Stock Market Outlook for February 7, 2019
30-Day Rate of Change of the S&P 500 Index the highest since November of 2011.
*** 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:
Shutterfly Inc. (NASD:SFLY) Seasonal Chart
Semtech Corp. (NASD:SMTC) Seasonal Chart
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The Markets
Stocks digested recent gains on Wednesday as investors wait for further news pertaining to the threat of another US government shutdown and, of course, progress on the US-China trade talks. The S&P 500 Index shed two-tenths of a percent, showing initial signs of reacting to its declining 200-day moving average. Overwhelmingly, investors have their eye on this critical pivot point and perhaps the last line in the sand that the bears are holding their hopes on. The large-cap benchmark is higher by over 16% since the December low, representing the best 30-session gain since November of 2011. Back then, the rebound rally from the drawdown realized through the third quarter was met with resistance at the 200-day moving average, resulting in a swift retracement of the gain in weeks that followed. The benchmark gave back approximately two-thirds of the gain from the low over a two-week period, eventually charting a higher-low that gave the all-clear to investors to jump in for the more prolonged rally through the months that followed. Bottom line is that reaction to this long-term hurdle following the pronounced rally over the past 30 sessions could be swift, putting the bullish bias of investors to the test.
On schedule for the Wednesday session was the release of the weekly EIA Petroleum Status report. . The Energy Information Administration (EIA) reported that oil stockpiles increased by 1.3 million barrels last week, while gasoline inventories rose by half a million barrels. The net result elevated the days of supply of oil by half of a day to 26.6, while gasoline saw a decline of two-tenths to 28.6. The average days of supply for each at this time of year is 22.6 and 27.6, respectively. Supplies remain elevated, but demand for products looks encouraging. Further analysis was sent to subscribers during Wednesday’s session. To be included on this distribution that provides insight on the seasonal setup for the energy sector, subscribe via the following link: https://charts.equityclock.com/subscribe
On the economic front, the US Census Bureau released trade data before the opening bell. The headline print indicated that the deficit shrank by 11.5% in November to $49.3 billion, the result of a 0.6% decline in exports and a 2.9% decline in imports. Analysts were expecting a deficit of $54.0 billion. Stripping out the seasonal adjustments, exports actually declined by 4.5% and imports were down by 9.5%; the average decline for each in the second to last month of the year is 4.3% and 5.1%, respectively. The change in the level of exports has been trending below average through the back half of the year, the result of weakness in auto, food, and capital goods exports. The impact of the tariff war looks to be taking a toll. The gauge of export activity provides indication that the weakness in economies around the globe picked up since the summer, leading to the fourth quarter meltdown in stocks around the globe. Seasonally, import and export activity tends to decline through the winter months, then pick up again in the spring.
US International Trade – Imports Seasonal Chart
US International Trade – Exports Seasonal Chart
Sentiment on Wednesday, as gauged by the put-call ratio, ended close to neutral at 0.97.
Seasonal charts of companies reporting earnings today:
S&P 500 Index
TSE Composite
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