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Stock Market Outlook for October 7, 2019


Benchmark caps a “whippy” week back above its 50-day moving average following the release of the payroll report for September.

 

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:

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Orion Group Holdings, Inc. (NYSE:ORN) Seasonal Chart

Orion Group Holdings, Inc. (NYSE:ORN) Seasonal Chart

1st Constitution Bancorp (NASD:FCCY) Seasonal Chart

1st Constitution Bancorp (NASD:FCCY) Seasonal Chart

ClearOne Communications Inc. (NASD:CLRO) Seasonal Chart

ClearOne Communications Inc. (NASD:CLRO) Seasonal Chart

Maxar Technologies Ltd. (TSE:MAXR.TO) Seasonal Chart

Maxar Technologies Ltd. (TSE:MAXR.TO) Seasonal Chart

Nutrien Ltd. (TSE:NTR.TO) Seasonal Chart

Nutrien Ltd. (TSE:NTR.TO) Seasonal Chart

Northern Trust Corp. (NASD:NTRS) Seasonal Chart

Northern Trust Corp. (NASD:NTRS) Seasonal Chart

Questerre Energy Corp. (TSE:QEC.TO) Seasonal Chart

Questerre Energy Corp. (TSE:QEC.TO) Seasonal Chart

 

 

The Markets

Stocks jumped higher on Friday following a payroll report for September that was neither too hot nor too cold.  The Bureau of Labor Statistics indicates that 136,000 payrolls were added last month, which is a miss versus the consensus estimate that called for a rise of 145,000. The unemployment rate fell to 3.5% from 3.7% and average hourly earnings were unchanged, a miss versus expectations of an increase of 0.3%. Stripping out the seasonal adjustments, payrolls actually increased by 362,000, or 0.2%, in September, which approximately half of the 0.4% increase that is average for this time of year. The result has narrowed the year-to-date spread versus the seasonal norm down to 0.3% above average through the first three quarters.  To receive further insight on what is driving the strength in employment in the US, subscribe now and we’ll send you our report detailing what is actually occurring in the labor market.

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

The S&P 500 Index gained 1.52% following the report’s release, ploughing through the open gap around 2940 and closing back above horizontal and 50-day moving average support around 2950.  Despite the move, the 20 and 50-day moving averages continue to show signs of rolling over, which warrants concern over a short and intermediate-term basis.

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With Friday’s rally, the large-cap benchmark was able to recoup much of the losses realized earlier in the week.  The benchmark lost a mere third of one percent over the five-day span, maintaining support on a closing basis around the 20-week moving average.  The hurdle, which approximately tracks the 100-day moving average, has provided support and resistance characteristics in the past, therefore the fact that the benchmark was able to defend this level on a weekly closing basis is encouraging for the longer-term trend.  Momentum indicators on the weekly chart have been trending lower since July, suggesting waning buying pressures.  The threat of a double-top remains the concern given the fact that the benchmark was unable to make a new high above July’s peak.  Seasonally, some of the stronger days for the month of October are now behind us and the middle of the month is typically dictated by reaction to quarterly earnings slated to be released in the weeks ahead.  The catalysts over the next few weeks are many, which is likely to keep investors on their toes for the foreseeable future.

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While the broader equity market rallied on Friday, suggesting a risk-on tilt, the market internals suggest otherwise.  Utilities, consumer staples, technology, and health care were some of the best performers, rallying alongside bonds and financial stocks.  The action was arguably defensive in nature, suggesting ongoing hesitation amongst investors to pick up risk assets.  The 10-year treasury note price is back up to the high of the year, an indication that investor pessimism remains elevated.  As highlighted on Thursday’s episode of Market Call Tonight, October is typically a month when bond prices and volatility peak, giving way to the risk-on, cyclical trade through the next six months.  Clearly, we’re not there yet and some catalyst to trigger the shift looks to be required, of which many are on the docket over the course of the month.

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Sentiment on Friday, as gauged by the put-call ratio, ended bearish at 1.04.  On Thursday the ratio hit an overly bearish high of 1.37.  This was amongst the highest levels of the year, second to just the May 29th read of 1.41, which ended up providing an excellent contrarian buy signal for the rally that followed though the month of June.

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Seasonal charts of companies reporting earnings today:

 

 

S&P 500 Index

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TSE Composite

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