Stock Market Outlook for September 5, 2019
While equity benchmarks in the US continue to gyrate within a short-term range, benchmarks overseas have already broken out.
*** 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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Calavo Growers, Inc. (NASD:CVGW) Seasonal Chart
Dynasil Corp. (NASD:DYSL) Seasonal Chart
The Markets
Stocks jumped higher on Wednesday as tensions in Hong Kong eased following the withdrawal of a bill that resulted in numerous disruptive rallies in recent weeks. The S&P 500 Index added 1.08%, trading to the upper limit of its short-term trading range between 2825 and 2940. This back and forth between support and resistance has been ongoing for a month as investors digest the imposition of tariffs by the US and China. But the bulls may be gaining some ground in this tug of war. Recent price action resembles an ascending triangle pattern, typically a bullish setup that continues a trend of higher-highs and higher-lows in price. The bullish setup is confirmed upon a break of the upper limit of the span. This is a market that is spring-loaded, but it is unclear as to what the catalyst will be to release the tension.
While equity benchmarks in the US remain within this short-term consolidation range, other benchmarks around the globe are breaking above their short-term ranges. The MSCI EAFE ETF (EFA) broke above a short-term reverse head-and-shoulders pattern; the Emerging Market ETF (EEM) did the same. For the EAFE ETF, price is showing signs of moving higher from from levels around the 200-day moving average, which is now starting to curl higher. Performance relative to the S&P 500 Index is also curling higher. A longer-term look hints of a reprieve in the underperformance that has been apparent in the index ETF over the past decade. A ratio chart of the EAFE ETF versus the S&P 500 ETF (SPY) shows that the lower limit of declining wedge was recently tested, an event that has typically preceded a multi-month trend of outperformance in the overseas benchmark. Seasonally, the MSCI EAFE Index tends to trend higher through the final quarter of the year, benefiting from the same favourable tendencies for stocks as what is realized closer to home.
Sentiment on Wednesday, as gauged by the put-call ratio, ended neutral at 1.00.
Seasonal charts of companies reporting earnings today:
S&P 500 Index
TSE Composite
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