Stock Market Outlook for October 3, 2019
Wednesday’s gap lower gives further credence to the double-top pattern on the S&P 500, which suggests a downside target of 2665.
*** 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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Huntsman Corp. (NYSE:HUN) Seasonal Chart
Pinnacle Financial Partners, Inc. (NASD:PNFP) Seasonal Chart
Steel Connect, Inc. (NASD:STCN) Seasonal Chart
CF Industries Holdings, Inc. (NYSE:CF) Seasonal Chart
Ceva Inc. (NASD:CEVA) Seasonal Chart
Hudson Pacific Properties Inc. (NYSE:HPP) Seasonal Chart
L.B. Foster Co. (NASD:FSTR) Seasonal Chart
Cameco Corp. (NYSE:CCJ) Seasonal Chart
Resources Connection Inc. (NASD:RECN) Seasonal Chart
Triton International Ltd. (NYSE:TRTN) Seasonal Chart
Upcoming BNN Appearance:
I will be on BNN’s Market Call Tonight this evening (Thursday, October 3rd) at 6:00pm ET taking your calls on Technical Analysis and Seasonal Investing. CALL TOLL-FREE 1-855-326-6266, EMAIL marketcall@bnnbloomberg.ca, or TWEET @MarketCall. We always get a lot of calls when on the show, so try tagging both @EquityClock and @MarketCall on Twitter with your questions and we’ll scan through them on the show.
The Markets
Stocks sold off on Wednesday as fears of an economic slowdown continue to grow following yesterday’s weak ISM manufacturing survey and rumours that tariffs on European goods would be announced. The S&P 500 Index closed down by 1.79%, following through with yesterday’s breakdown below the 50-day moving average around 2950. Next hurdle to watch is the 200-day moving average at 2837, however, the theoretical target of the double-top pattern points much lower. The bearish setup hints of a move to 2665, which would test the lower limit of a shallow rising trading range that we have been suggesting for the past year. Horizontal support is apparent at 2825. The large-cap benchmark is presently short-term oversold, perhaps conducive for stability in the short-term as selling pressures become exhausted. Short-term momentum indicators were last overbought on September 12th and have been trending lower since.
In yesterday’s report we highlighted topping patterns on the charts of major market benchmarks, providing a threatening setup going into the month of October. Negative setups by way of triple tops or head-and-shoulders can also be seen on the charts of some notable market darlings. Shares of Amazon, Facebook, Google, Bank of America, American Express, Chevron, McDonald’s, Disney, and Intel are all rolling over from resistance, showing bearish setups that suggest downside targets that are much lower than present levels. As I always reiterate, reality rarely jives perfectly with textbook theory. Still, the patterns give reason for investors to stay to the sidelines in the absence of some catalyst, of which many are upcoming. Earnings season starts in short-order and trade talks between the US and China are expected to take place next week.
The non-farm payroll report to be released on Friday is likely the next focus of investors. Analysts are expecting payrolls to expand by 145,000, which is marginally higher than the 135,000 that ADP reported on Wednesday. On average, payrolls rise by 0.4% in September, excluding to the seasonal adjustments, which suggests that actual addition of 606,000. The start of end of year/holiday hiring tends to lift the numbers into the start of the fourth quarter. We will send out a breakdown of the results to subscribers on Friday, without all of manipulation provided by the seasonal adjustment factor.
On schedule for the Wednesday session, the weekly tally of oil inventories in the US was released. The Energy Information Administration reports that oil inventories expanded by 3.1 million barrels last week, while gasoline stockpiles shrank by 228,000 barrels. The result saw the days of supply of oil expand by seven-tenths of a day to 25.3, while gasoline expanded by two-tenths to 24.7. The average days of supply for each at this time of year is 21.7 and 23.7, respectively. We sent out further insight to subscribers intraday, including a way to play the energy sector through the fourth quarter. Subscribe now.
Sentiment on Wednesday, as gauged by the put-call ratio, ended bearish at 1.27.
Seasonal charts of companies reporting earnings today:
S&P 500 Index
TSE Composite
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