Stock Market Outlook for September 6, 2019
S&P 500 resolves its consolidation range to the upside. Next test for the market: the monthly non-farm payroll report.
*** 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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Oritani Financial Corp. (NASD:ORIT) Seasonal Chart
East West Bancorp, Inc. (NASD:EWBC) Seasonal Chart
Home BancShares Inc. (NASD:HOMB) Seasonal Chart
Renaissance RE Holdings Ltd. (NYSE:RNR) Seasonal Chart
The Markets
Stocks went into rally mode on Thursday following news that the US and China agreed to trade talks next month. The S&P 500 index added 1.30%, breaking out of the short-term range that spanned between 2825 and 2940. The breakout projects an upside target of 3055, based on the magnitude of the previous span. The benchmark is presently short-term overbought, but the gap opened during Thursday’s session between 2940 and 2960 provides a logical zone for investors to shoot against in the bid higher for the large-cap benchmark. The percent of stocks trading above 200-day moving averages is now at 65%, which is above the 62.5% hurdle that we look towards to gauge potentially sustainable trends; when the benchmark is below this hurdle, as it has been for the past month, prolonged periods of volatility have typically followed.
As stocks jumped higher, the crowded defensive trades sold off. Long-term treasury bond ETF (TLT) shed 1.81%; the Gold ETF (GLD) dropped by 2.40%. Defensive equity sectors (Staples, REITs, and Utilities) all ended firmly in the red. The Technology, Financial, and Discretionary sectors topped the leaderboard, posting gains of around 2% for the session. Seasonally, the month of September tends to be a transition month when defensive trades typically peak, on average, relative to their cyclical counterparts and cyclical assets typically reach a low. Technical signals in September and October to indicate the transition are typically sought and Thursday’s move was certainly a strong signal.
On Friday, the market will receive the next clue as to the strength of the economy with the non-farm payroll report for August. The consensus analyst estimate is that payrolls will increase by 163,000, inline with the reported increase for July. Before the seasonal adjustments, payrolls tend increase by 0.1%, on average, in the eighth month of the year, which suggests a gain of 151,000. Employment has been trending above average through the first seven months of the year, helping to strengthen the consumer base of the economy and mitigate an economic decline attributed to weak manufacturing conditions. We’ll break down the results for subscribers in a report to be released on Friday. Subscribe now to receive a copy of this report.
New for subscribers is a report reviewing the earnings results, within a seasonal context, of Dow Jones industrial Average companies. We identify which of the Dow constituents screen the best for the coming quarter according to our three pronged approach incorporating seasonal, technical, and fundamental analysis. Subscribe now and we’ll send it to you.
A day delayed due to the holiday Monday, the petroleum status report for the week just past was released during Thursday’s session. The Energy Information Administration (EIA) indicates that oil stockpiles shrank by 4.8 million barrels, while gasoline stockpiles declined by 2.4 million barrels. The result saw the continued decline of the days of supply of oil from 24.4 to 24.2, while gasoline saw its days of supply contract by one-tenth to 23.6; the average for this time of year is 21.7 and 22.8, respectively. Subscribers can login and view the charts via the following link: https://charts.equityclock.com/u-s-eia-weekly-petroleum-status-report
Sentiment on Thursday, as gauged by the put-call ratio, ended bullish at 0.82.
Seasonal charts of companies reporting earnings today:
S&P 500 Index
TSE Composite
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