios with those areas of the market that have performed well in the month.  The core cyclical sectors to the economy (materials, industrials, and energy) ended the day in the red.  This type of trading is indicative of risk aversion and suggestive of the ongoing caution amongst investors.  The market has been defensive since the start of October, contradicting seasonal norms that call for a risk-taking environment in the fourth quarter.  Some simple gauges of risk sentiment, however, are suggesting an exhaustion of the selling pressures in risk- assets.  The ratio of the S&P 500 Consumer Discretionary Sector Index versus the Consumer Staples Index shows that momentum indicators are positive diverging from price, an indication of downside exhaustion.  The ratio charted a massive double-top pattern between June and October, leading to the breakdown in the month of October.  The downside target of the break of the summer trading range has easily been fulfilled and the ratio is now back to rising trendline support.  Further signs of improving risk sentiment can be observed in the recent outperformance of the Dow Jones Transportation Average relative to the Dow Jones Industrial Average, the outperformance of emerging markets relative to developed markets, and the outperformance of semiconductor stocks relative to the technology benchmark.  Each of these riskier areas tend to be highly sensitive to the strength of the economy, so the fact that they have underperformed so significantly between March and the end of October does tell you something about the economy more intermediate-term, but the short-term action may be pointing to an alleviation of the risk-off trend.

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On the economic front, a report on home prices in the US reiterated the cooling of this once red hot segment of the economy. The headline print indicated that home prices increased by 0.3% in September, inline with the consensus analyst estimate. The change put the year-over-year pace at +5.1%, which is down from the +5.5% rate seen in the previous report. Stripping out the seasonal adjustments, home prices were unchanged in the last month of the third quarter, which is weaker than the 0.1% increase that is average for the month. The result puts the year-to-date pace higher by 4.6%, which is about inline with the seasonal average trend. This is the weakest price appreciation through the first three quarters of the year since 2011 when the housing market was still healing from the recessionary conditions of the years prior.  Parsing the regions, the cities that had become the most overpriced in recent years as a result of the above average appreciation in the housing market are the ones that are now falling the most. Washington, Seattle, San Francisco, San Diego, and Los Angeles have each shown price declines in recent months, negatively diverging from seasonal norms that call for gains. A number of these cities are also showing a year-to-date change that is firmly below average, joining other highly values cities, such as New York and Boston. Only Tampa, Phoenix, Las Vegas, Detroit, Cleveland, Charlotte, and Atlanta are managing to buck the weakness, for now, charting gains this year that are firmly above average trends.  For a complete breakdown of the results, the charts are available in the database at https://charts.equityclock.com/sp-corelogic-case-shiller-home-price-index-city-breakdown.

S&P/Case-Shiller 20-City Composite Home Price Index Seasonal Chart

Monthly S&P/Case-Shiller 20-City Composite Home Price Index Data

Sentiment on Tuesday, as gauged by the put-call ratio, ended slightly bullish at 0.92.

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Sectors and Industries entering their period of seasonal strength:

Palladium Futures (PA) Seasonal Chart

 FUTURE_PA1 Relative to the S&P 500 FUTURE_PA1 Relative to Gold

FUTURE_PA1 Monthly Averages

 

 

Seasonal charts of companies reporting earnings today:

    Bitauto Holdings Limited (BITA) Seasonal Chart  Burlington Stores, Inc. (BURL) Seasonal Chart Chico's FAS, Inc. (CHS) Seasonal Chart Dick's Sporting Goods Inc (DKS) Seasonal Chart EVINE Live Inc. (EVLV) Seasonal Chart Golub Capital BDC, Inc. (GBDC) Seasonal Chart Guess?, Inc. (GES) Seasonal Chart  IEC Electronics Corp. (IEC) Seasonal Chart  J.M. Smucker Company (The) (SJM) Seasonal Chart La-Z-Boy Incorporated (LZB) Seasonal Chart Monmouth Real Estate Investment Corporation (MNR) Seasonal Chart Royal Bank Of Canada (RY) Seasonal Chart Semtech Corporation (SMTC) Seasonal Chart  Sina Corporation (SINA) Seasonal Chart Sportsman's Warehouse Holdings, Inc. (SPWH) Seasonal Chart The Descartes Systems Group Inc. (DSGX) Seasonal Chart Tiffany & Co. (TIF) Seasonal Chart Tilly's, Inc. (TLYS) Seasonal Chart Veeva Systems Inc. (VEEV) Seasonal Chart Weibo Corporation (WB) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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