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Stock Market Outlook for December 12, 2018

Key indicator of breadth already suggesting a bear market trend.

 

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:

Galectin Therapeutics Inc. (NASD:GALT) Seasonal Chart

Galectin Therapeutics Inc. (NASD:GALT) Seasonal Chart

HollyFrontier Corp. (NYSE:HFC) Seasonal Chart

HollyFrontier Corp. (NYSE:HFC) Seasonal Chart

Granite Oil (TSE:GXO) Seasonal Chart

Granite Oil (TSE:GXO) Seasonal Chart

Amerigo Resources (TSE:ARG) Seasonal Chart

Amerigo Resources (TSE:ARG) Seasonal Chart

Weatherford International Plc (NYSE:WFT) Seasonal Chart

Weatherford International Plc (NYSE:WFT) Seasonal Chart

Superior Plus Corp. (TSE:SPB) Seasonal Chart

Superior Plus Corp. (TSE:SPB) Seasonal Chart

Gildan Activewear, Inc. (NYSE:GIL) Seasonal Chart

Gildan Activewear, Inc. (NYSE:GIL) Seasonal Chart

Suburban Propane Partners LP (NYSE:SPH) Seasonal Chart

Suburban Propane Partners LP (NYSE:SPH) Seasonal Chart

Fortress Paper Ltd. (TSE:FTP) Seasonal Chart

Fortress Paper Ltd. (TSE:FTP) Seasonal Chart

 

 

The Markets

Stocks gyrated between gains and losses on Tuesday in what ended up being another volatile session for stocks.  The S&P 500 Index closed lower by four basis points, continuing to maintain support at 2630 by the closing bell.  Tuesday’s action confirmed the limits to watch in the days ahead as we look for catalysts to fuel an upside breakout or a downside breakdown.  Previous gap resistance between 2675 and 2700 was tested at the highs of the day, while the lows of the day, as already alluded to, tested the 2630 level of support.  While the market is trying to solidify the level of support below, as suggested by the consecutive long tail candlesticks around the key support level, it remains quite vulnerable, as highlighted in yesterday’s report.  The benchmark cracked below this level intraday on Monday, but rebounded by the close as negative bets were pared in the upper 2500 zone.  Headlines remain in the driver’s seat and the market action will depend on what the bulls or the bears can sink their teeth into.  Ideally, a huge washout combined with severely negative sentiment could help to shakeout weak hands, providing the ideal setup for the Santa Claus rally period in the last half of the month, but Tuesday’s rebound just maintains the status-quo.

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Providing little confidence in the strength of Tuesday’s rebound attempt was the fact that it was led by defensive sectors of the market.  Consumer staples, utilities, and REITs all ended in the green, while financials, industrials, and materials closed lower.  The defensive bias speaks to the sentiment of investors, which is that of caution and uncertainty, certainly not conducive to gains in risk assets, such as stocks.  On a positive note, the defensive tilt over the past few months has created fuel for a cyclical rally should investors receive a catalyst to rotate out of their protective allocations.

Defensive

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Cyclical

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One of the indicators that we like to look to as a gauge of the market direction has already broken below support presented by the October/November lows.  The NYSE Advance-Decline Volume line broke below its 50-day moving average early in October, suggesting warning for equity markets entering the fourth quarter; the 50-day average is a level that had supported the breadth indicator for the last few years.  The indicator is now showing signs of resistance at this variable level and lower-lows and lower-highs are being realized.  These are characteristics of a bear market trend, certainly warranting near-term caution for stocks.

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On the economic front, the Producer Price Index (PPI) for November was released before Tuesday’s opening bell. The headline print indicated that the PPI Final Demand increased by 0.1% in November, marginally greater than the consensus estimate that called for an unchanged result. Less the more volatile components of food and energy, PPI was higher by 0.3%, also edging past estimates calling for a 0.1% gain. Stripping out the seasonal adjustments, PPI Final Demand actually declined by 0.3%, which is slightly weaker than the 0.2% decline that is average for the second to last month of the year. The year-to-date change is now higher by 2.8%, which is 1.1% above the seasonal average trend by this point in the year. Less food and energy, the spread between the actual an average trend is 1.3%, which is the highest level in eight years. Inflation remains firmly embedded in the manufacturing economy as businesses demand goods and look to expand in this new tax era.  Seasonally, producer prices tend to decline into the end of the year, weighed down by lower energy commodity prices.  Equity Clock subscribers were given greater insight on what is driving the aggregate result and why the results may be a net positive for the broader economy.  You too can receive this research and analysis right to your inbox by subscribing via the following link: https://charts.equityclock.com/subscribe

http://charts.equityclock.com/seasonal_charts/economic_data/PPIFID_seasonal_chart.PNG

http://charts.equityclock.com/seasonal_charts/economic_data/PPIFID_sheet.png

Sentiment on Tuesday, as gauged by the put-call ratio, ended bullish at 0.94.

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Seasonal charts of companies reporting earnings today:

Anavex Life Sciences Corp. (AVXL) Seasonal Chart Nordson Corporation (NDSN) Seasonal Chart Oxford Industries, Inc. (OXM) Seasonal Chart Peak Resorts, Inc. (SKIS) Seasonal Chart Photronics, Inc. (PLAB) Seasonal Chart Tailored Brands, Inc. (TLRD) Seasonal Chart Vera Bradley, Inc. (VRA) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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