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Stock Market Outlook for January 7, 2019


Stocks surge following strong employment reports for the month of December.

 

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:

Sleep Number Corporation (NASD:SNBR) Seasonal Chart

Sleep Number Corporation (NASD:SNBR) Seasonal Chart

Laboratory Corp. of America Holdings  (NYSE:LH) Seasonal Chart

Laboratory Corp. of America Holdings (NYSE:LH) Seasonal Chart

Cracker Barrel Old Country Store (NASD:CBRL) Seasonal Chart

Cracker Barrel Old Country Store (NASD:CBRL) Seasonal Chart

Cabela's Inc. (NYSE:CAB) Seasonal Chart

Cabela’s Inc. (NYSE:CAB) Seasonal Chart

NXP Semiconductor N.V. (NASD:NXPI) Seasonal Chart

NXP Semiconductor N.V. (NASD:NXPI) Seasonal Chart

Broadcom Corporation (NASDAQ:AVGO) Seasonal Chart

Broadcom Corporation (NASDAQ:AVGO) Seasonal Chart

Hubbell, Inc. (NYSE:HUBB) Seasonal Chart

Hubbell, Inc. (NYSE:HUBB) Seasonal Chart

Metro, Inc. (TSE:MRU) Seasonal Chart

Metro, Inc. (TSE:MRU) Seasonal Chart

Canadian National Railway Company  (TSE:CNR) Seasonal Chart

Canadian National Railway Company (TSE:CNR) Seasonal Chart

Church & Dwight Co, Inc. (NYSE:CHD) Seasonal Chart

Church & Dwight Co, Inc. (NYSE:CHD) Seasonal Chart

Big Lots, Inc. (NYSE:BIG) Seasonal Chart

Big Lots, Inc. (NYSE:BIG) Seasonal Chart

 

 

The Markets

Stocks surged on Friday following a much stronger than expected employment report for December and dovish comments from Fed Chair Jerome Powell.  The S&P 500 Index jumped by 3.43%, easily recouping the loss from the previous day’s session.  For the week, the large-cap benchmark was higher by 1.86%, continuing to bounce from the rising 200-week moving average that was tested at the lows on Christmas Eve.  Momentum indicators on this weekly look are showing signs of curling higher, attempting to rebound from oversold levels achieved at the end of December.  Resistance has been apparent at the 20-week moving average, which is in the midst of charting a bearish crossover with its 50-week moving average.  While the crossover itself means nothing, levels of resistance overhead are moving lower and eventually will intersect with prices below.  The 50-week moving average around 2700 presents the best case scenario of the upside target on this initial rebound attempt before a retest of the lows is likely.  The possible path assumes that upside catalysts, such as progress in the China trade deal with the US, fail to materialize in the near term.  Seasonally, tendencies for stocks in the first two months of the year are generally random with only 56% of periods showing a positive result, essentially just marginally better than the flip of a coin.  Earnings season is likely to provide an important influence on the direction of markets in the near-term.

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On the economic front, the headlines showed a blowout number for employment growth in the month of December. The Bureau of Labor Statistics reported that 312,000 payrolls were added last month, far surpassing analyst expectations that called for a rise of 180,000. The unemployment rate ticked higher by two-tenths to 3.9%, the result of an expansion in the labour force as a greater number of Americans search for work. Average hourly earnings rose 0.4% to a year-over-year rate of 3.2%. Expectations were for a rise of 0.3%.  Stripping out the seasonal adjustments, employment actually declined by 54,000 in the month, essentially an unchanged result compared to the total of those employed at 151.2 million. This is inline with the average change for the month as hiring activity peaks following the pre-holiday ramp up in workers. For the calendar year, employment increased by 1.8%, which is two-tenths of a percent higher than the average increase for the year. This is the best growth since 2015.  Subscribers to our service received further insight and analysis into the metrics behind the headline result.  Subscribe now to receive our research and analysis right to your inbox.

Total Nonfarm Seasonal Chart

Monthly Total Nonfarm Data

North of the border, Statscan reported that employment increased by 9,300 in the final month of 2018, beating the consensus estimate that called for an increase of 6,000. The unemployment rate remained steady at 5.6%, which is better than the 5.7% rate forecasted by analysts. Stripping out the seasonal adjustments, employment in this country actually fell by 51,800, or 0.3%, inline with the average change for the last month of the year. The result places the calendar year growth in employment at 1.1%. This is the weakest growth since 2015 when the plunge in the price of oil took a toll on the energy sector. The average calendar year increase in employment is 1.5%.  We provided further details on the state of the labour market in Canada to subscribers, including a component in the survey that we find encouraging despite the below average employment growth on the year.

Canada Labour force Seasonal Chart

Monthly Canada Labour force Data

Also released out of Statscan was the latest read of Industrial Product Prices in Canada.  We provide the chart of the aggregate result without comment.  The component charts to the report have been uploaded to the database at https://charts.equityclock.com/canada-industrial-product-price-index-ippi-by-north-american-product-classification-system-napcs.

Canada Total, Industrial product price index (IPPI) Seasonal Chart

Monthly Canada Total, Industrial product price index (IPPI) Data

Sentiment on Friday, as gauged by the put-call ratio, ended bullish at 0.91.  On Thursday, the ratio hit an overly bearish high of 1.31, providing the fuel for Friday’s short-covering rally.

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Seasonal charts of companies reporting earnings today:

Commercial Metals Company (CMC)  Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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