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Stock Market Outlook for October 9, 2019


The 50-day moving average of the S&P 500 Index pointing lower for the first time since last year’s fourth quarter meltdown.

 

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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Moog, Inc. (NYSE:MOG/A) Seasonal Chart

Moog, Inc. (NYSE:MOG/A) Seasonal Chart

Hanover Insurance Group, Inc. (NYSE:THG) Seasonal Chart

Hanover Insurance Group, Inc. (NYSE:THG) Seasonal Chart

Office Depot, Inc. (NASD:ODP) Seasonal Chart

Office Depot, Inc. (NASD:ODP) Seasonal Chart

Ameriprise Financial Inc. (NYSE:AMP) Seasonal Chart

Ameriprise Financial Inc. (NYSE:AMP) Seasonal Chart

Cadiz Inc. (NASD:CDZI) Seasonal Chart

Cadiz Inc. (NASD:CDZI) Seasonal Chart

Bank of New York Mellon Corp (NYSE:BK) Seasonal Chart

Bank of New York Mellon Corp (NYSE:BK) Seasonal Chart

Hyatt Hotels Corp. (NYSE:H) Seasonal Chart

Hyatt Hotels Corp. (NYSE:H) Seasonal Chart

Prudential Financial Inc. (NYSE:PRU) Seasonal Chart

Prudential Financial Inc. (NYSE:PRU) Seasonal Chart

Caleres, Inc. (NYSE:CAL) Seasonal Chart

Caleres, Inc. (NYSE:CAL) Seasonal Chart

 

 

The Markets

Stocks sold off on Tuesday as investors doubted whether a trade deal between the US and China could be achieved following the imposition of sanctions on some Chinese companies.  The S&P 500 Index fell by 1.56%, trading lower from its 50-day moving average.  The moving average is rolling over, suggesting weakness on an intermediate-term scale.  The last time the 50-day moving average was pointing lower was in October of last year, confirming the weakness in the broader market that spanned the fourth quarter.  There are presently 33% of stocks in the S&P 500 Index that are trading above their respective 50-day moving average line; typically tradable lows have occurred when the breadth indicator bottoms below 20%, as we saw close to the end of last year.  An oversold low is the present trajectory, but catalysts to alter the path remain many over the course of the month.

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Similarly, while the percent of stocks trading above 50-day moving averages can provide indication of an oversold low to keep on your radar, the level of the Volatility Index (VIX) can provide indication of excessive fear in the market.  The level of the VIX currently sits marginally above 20, just shy of the threshold that we like to reference around 21 as being the level to become opportunistic in equities.  Another tool to keep on your radar to find that oversold low.

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The ongoing gauge of investor risk sentiment has been the performance of the small cap Russell 2000 Index.  While theoretically in a position to benefit from the lack of exposure to the escalating trade war and the low cost of borrowing, the risks pertaining to a slowing economy and the higher beta characteristic that the benchmark encompasses has investors shying away from this segment of the market.  The Russell 2000 has shown a defined trend of underperformance compared with its large-cap counterpart for the past year, a signal of risk aversion.  The benchmark is back to the lower limit of its multi-month trading range, which spans, approximately, between 1450 and 1600.  A break, one way or the other, would point to a target 150 points above or below the span, meaning either a move back towards the low charted at the end of last year or a return to the all-time high charted before the fourth quarter meltdown in September.  The market is placing bets and it very much looks binary in nature, depending on the catalyst received.

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Sentiment on Tuesday, as gauged by the put-call ratio, ended neutral at 0.99.

 

 

 

Seasonal charts of companies reporting earnings today:

EXFO Inc Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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