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Stock Market Outlook for August 26, 2019


Signs of a peak in the US Dollar could be supportive for commodities and, perhaps, provide a backstop to stocks.

 

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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Cracker Barrel Old Country Store, Inc. (NASD:CBRL) Seasonal Chart

Cracker Barrel Old Country Store, Inc. (NASD:CBRL) Seasonal Chart

DaVita Inc. (NYSE:DVA) Seasonal Chart

DaVita Inc. (NYSE:DVA) Seasonal Chart

Hibbett Sports Inc. (NASD:HIBB) Seasonal Chart

Hibbett Sports Inc. (NASD:HIBB) Seasonal Chart

Hope Bancorp, Inc. (NASD:HOPE) Seasonal Chart

Hope Bancorp, Inc. (NASD:HOPE) Seasonal Chart

Albemarle Corp. (NYSE:ALB) Seasonal Chart

Albemarle Corp. (NYSE:ALB) Seasonal Chart

China Automotive Systems Inc. (NASD:CAAS) Seasonal Chart

China Automotive Systems Inc. (NASD:CAAS) Seasonal Chart

 

 

The Markets

Stocks dipped on Friday following tweets from President Trump that indicated a retaliation to China’s increase in tariffs would be forthcoming.  The S&P 500 Index closed down by 2.59%, moving back to the lows of August and confirming resistance around the 50-day moving average.  The limits of the tight trading range between 2825 and 2940 will be tested again on Monday as Trump takes the tariff war to a new level by increasing previously announced tariffs by an additional 5%.  Energy and technology stocks were hardest hit on the day as investors regress back to risk-off mode.  For now the large-cap benchmark is in this previously mentioned short-term range, but the longer the benchmark shows resistance at its 50-day moving average, the more concerns increase pertaining to the intermediate-term trend.  Seasonally, September has historically been the most volatile time of year for stocks, therefore the erratic trading may not go away anytime soon.

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While stocks and commodities did sell off amidst the risk-off tone set on the day, the US dollar failed to attract a bid as it has in previous risk-off moves.  The US Dollar Index charted an outside reversal candlestick, trading lower from the previous high around 98.50.  Momentum indicators are showing signs of rolling over, all of which are suggesting a shift in trajectory of the currency benchmark.  The Dollar Index has been trading within a narrowing rising range for the past year, the upper limit of which was tested at the start of August.  The lower limit of the span at 96.5 is the next reasonable target.  A depreciation in the domestic currency could help to support commodity prices and perhaps add a bit of a backstop to stocks, both of which have been struggling with a rising dollar for the past year and a half.  Seasonally, the US Dollar tends to weaken in the month of September, which has historically been supportive of commodities, such as gold.

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US Dollar Index Futures (DX) Seasonal Chart

On the economic front, a report on Retail Sales in Canada was released before Friday’s opening bell.  Statscan reports that retail sales in Canada were unchanged (0.0%) in June versus the month prior, slightly better than the consensus analyst estimate that called for a decline of 0.1%. The year-over-year increase remained unchanged at 1.0%. Striping out the seasonal adjustments, retail trade in this country actually fell by 5.8%, which is considerably weaker than the 1.4% decline that is average for this time of year. The year-to-date change remains upbeat, now 6.9% above average, still among the best performances on record.  We provided further analysis in a report released to subscribers intraday.  Signup now and we’ll send it to you.

Retail trade Seasonal Chart

Also released on Friday was the US New Home Sales report for July.  The headline print indicated that sales of new homes fell by 12.8% to a seasonally adjusted annual rate of 635,000.  This was a miss versus estimates of a pace of 645,000.  Stripping out the seasonal adjustments, the decline was actually 19.7%, which is significantly weaker than the 5.1% decline that is average for July.  The result narrowed the year-to-date gain to 39.5%, which is 15.6% above the seasonal average trend.  This is the second best pace of this economic expansion, lagging only the 42.1% increase through July of 2016.  We have uploaded the charts for subscribers to access via the following link: https://charts.equityclock.com/u-s-new-home-salesSubscribe now.

New Home Sales Seasonal Chart

Sentiment on Friday, as gauged by the put-call ratio, ended bearish at 1.19.  Investors continue to use options to hedge their portfolios, typically conducive to providing a backstop for stocks.

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Seasonal charts of companies reporting earnings today:

Caleres, Inc. (CAL) Seasonal Chart OSI Systems, Inc. (OSIS) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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