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Stock Market Outlook for February 19, 2019


Equity benchmarks have cleared levels of resistance, but one indicator has yet to signal the all clear with respect to volatility.

 

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:

Public Service Enterprise (NYSE:PEG) Seasonal Chart

Public Service Enterprise (NYSE:PEG) Seasonal Chart

Texas Capital Bancshares, Inc. (NASD:TCBIP) Seasonal Chart

Texas Capital Bancshares, Inc. (NASD:TCBIP) Seasonal Chart

Digital Realty Trust, Inc. (NYSE:DLR) Seasonal Chart

Digital Realty Trust, Inc. (NYSE:DLR) Seasonal Chart

Chesapeake Energy Corp. (NYSE:CHK) Seasonal Chart

Chesapeake Energy Corp. (NYSE:CHK) Seasonal Chart

Exelon Corp. (NYSE:EXC) Seasonal Chart

Exelon Corp. (NYSE:EXC) Seasonal Chart

Amazon.com, Inc. (NASD:AMZN) Seasonal Chart

Amazon.com, Inc. (NASD:AMZN) Seasonal Chart

Kellogg Co. (NYSE:K) Seasonal Chart

Kellogg Co. (NYSE:K) Seasonal Chart

Gartner Group, Inc. (NYSE:IT) Seasonal Chart

Gartner Group, Inc. (NYSE:IT) Seasonal Chart

Devon Energy Corp. (NYSE:DVN) Seasonal Chart

Devon Energy Corp. (NYSE:DVN) Seasonal Chart

Newfield Exploration Co. (NYSE:NFX) Seasonal Chart

Newfield Exploration Co. (NYSE:NFX) Seasonal Chart

Boardwalk Equities, Inc. (TSE:BEI/UN.TO) Seasonal Chart

Boardwalk Equities, Inc. (TSE:BEI/UN.TO) Seasonal Chart

Tahoe Resources Inc. (NYSE:TAHO) Seasonal Chart

Tahoe Resources Inc. (NYSE:TAHO) Seasonal Chart

Martin Marietta Materials (NYSE:MLM) Seasonal Chart

Martin Marietta Materials (NYSE:MLM) Seasonal Chart

Sonoco Products Co. (NYSE:SON) Seasonal Chart

Sonoco Products Co. (NYSE:SON) Seasonal Chart

Avis Budget Group, Inc. (NASD:CAR) Seasonal Chart

Avis Budget Group, Inc. (NASD:CAR) Seasonal Chart

 

 

The Markets

Stocks ploughed ahead on Friday as a deal to keep the US government funded beyond the February 15th deadline and news of progress in the China-US trade talks sent stocks to the highs of the year.  The S&P 500 Index gained 1.09% to 2775, mere points from the December high around 2800.  Despite the apparent threat of an imminent sell signal with respect to major momentum indicators, the negative revelation has yet to trigger.  The market remains in this headline driven state where one news release could send the market sharply one way or the other, making it difficult to forecast in the near-term.  Sentiment has normalized, as has equity positions within portfolios.  Both the technical and fundamental state of the market are providing mixed signals.  And meanwhile, seasonal tendencies for the next couple of months are firmly positive, although negative performance is the average through the remaining weeks in February.  This market is neither a screaming buying nor a screaming sell, but the risks are certainly elevated.

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For the week, the large-cap benchmark was higher by 2.5%, moving beyond the 50-week moving average where we noted initial reaction to this technical hurdle in the previous week.  The benchmark has cleared most of its variable levels of resistance, as defined by major moving averages, leaving only horizontal levels of reference, including the November/December highs around 2800 and, of course, the all time high at 2940.  For now, a trend of lower-lows and lower-highs from the September peak remains intact, still leaving the bulls with plenty to prove as they attempt to take back control following the fourth quarter plunge.

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While the rising intermediate trend of equity markets is certainly acting as a benefit to investor portfolios, including those invested in the Seasonal Advantage Portfolio that we manage with Castlemoore, one indicator that we follow suggests that we may not be in the clear from the volatile trading action over the past few months.  In the past we have profiled the percent of stocks trading above their 200-day moving averages, both at extremes (highs and lows) and the sustainability of a weak trend when the percent of stocks above this long-term hurdle is less than 62.5%.  The percent reached 61.4% on Friday, which still suggests that further volatility is probable.  Sustained positive trends in stocks have typically coincided with the indicator above 62.5%. 

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On the economic front, a report on industrial production in the US showed a result that was not as bad as what the headlines suggested. The seasonally adjusted print indicated that industrial production declined in January by 0.6%, missing the consensus analyst estimate that called for a 0.1% gain. The manufacturing component declined by 0.9%, also a miss versus estimates of a 0.1% increase. Capacity utilization declined to 78.2% from 78.8% previous. Stripping out the seasonal adjustments, Total Industrial Production was essentially unchanged (0.0%) in the month, which is better than the 0.2% decline that is average for January. The result follows the strongest year for industrial production since 2010; activity in 2018 increased by 3.7% over the calendar year. The average calendar year increase is 1.1%.  To learn more above what is driving the headline result in US industrial production, subscribe now and we’ll send you a report on this and other relevant economic data that is likely to influence the strength of seasonal trends in equity prices.

Industrial Production: Total Seasonal Chart

Monthly Industrial Production: Total Data

In other other news relating to manufacturing activity in the US, the empire manufacturing survey continued to point to growth for the month of February.  The headline print pointed to a level of +8.8, beating the consensus analyst estimate of +7.6.  Stripping out the seasonal adjustments, the general business conditions index actually increased to +12.8 from +7.6 previous.  The average level for this time of year is +14.3.  It has been a few years since a below average level for February has been seen given the robust manufacturing conditions in the US.  Seasonally, the manufacturing indicator of conditions in the New York region typically hits its high of the year in March as optimism amongst manufacturers is the most upbeat amidst the ramp up in activity following the winter months.

Empire State General Business Conditions Index Seasonal Chart

Sentiment on Friday, as gauged by the put-call ratio, ended bullish at 0.80.

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Seasonal charts of companies reporting earnings today:

Aqua America, Inc. (WTR) Seasonal Chart Continental Resources, Inc. (CLR) Seasonal Chart Helix Energy Solutions Group, Inc. (HLX) Seasonal Chart Masonite International Corporation (DOOR) Seasonal Chart Otter Tail Corporation (OTTR) Seasonal Chart Superior Energy Services, Inc. (SPN) Seasonal Chart Transocean Ltd. (RIG) Seasonal Chart Advance Auto Parts Inc (AAP) Seasonal Chart Allegion plc (ALLE) Seasonal Chart American Campus Communities Inc (ACC) Seasonal Chart American Water Works (AWK) Seasonal Chart America's Car-Mart, Inc. (CRMT) Seasonal Chart Atlas Air Worldwide Holdings (AAWW) Seasonal Chart Concho Resources Inc. (CXO) Seasonal Chart Cooper Tire & Rubber Company (CTB) Seasonal Chart Devon Energy Corporation (DVN) Seasonal Chart Diamondback Energy, Inc. (FANG) Seasonal Chart Ecolab Inc. (ECL) Seasonal Chart Expeditors International of Washington, Inc. (EXPD) Seasonal Chart FirstEnergy Corp. (FE) Seasonal Chart Genuine Parts Company (GPC) Seasonal Chart Herbalife Nutrition Ltd. (HLF) Seasonal Chart Holly Energy Partners, L.P. (HEP) Seasonal Chart Host Hotels & Resorts, Inc. (HST) Seasonal Chart Hudbay Minerals Inc. (HBM) Seasonal Chart Kite Realty Group Trust (KRG) Seasonal Chart La-Z-Boy Incorporated (LZB) Seasonal Chart LendingClub Corporation (LC) Seasonal Chart Medtronic plc (MDT) Seasonal Chart National Health Investors, Inc. (NHI) Seasonal Chart Noble Energy Inc. (NBL) Seasonal Chart  Nordic American Tankers Limited (NAT) Seasonal Chart Pioneer Energy Services Corp. (PES) Seasonal Chart Safe Bulkers, Inc (SB) Seasonal Chart Sage Therapeutics, Inc. (SAGE) Seasonal Chart Texas Roadhouse, Inc. (TXRH) Seasonal Chart The Hackett Group, Inc. (HCKT) Seasonal Chart Tile Shop Hldgs, Inc. (TTS) Seasonal Chart Tower Semiconductor Ltd. (TSEM) Seasonal Chart U.S. Silica Holdings, Inc. (SLCA) Seasonal Chart Walmart Inc. (WMT) Seasonal Chart Westlake Chemical Corporation (WLK) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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