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Stock Market Outlook for October 22, 2019


The switch between small-cap/large-cap and value/growth reaching a key pivot point on the seasonal timeline.

 

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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Open Text Corp. (TSE:OTEX.TO) Seasonal Chart

Open Text Corp. (TSE:OTEX.TO) Seasonal Chart

Western Digital Corp. (NASD:WDC) Seasonal Chart

Western Digital Corp. (NASD:WDC) Seasonal Chart

LPL Financial Holdings Inc. (NASD:LPLA) Seasonal Chart

LPL Financial Holdings Inc. (NASD:LPLA) Seasonal Chart

Covenant Transportation Group Inc. (NASD:CVTI) Seasonal Chart

Covenant Transportation Group Inc. (NASD:CVTI) Seasonal Chart

Sun Life Financial Services of Canada, Inc. (TSE:SLF.TO) Seasonal Chart

Sun Life Financial Services of Canada, Inc. (TSE:SLF.TO) Seasonal Chart

 

 

The Markets

Stocks pushed higher on Monday amidst ongoing trade optimism and earnings reports that are coming in better than feared.  The S&P 500 Index added just less than seven-tenths of one percent, closing above the psychologically important 3,000 level that had been flirted with in the previous week.  Once again, the upper limit of the summer trading range is being tested as investors continue to wait for that catalyst to fuel a breakout.  Energy, financials, and technology topped the leaderboard as value outperformed growth. 

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The battle between the value and the growth is looking interesting.  Following a prolonged period of underperformance amongst value stocks, the segment of the market is attempting to close at least some of the gap in performance with its growth counterpart.  On a weekly look, while the trend of the ratio of the Russell 1000 Value Index relative to the Russell 1000 Growth Index continues to show lower-lows and lower-highs, positive momentum divergences with respect to MACD and RSI are hinting of selling exhaustion, implying a shift from growth to value may be on the horizon.  From a seasonal perspective, that shift typically takes place by the middle of November, running through the end of the year, in what could be argued as an end of year mean reversion trade.  With a number of imbalances in the market at present with respect to risk-on and risk-off bets, the switch between value and growth is another reversion trade that we’ll be watching as the year winds down.

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Another area that is showing new interest from investors is small cap stocks, which have been shunned from investor portfolios all year given the higher risk metrics associated with them.  The Russell 2000 Small Cap index ETF (IWM) gained just over nine-tenths of a percent on Monday, continuing a recent string of outperformance versus the large-cap S&P 500 Index.  The ETF has overcome the hurdles presented by major moving averages between $150 and $152 and has defined support around $144.  As with other benchmarks, a positive catalyst could break the benchmark out of its range, enticing investors back to these riskier bets.  Seasonally, the Russell 2000 Index has shown a similar period of seasonal strength as value stocks, outperforming counterparts, on average, through the end of the year.

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RUSSELL 2000 Index Seasonal Chart

$RUT Relative to the S&P 500
$RUT Relative to the S&P 500

$RUT Monthly Averages

Sentiment on Monday, as gauged by the put-call ratio, ended bullish at 0.94.

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Seasonal charts of companies reporting earnings today:

Procter & Gamble Company (The) Seasonal Chart Novartis AG Seasonal Chart McDonald's Corporation Seasonal Chart Texas Instruments Incorporated Seasonal Chart United Technologies Corporation Seasonal Chart NextEra Energy, Inc. Seasonal Chart Lockheed Martin Corporation Seasonal Chart United Parcel Service, Inc. Seasonal Chart Canadian National Railway Company Seasonal Chart Sherwin-Williams Company (The) Seasonal Chart Kimberly-Clark Corporation Seasonal Chart UBS AG Seasonal Chart Biogen Inc. Seasonal Chart The Travelers Companies, Inc. Seasonal Chart Equity Residential Seasonal Chart Discover Financial Services Seasonal Chart PACCAR Inc. Seasonal Chart Chipotle Mexican Grill, Inc. Seasonal Chart CoStar Group, Inc. Seasonal Chart Fifth Third Bancorp Seasonal Chart Centene Corporation Seasonal Chart New Oriental Education & Technology Group, Inc. Seasonal Chart Regions Financial Corporation Seasonal Chart Nucor Corporation Seasonal Chart Hasbro, Inc. Seasonal Chart Quest Diagnostics Incorporated Seasonal Chart W.R. Berkley Corporation Seasonal Chart PulteGroup, Inc. Seasonal Chart Whirlpool Corporation Seasonal Chart Teradyne, Inc. Seasonal Chart Carlisle Companies Incorporated Seasonal Chart Interpublic Group of Companies, Inc. (The) Seasonal Chart Monolithic Power Systems, Inc. Seasonal Chart Skechers U.S.A., Inc. Seasonal Chart Harley-Davidson, Inc. Seasonal Chart Polaris Inc. Seasonal Chart Synovus Financial Corp. Seasonal Chart PS Business Parks, Inc. Seasonal Chart Manhattan Associates, Inc. Seasonal Chart JetBlue Airways Corporation Seasonal Chart MGIC Investment Corporation Seasonal Chart Highwoods Properties, Inc. Seasonal Chart Six Flags Entertainment Corporation New Seasonal Chart Webster Financial Corporation Seasonal Chart Graphic Packaging Holding Company Seasonal Chart CenterState Bank Corporation Seasonal Chart NextEra Energy Partners, LP Seasonal Chart Boyd Gaming Corporation Seasonal Chart Trustmark Corporation Seasonal Chart iRobot Corporation Seasonal Chart USANA Health Sciences, Inc. Seasonal Chart First Busey Corporation Seasonal Chart Hawaiian Holdings, Inc. Seasonal Chart Tile Shop Hldgs, Inc. Seasonal Chart Computer Task Group, Incorporated Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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