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Stock Market Outlook for August 15, 2019


Investors (primarily media) worried about the inversion of the yield curve, however, with gains in excess of 20% for the S&P 500 following the first instance of inversion in 1998 and 2006 suggests you may not want to miss the next leg to this bull market.

 

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:

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CAS Medical Systems, Inc. (NASD:CASM) Seasonal Chart

CAS Medical Systems, Inc. (NASD:CASM) Seasonal Chart

Farmer Brothers Co. (NASD:FARM) Seasonal Chart

Farmer Brothers Co. (NASD:FARM) Seasonal Chart

Geely Holding Group Co. (OTCMKT:GELYF) Seasonal Chart

Geely Holding Group Co. (OTCMKT:GELYF) Seasonal Chart

QAD, Inc. (NASD:QADB) Seasonal Chart

QAD, Inc. (NASD:QADB) Seasonal Chart

autobytel.com, Inc. (NASD:ABTL) Seasonal Chart

autobytel.com, Inc. (NASD:ABTL) Seasonal Chart

First Financial Bancorp. (NASD:FFBC) Seasonal Chart

First Financial Bancorp. (NASD:FFBC) Seasonal Chart

A. H. Belo Corp. (NYSE:AHC) Seasonal Chart

A. H. Belo Corp. (NYSE:AHC) Seasonal Chart

Belden Inc. (NYSE:BDC) Seasonal Chart

Belden Inc. (NYSE:BDC) Seasonal Chart

Healthcare Services Group, Inc. (NASD:HCSG) Seasonal Chart

Healthcare Services Group, Inc. (NASD:HCSG) Seasonal Chart

Garmin Ltd. (NASD:GRMN) Seasonal Chart

Garmin Ltd. (NASD:GRMN) Seasonal Chart

Taro Pharmaceutical Industries Ltd. (NYSE:TARO) Seasonal Chart

Taro Pharmaceutical Industries Ltd. (NYSE:TARO) Seasonal Chart

 

 

The Markets

Panic returned to equity markets on Wednesday as investors became hinged on the inversion of the yield curve between the 2 and 10 year treasury bonds.  Previous inversions have led to an economic recession within 12 to 18 months, a fear that investors are pricing in.  The S&P 500 Index fell by 2.93%, erasing all of yesterday’s gain and moving back towards the lows set last week.  Resistance at the 50-day moving average has been confirmed.  As we have been stating in recent reports, a standard ABC correction looks probable before a sustained tradable low can be derived.  It will be the strength of the rebound that warrants monitoring.  We’ve been expressing our caution of risk assets in intraday reports released in recent weeks and have positioned portfolios appropriately, therefore we are embracing this selloff and are looking for opportunities to re-deploy cash at appealing levels.  We raised our cash levels to almost 50% (from 2%) on July 26th when the S&P 500 Index hit our target of 3025.  Don’t be left out!  Subscribe now to receive our intraday and monthly reports directly to your inbox.

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So, is the yield curve inversion between the 2’s and 10’s something to fear?  We did a write-up on the phenomena in a April’s monthly report when the spread between the two bonds was finding support around multi-year lows.  The chart below shows the past two instances when the yield curve first inverted, as it did in 1998 and 2006.  While these events were certainly foretelling of the massive peaks in stock prices that followed in the years thereafter, it certainly did not mark the peak in stock prices.  Both events saw gains in excess of 20% in the 18 months that followed, resulting in the steepest trend for stocks of the economic cycle.  A minor corrective move did follow each inversion, leading to appealing buying opportunities for the pronounced multi-month move that carried benchmarks to their ultimate peaks in 2000 and 2007.  Stocks are just over 6% lower from their all-time highs, inching into the range that previous inversion corrections have found support.

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Today we’ll get some critical reads of the health of the US economy when reports on retail sales and industrial production are released.  Data for the month of June suggested a turning point in the economic trajectory, therefore we will be monitoring the results closely to determine if the June weakness was just an aberration or the start of a trend.  We’ll send out the results to subscribers during Thursday’s session.

Retail Trade: Total Seasonal Chart

Industrial Production: Total Seasonal Chart

On schedule for this time of week, the Energy Information Administration (EIA) released its petroleum status report for the week just past.  The EIA reported that oil stockpiles increased by 1.6 million barrels in the week ending August 9th, while gasoline inventories declined by 1.4 million barrels. The result saw the days of supply of oil tick mildly higher by one-tenth to 25.5, while gasoline saw its days of supply fall by six-tenths to 24.1. The average for each at this time of year is 21.8 and 23.4, respectively. If you would like to receive our full analysis of this report directly to your inbox, subscribe to our service for regular updates.

http://charts.equityclock.com/seasonal_charts/economic_data/Crude_Oil_Days_of_Supply_seasonal_chart.PNG

Sentiment on Wednesday, as gauged by the put-call ratio, ended overly bearish at 1.27.  This is the highest level since May as investors became overly pessimistic of equities.  Pessimism to this extreme typically leads to appealing buying opportunities as investors hedge portfolios, thereby taking away the impetus to sell.

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Seasonal charts of companies reporting earnings today:

Accuray Incorporated (ARAY) Seasonal Chart Aegon NV (AEG) Seasonal Chart Alibaba Group Holding Limited (BABA) Seasonal Chart America's Car-Mart, Inc. (CRMT) Seasonal Chart Applied Materials, Inc. (AMAT) Seasonal Chart Arcturus Therapeutics Holdings Inc. (ARCT) Seasonal Chart Bio-Path Holdings, Inc. (BPTH) Seasonal Chart Briggs & Stratton Corporation (BGG) Seasonal Chart Canadian Solar Inc. (CSIQ) Seasonal Chart Celsion Corporation (CLSN) Seasonal Chart Globant S.A. (GLOB) Seasonal Chart Gold Fields Limited (GFI) Seasonal Chart Golden Ocean Group Limited (GOGL) Seasonal Chart iHeartMedia, Inc. (IHRT) Seasonal Chart J.C. Penney Company, Inc. Holding Company (JCP) Seasonal Chart NVIDIA Corporation (NVDA) Seasonal Chart Pointer Telocation Ltd. (PNTR) Seasonal Chart Tapestry, Inc. (TPR) Seasonal Chart Viavi Solutions Inc. (VIAV) Seasonal Chart voxeljet AG (VJET) Seasonal Chart Walmart Inc. (WMT) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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