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Stock Market Outlook for January 24, 2019


Ratio between high yield and investment grade bond ETFs deteriorating again, expressing concern pertaining to economic fundamentals.

 

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:

Crane Co.  (NYSE:CR) Seasonal Chart

Crane Co. (NYSE:CR) Seasonal Chart

Uni-Pixel, Inc. (NASD:UNXL) Seasonal Chart

Uni-Pixel, Inc. (NASD:UNXL) Seasonal Chart

Charles & Colvard Ltd. (NASD:CTHR) Seasonal Chart

Charles & Colvard Ltd. (NASD:CTHR) Seasonal Chart

T-Mobile US, Inc. (NASD:TMUS) Seasonal Chart

T-Mobile US, Inc. (NASD:TMUS) Seasonal Chart

Coach, Inc. (NYSE:COH) Seasonal Chart

Coach, Inc. (NYSE:COH) Seasonal Chart

Diamond Offshore Drilling, Inc.  (NYSE:DO) Seasonal Chart

Diamond Offshore Drilling, Inc. (NYSE:DO) Seasonal Chart

 

 

The Markets

Stocks closed mildly higher on Wednesday as this push and pull between the bears and the bulls continues amidst headlines influencing the tape.  The S&P 500 Index added just over two-tenths of a percent, remaining supported at the 50-day moving average around 2620.  Momentum indicators are showing early signs of rolling over, but the bears are showing some difficulty ramping up the selling pressures to the same degree as previous rollovers in October, November, or December.  The debate rages on whether the bear market action that was realized at the end of 2018 has concluded or is ongoing.  Consumer staples and Utilities were the sector leaders on the day, adding more than one percent and enticing investors away from cyclical sectors that have led the rebound from the December low.  A shift back towards risk aversion would send a signal that investors have become pessimistic, once again.

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One of the catalysts that fuelled the equity market weakness in the month of December was the embargo on high yield debt.  Concerns about the credit quality of many of the issues amidst deteriorating economic fundamentals resulted in a sharp decline in the high yield bond ETF (JNK) relative to its investment grade counterpart (LQD).  The ratio between the two ETFs bottomed on December 24th, similar to the equity market, and rallied back to its December breakdown point alongside improving risk sentiment.  The ratio is now rolling over, once again, reiterating a trend of lower-lows and lower-highs as market concerns pertaining to economic fundamentals prevail.  Looking at the past 11 years that both funds have been trading, typically the period between mid-December and May sees the high yield ETF outperform the investment grade counterpart, on average, amidst a more favourable risk environment and improving economic fundamentals.  It is questionable as to whether this trend will play out this year or not.  Continued weakness in high yield debt will draw the attention of equity investors, who will react accordingly.

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On the economic front, Statscan reported retail sales for Canada that missed expectations.  The headline print indicated that retail sales fell by 0.9% in November, missing analyst estimates that called for a 0.7% decline for this important shopping period ahead of the holiday season. The year-over-year change now sits at a meager +0.5%, slightly improved from the previously revised +0.3% change as of the end of October. Stripping out the seasonal adjustments, retail sales in Canada were actually higher by 0.6% in November, which is stronger than the 0.2% increase that is average for the second to last month of the calendar year. The result continues an above average pace that has been evident throughout the year; the year-to-date change in retail sales is running 6.6% above the seasonal norm with just one month left in the year to report. Seasonally, December has been the second strongest month of the year for retail sales gains as consumers make purchases for the holiday season.  To read more about the state of the consumer in Canada, subscribe to our service at https://charts.equityclock.com/subscribe to receive this and other reports on the economy without the seasonal adjustment bias that fuels headline results that often vastly distort what is actually occurring. 

Retail trade Seasonal Chart

Monthly Retail trade Data

Sentiment on Wednesday, as gauged by the put-call ratio, ended bearish at 1.16.

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Seasonal charts of companies reporting earnings today:

Alaska Air Group, Inc. (ALK) Seasonal Chart American Airlines Group, Inc. (AAL) Seasonal Chart American Electric Power Company, Inc. (AEP) Seasonal Chart Applied Industrial Technologies, Inc. (AIT) Seasonal Chart Avnet, Inc. (AVT) Seasonal Chart Banc of California, Inc. (BANC) Seasonal Chart Bristol-Myers Squibb Company (BMY) Seasonal Chart Discover Financial Services (DFS) Seasonal Chart E*TRADE Financial Corporation (ETFC) Seasonal Chart Federated Investors, Inc. (FII) Seasonal Chart Freeport-McMoran, Inc. (FCX) Seasonal Chart Huntington Bancshares Incorporated (HBAN) Seasonal Chart Intel Corporation (INTC) Seasonal Chart International Speedway Corporation (ISCA) Seasonal Chart Intuitive Surgical, Inc. (ISRG) Seasonal Chart JetBlue Airways Corporation (JBLU) Seasonal Chart McCormick & Company, Incorporated (MKC) Seasonal Chart Meridian Bioscience Inc. (VIVO) Seasonal Chart Norfolk Souther Corporation (NSC) Seasonal Chart Rogers Communication, Inc. (RCI) Seasonal Chart Southwest Airlines Company (LUV) Seasonal Chart Starbucks Corporation (SBUX) Seasonal Chart TAL Education Group (TAL) Seasonal Chart Textron Inc. (TXT) Seasonal Chart Union Pacific Corporation (UNP) Seasonal Chart W.W. Grainger, Inc. (GWW) Seasonal Chart Western Digital Corporation (WDC) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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