Stock Market Outlook for January 31, 2019
S&P 500 Index back to the upper limit of a declining megaphone pattern.
*** 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:
Adobe Systems, Inc. (NASD:ADBE) Seasonal Chart
Progressive Corp. (NYSE:PGR) Seasonal Chart
EnerSys Inc. (NYSE:ENS) Seasonal Chart
Canadian Tire Corp, Ltd. (TSE:CTC/A.TO) Seasonal Chart
Comerica, Inc. (NYSE:CMA) Seasonal Chart
Tyson Foods Inc Cl A (NYSE:TSN) Seasonal Chart
The Markets
Stocks in the US closed strongly higher on Wednesday as investors digested dovish statements from Fed Chair Jerome Powell. Following the their two-day policy meeting, the FOMC indicated that it would be patient with future rate adjustments given muted inflationary pressures and global economic developments. The S&P 500 Index surged by 1.55%, continuing to claw back the losses recorded in the month prior. The benchmark broke above the recent short-term consolidation range between 2625 and 2675, but a new hurdle is directly overhead. At the highs of Wednesday’s session, the large-cap benchmark tested declining trendline resistance that connects the peaks from the October high. The declining level of resistance also forms the upper limit to a declining megaphone pattern, the lower limit of which was tested on Christmas Eve. We’ll have to watch in the days ahead to see if the benchmark reacts to this overhanging hurdle, thereby maintaining the pattern. The declining 100-day moving average, the level from which the benchmark declined from in November and December, also warrants monitoring.
On Tuesday, the latest look at US home prices was released by way of the Case-Shiller Home Price Index. The headline print indicated that home prices in the 20 largest US cities had increased by 0.3% in November, weaker than the 0.4% increase forecasted by analysts. Stripping out the seasonal adjustments, home prices actually declined by 0.1%, missing estimates that called for a rise of 0.2%. The year-to-date change now sits at +4.5%, which is just marginally above the 4.1% average increase by this point in the year. This is the second weakest year-to-date change since 2011. The 10-largest (and most expensive) cities, including Los Angeles, San Diego, San Francisco, New York, Miami, and Washington, are weighing on the national result; the 10-city index is showing a year-to-date change that is 1.3% below its seasonal average trend. Aside for some exceptions, such as Atlanta and North Carolina, momentum with respect to prices in the housing market is showing clear signs of slowing. Of course, this is just another signal that the housing market is weakening, typical of a late stage economy. Seasonally, home prices tend to flat-line through the winter months then shoot higher in the spring as buyers enter the market. For a breakdown of each of the cities covered in the report, the charts are available in the database at the following link: https://charts.equityclock.com/sp-corelogic-case-shiller-home-price-index-city-breakdown
Encouraging signs pertaining to the supply of petroleum in the US. Following a number of weeks of significant injections, whether it be to the raw input or product inventories, the latest week showed a net withdrawal of petroleum inventories, helped by a drop off in the level of oil imports and a surge in the level of product supplied of gasoline. The headline print indicated that oil stockpiles increased by 919,000 barrels, while gasoline saw a draw of 2.2 million barrels. Distillates were also lower by 1.1 million barrels. The result increased the level of days of supply of oil by half of a day to 26.1, while gasoline saw its days of supply fall by a full day to 28.8. For gasoline, this is now the second highest level of days of supply in the past two decades; albeit elevated, it is hinting of signs of returning to more normal levels. The average level of days of supply of gasoline for this time of year is 27.0. Seasonally, this indicator, which shows the confluence of supply and demand, peaks in the first half of February, on average, but the abrupt shift in this late January week could be hinting of an earlier than average peak. We’ll monitor the trend as new data is released in the coming weeks. Further analysis pertaining to the state of petroleum inventories in the US was released to Equity Clock subscribers during Wednesday’s session. Join now to receive this and future research and analysis directly in your inbox: https://charts.equityclock.com/subscribe
Sentiment on Wednesday, as gauged by the put-call ratio, ended bullish at 0.89.
Seasonal charts of companies reporting earnings today:
S&P 500 Index
TSE Composite
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