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Stock Market Outlook for September 16, 2019


Historical precedent of a significant bond market drawdown suggests a strongly bullish bias for 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:

Subscribers – Click on the relevant link to view the full profile. Not a subscriber? Signup here.

Armada Hoffler Properties, Inc. (NYSE:AHH) Seasonal Chart

Armada Hoffler Properties, Inc. (NYSE:AHH) Seasonal Chart

Illinois Tool Works, Inc. (NYSE:ITW) Seasonal Chart

Illinois Tool Works, Inc. (NYSE:ITW) Seasonal Chart

Wall Financial Corp. (TSE:WFC.TO) Seasonal Chart

Wall Financial Corp. (TSE:WFC.TO) Seasonal Chart

Globus Medical, Inc. (NYSE:GMED) Seasonal Chart

Globus Medical, Inc. (NYSE:GMED) Seasonal Chart

Oak Valley Bancorp (NASD:OVLY) Seasonal Chart

Oak Valley Bancorp (NASD:OVLY) Seasonal Chart

Cervus Equipment Corp. (TSE:CERV.TO) Seasonal Chart

Cervus Equipment Corp. (TSE:CERV.TO) Seasonal Chart

Autozone Inc. Nevada (NYSE:AZO) Seasonal Chart

Autozone Inc. Nevada (NYSE:AZO) Seasonal Chart

 

 

The Markets

A stronger than expected report on retail trade for the month of August fuelled a further unwind in the bond market on Friday, distracting the equity market.  The S&P 500 Index closed mildly lower by just less than a tenth of one percent, remaining positioned above the psychologically important 3000 level.  Momentum has begun to fade following last week’s breakout move, however, the large-cap benchmark continues to maintain a short-term trend of higher-highs and higher-lows.

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For the week, the large-cap benchmark is up by just less than a percent.  Momentum indicators remain in bullish territory, although the trends of each have flat-lined, indicative of the lack of investor enthusiasm to purchase the market around all-time highs.  The benchmark remains on a trend of higher-highs and higher-lows on this intermediate look with the next critical test in this bullish path being the all-time high.

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Last week was all about rotation as crowded defensive bets unwound and depressed areas of the market caught a bid.  The Intermediate Treasury Bond (IEF) fell by 2.56%, realizing one of the weakest week’s in the history of the product.  The last time there was a larger weekly drawdown was in November of 2016 as the Presidential election sent investors aggressively rotating into risk assets after becoming  overly defensive into the event.  The precedent of significant weekly drawndowns on the IEF ETF has been strongly bullish for equities.  The S&P 500 Index has shown gains 30, 60, and 90 days following a weekly drawdown of 2.5% on the Intermediate Treasury Bond ETF; average returns were 1.77%, 4.03%, and 6.24%, respectively.  The bond ETF broke below support at its 50-day moving average, the first time the fund has traded below this level since November.

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S&P 500 Index Performance following Weekly Drawdown of 2.5% or more for the Intermediate Treasury Bond ETF (IEF)
Date 30-Days Following 60-Days Following 90-Days Following
11/11/16 4.39% 4.83% 6.63%
6/21/13 6.26% 3.76% 8.16%
12/10/10 2.51% 6.79% 4.41%
8/07/09 0.59% 4.38% 5.56%
6/05/09 -4.65% 6.97% 6.72%
10/10/08 3.53% -1.17% 1.17%
3/21/03 -0.26% 2.66% 11.03%
Average Return 1.77% 4.03% 6.24%

 

On the economic front, retail sales for the month of August were released before Friday’s opening bell. The headline print indicated that activity expanded by 0.4% last month, which is double the 0.2% increase that was forecasted by analysts. Less gas and autos, the gain in retail trade was more muted at 0.1%, which is actually a miss versus the 0.3% consensus estimate. Stripping out the seasonal adjustments, retail sales actually increased by 2.6% in August, which is marginally weaker than the 2.7% increase that is average for the summer month. The year-to-date change is now running 5.2% above average, which remains the best performance through the first two-thirds of the calendar in at least 27 years.  In our last report on retail sales to subscribers, we highlighted an opportunity to take advantage of the strength in the consumer.  The trade is now higher by over 15% in one month.  Don’t miss out on the next opportunity.  Subscribe now!

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

Sentiment on Friday, as gauged by the put-call ratio, ended slightly bullish at 0.92.

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Seasonal charts of companies reporting earnings today:

     Renesola Ltd. Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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