Stock Market Outlook for February 5, 2019
S&P 500 Index closes above its 100-day moving average for the first time since early October as the rebound matures.
*** 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:
Williams Cos., Inc. (NYSE:WMB) Seasonal Chart
Sonic Corp. (NASD:SONC) Seasonal Chart
ABB Ltd. (NYSE:ABB) Seasonal Chart
WestRock Co. (NYSE:WRK) Seasonal Chart
Equity Residential Property Trust (NYSE:EQR) Seasonal Chart
HanesBrands, Inc. (NYSE:HBI) Seasonal Chart
VFCorp (NYSE:VFC) Seasonal Chart
Walker & Dunlop Inc. (NYSE:WD) Seasonal Chart
The Markets
A tech led rally ahead of the release of earnings from Google fuelled further gains for equity benchmarks in the US on Monday. The S&P 500 Index added just less than seven-tenths of one percent, inching above its 100-day moving average for the first time since early October. The 200-day moving average at 2741.55 is the last major hurdle overhead as the rebound rally from the December lows reaches maturity. At the start of January in our daily outlook we proposed a 28 to 30 day average rebound timeframe based on previous oversold conditions, such as what we saw back at the December low. Tuesday marks session 28 since the December 24th low, suggesting that the timeframe of the present rally is inline with previous rebound attempts before the gains became exhausted. Of course, history doesn’t always repeat, but it often rhymes. At the beginning of January we suggested that the 30-day “rebound attempt may provide an ideal opportunity to trim equity exposure around levels of resistance.” The market itself hasn’t provided definitive sell signals, but waning momentum suggests that they could be near. In the Seasonal Advantage Portfolio that we manage with Castlemoore, we remain close to fully invested, having added significantly to equity exposure in the middle of December. The value of the portfolio is back to all-time highs, thanks to prudent defensive actions in October and December, which made it easy to recoup the losses generated in the fourth quarter. To learn more about this portfolio that has outperformed the market since its inception, contact me through Castlemoore or email seasonalportfolio@equityclock.com.
On the economic front, the November report on US Factory Orders was finally released after being delayed the recent government shutdown. The headline print indicated that factory orders declined by 0.6%, which is weaker than the 0.2% increase that analysts were expecting. Stripping out the seasonal adjustments, the Value of Manufacturers’ New Orders for All Manufacturing Industries actually fell by 5.5% in November, which is weaker than the 4.3% decline that is average for the second to last month of the year. The year-to-date change now sits at +1.4%, which is above the seasonal average trend that calls for a 0.8% decline by this point in the year. To receive further insight on the state of the manufacturing economy in the US, simply subscribe to our service and we’ll send you a report showing the trends in orders and shipments.
Sentiment on Monday, as gauged by the put-call ratio, ended bullish at 0.84.
Seasonal charts of companies reporting earnings today:
S&P 500 Index
TSE Composite
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