Stock Market Outlook for September 26, 2019
New home sales increased by 1.8% (NSA) in August, a positive divergence compared with the 3.8% decline that is average for the summer month.
*** 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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Autoliv, Inc. (NYSE:ALV) Seasonal Chart
Textron, Inc. (NYSE:TXT) Seasonal Chart
Kulicke and Soffa Industries, Inc. (NASD:KLIC) Seasonal Chart
Danaher Corp. (NYSE:DHR) Seasonal Chart
Compass Minerals Intl, Inc. (NYSE:CMP) Seasonal Chart
Peoples Bank (NASD:PBCT) Seasonal Chart
XPO Logistics, Inc. (NYSE:XPO) Seasonal Chart
Lamar Advertising Co. (NASD:LAMR) Seasonal Chart
Gibraltar Steel Corp. (NASD:ROCK) Seasonal Chart
TE Connectivity Ltd. (NYSE:TEL) Seasonal Chart
The Markets
Stocks retraced the losses from the previous day’s session as Donald Trump indicated that a China trade deal could come sooner than expected. The president has employed theses headline bombs in the past in an attempt to keep the market afloat following periods of abrupt market weakness. On Tuesday, it was announced that the House Leader would move forward with an impeachment inquiry against the president, the news of which took a bite out of equity benchmarks. This negative reaction was essentially reversed with Wednesday’s dose of optimism from the President. The ongoing question is whether or not he can deliver, especially now when his position may be compromised. The S&P 500 Index added just over six-tenths of one percent, bouncing from horizontal support at 2950 at the lows of the session. This remains the critical hurdle for the benchmark and its strength to support the market will be closely monitored now that momentum sell signals have been generated following Tuesday’s action.
As indicated in a previous report, one of the things we have been monitoring is how some of the risk-off plays react to short-term levels of resistance presented by their 20-day moving averages. Following the rotation away from risk in the first half of the month, risk off plays, such as bonds and gold, had sold off in a rather pronounced manner. The unwind of a parabolic move, as it pertained to the bond market, meant a tough battle to continue the intermediate trend of higher-highs and higher-lows. A lower-high would be fairly telling that the risk-off play is exhausted, clearing the way for a chance of the re-acceleration of risk. On Wednesday, both gold and bonds realized rather pronounced moves lower from around their respective 20-day moving averages, raising the likelihood of the aforementioned risk-off exhaustion. One day does not make a trend, but a rotation away from defensive bets into the fourth quarter is a scenario we’re watching closely.
On the economic front, a report on new home sales was released during Wednesday’s session. The headline print of August’s report indicates that activity increased by 7.1% last month to a seasonally adjusted annualized rate of 713,000. Analysts were expecting a 0.6% decline to 662,000. Stripping out the seasonal adjustments, new home sales actually increased by 1.8%, which is a positive divergence compared with the 3.8% decline that is average for the summer month. The result places the year-to-date change 30.2% above the seasonal average trend, the best pace through this point in the year since 2003. Further insight was sent to subscribers intraday, including opportunities to capitalize on the strength in the housing market through the end of the year. Subscribe now.
Sentiment on Wednesday, as gauged by the put-call ratio, ended bearish at 1.05.
Seasonal charts of companies reporting earnings today:
S&P 500 Index
TSE Composite
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