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Stock Market Outlook for August 19, 2019


The 200-session rate of change (ROC) of the 10-year treasury yield is the lowest in decades, suggesting an unsustainable pace.

 

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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Wesdome Gold Mines Ltd. (TSE:WDO.TO) Seasonal Chart

Wesdome Gold Mines Ltd. (TSE:WDO.TO) Seasonal Chart

Entercom Communications Corp. (NYSE:ETM) Seasonal Chart

Entercom Communications Corp. (NYSE:ETM) Seasonal Chart

HudBay Minerals Inc. (TSE:HBM.TO) Seasonal Chart

HudBay Minerals Inc. (TSE:HBM.TO) Seasonal Chart

Entree Gold Inc. (TSE:ETG.TO) Seasonal Chart

Entree Gold Inc. (TSE:ETG.TO) Seasonal Chart

Transportadora De Gas Sur (NYSE:TGS) Seasonal Chart

Transportadora De Gas Sur (NYSE:TGS) Seasonal Chart

Matson, Inc. (NYSE:MATX) Seasonal Chart

Matson, Inc. (NYSE:MATX) Seasonal Chart

Donaldson Co, Inc. (NYSE:DCI) Seasonal Chart

Donaldson Co, Inc. (NYSE:DCI) Seasonal Chart

SJW Group Inc. (NYSE:SJW) Seasonal Chart

SJW Group Inc. (NYSE:SJW) Seasonal Chart

 

 

The Markets

Stocks rebounded on Friday as bond yields came off the lows set in the previous day’s session.  The S&P 500 Index gained 1.44%, bouncing higher from short-term support that has been charted in the past couple of weeks around 2825.  A gap higher around 2860 during Friday’s session creates another level of support for investors to shoot off of as investors attempt to stabilize the market, at least for the short-term.  Positive momentum divergences with respect to MACD and RSI are suggesting improving buying demand.  Gap resistance between 2900 and 2920 is the range of resistance to eat through overhead.  The next four weeks have historically been mildly positive for stocks, rising by 0.94%, on average, with 13 of the past 20 periods showing gains between August 19th and September 16th.

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For the week, the large-cap benchmark was lower by 1.03%.  Two consecutive long tailed candlesticks are highlighting the 50-week moving average as a a level of support.  Momentum indicators on this weekly look are holding within bullish territory, although they have rolled over in recent weeks.  A MACD sell signal was triggered in the previous week.  The damage caused by the sell-off from the July high is minor in nature and the longer-term uptrends, while at risk, are intact.

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In a complete flip of the concerns that investors were reacting to last year pertaining to the cost of borrowing, investors are now finding comfort on days when yields rise.  The decline in the cost of borrowing since October of last year fits the definition of parabolic,suggesting that the recent fall is unsustainable are the current rate.  The 200 session rate of change (ROC) of the 10-year treasury yield is the weakest on record and a snap-back to alleviate the stretched condition over the near term is more probable than not.  This may be enough to bring relief to a market that is using the yield curve as indication of a recession on the horizon.  Seasonally, yields decline through the summer, but the technicals suggest that they may have come too far, too fast.

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On the economic front, a report on US housing starts was released before Friday’s opening bell. The headline print of July’s report indicated that activity declined by 4.0% to a seasonally adjusted annual rate of 1.191 million. This was a notable miss versus estimates of an increase of 1.5% to a rate of 1.259 million. Stripping out the seasonal adjustments, starts actually declined by 2.5%, which is weaker than the 2.0% decline that is average for this time of year. The year-to-date change is up a whopping 49.6%, which is 10.3% above the seasonal average trend through the first seven months of 2019. This is the best pace over this timeframe since 2012.  Subscribe now to receive our full analysis of this report on home building activity.

Housing Starts Seasonal Chart

Sentiment on Friday, as gauged by the put-call ratio, ended bearish at 1.10.

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Seasonal charts of companies reporting earnings today:

21Vianet Group, Inc. (VNET) Seasonal Chart Baidu, Inc. (BIDU) Seasonal Chart BHP Group Plc (BBL) Seasonal Chart Estee Lauder Companies, Inc. (The) (EL) Seasonal Chart Fabrinet (FN) Seasonal Chart QIWI plc (QIWI) Seasonal Chart Sasol Ltd. (SSL) Seasonal Chart Sina Corporation (SINA) Seasonal Chart Weibo Corporation (WB) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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