Stock Market Outlook for February 14, 2019
Momentum sell signals have triggered for the TSX Composite as the benchmark struggles at resistance.
*** 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:
Peoples Bancorp of North Carolina, Inc. (NASD:PEBK) Seasonal Chart
PG&E Corp. (NYSE:PCG) Seasonal Chart
United Dominion Realty Trust (NYSE:UDR) Seasonal Chart
XL Capital Ltd. (NYSE:XL) Seasonal Chart
The Markets
Stocks continued to rise on Wednesday amidst growing optimism pertaining to a US-China trade deal, as well as the alleviation of fears related to another government shutdown. The S&P 500 Index added three-tenths of one percent, starting to cement its position back above its declining 200-day moving average. No longer is this market akin to a stretched rubber band that is prone to snapping back, as was the case at the December low. Now dominating the tape are headlines, which could move the market abruptly in one direction or the other. This makes it a difficult market to navigate over the short-term. Daily momentum indicators on the large-cap benchmark continue to roll over, but have yet to trigger sell signals.
While US benchmarks have yet to trigger a bearish crossover with respect to stochastics or MACD, north of the border it is another story. The TSX Composite has triggered momentum sell signals in recent sessions, including a bearish crossover on MCAD and RSI. Performance relative to S&P 500 Index has notably faded in the past couple of weeks as the 20-day average of relative performance starts to point lower for the first time since September. The TSX stopped almost precisely at its 200-day moving average last week and buyers have clearly disappeared following the strong trend over the past few months. Seasonally, the Canadian benchmark tends to outperform American counterparts through the end of February as seasonal strength in financials, materials, and energy, as well as fund inflows through to the RRSP contribution deadline, supports Canadian equities.
Just briefly on the petroleum status report from the Energy Information Administration, the EIA indicated that oil stockpiles increased by 3.6 million barrels last week, while gasoline recorded an increase of 408,000 barrels. The injection places the year-to-date change in oil stockpiles around six-tenths of one percent above the seasonal average trend, the result of diminished demand for product in the week ending February 8th. The supply/demand balance of energy commodities is a significant factor in the success or failure of the seasonal trade in the energy sector, which runs into the month of May.
On the economic front, the Consumer Price Index (CPI) for January was released before Wednesday’s opening bell. The headline print indicated that CPI was unchanged last month, missing estimates that called for a 0.1% increase. Less food and energy, the change in CPI was inline with the consensus estimate, up 0.2%. Stripping out the seasonal adjustments, the Consumer Price Index for All Urban Consumers: All Items was up 0.2% in the first month of the year, which is below the 0.3% increase that is average for January. The consumer price index gained 1.9% in 2018, which was about two-tenths of a percent below average for the calendar year. Subscribe now to Equity Clock to receive updates on this and other relevant reports that have an influence on seasonal market tendencies.
Sentiment on Wednesday, as gauged by the put-call ratio, ended slightly bearish at 1.01.
Seasonal charts of companies reporting earnings today:
S&P 500 Index
TSE Composite
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