Stock Market Outlook for October 24, 2019
The number of new 52-week highs on the NYSE is on a rebound, helping to push the NYSE Cumulative Advance-Decline line to new highs.
*** 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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Almaden Minerals Ltd. (TSE:AMM.TO) Seasonal Chart
Magellan Health Services, Inc. (NASD:MGLN) Seasonal Chart
Bloomin’ Brands Inc. (NASD:BLMN) Seasonal Chart
Mosaic Co. (NYSE:MOS) Seasonal Chart
Akamai Technologies, Inc. (NASD:AKAM) Seasonal Chart
The Markets
Stocks posted minor gains on Wednesday as investors continue to digest the release of earnings. Notable releases on Wednesday were reports for Caterpillar and Boeing, both of which recorded significant earnings misses. The results, however, failed to deter investors, who bid the stocks higher throughout the session. Reaction in these industrial bellwethers is fairly indicative of the sentiment of investors whereby weak earnings are warranting a pass given that results are not as bad as what they were feared to be. Ongoing positive reaction to downbeat earnings could be the catalyst to break the market free of its summer range. The S&P 500 Index added just less than three-tenths of one percent, continuing this dance with the psychologically important 3,000 level. The open gap around 2950 remains a short-term level of support below, while the hurdle on the upside is the all-time high around 3025.
Industrials have become the proxy for the beleaguered cyclical trade, impacted by the woes of the ongoing trade war. Reduced production at Boeing is also a factor. The sector has been underperforming the market since the end of February, trading within a very defined range for the past eight months. Recently, however, the relative performance trend seems to have broken from its downward path of lower-lows and lower-highs, hinting of an upward shift as buying demand returns to the previous unloved area of the market. The Industrial Sector ETF (XLI) confirmed support at the 200-day moving average at the start of October. The long-term moving average is pointing higher, suggesting the long-term positive trend remains intact and increasing the likelihood of a breakout above the multi-month trading range that spans between $72 and $79. Upside target upon a breakout from the span is to $86. Seasonally, the sector is entering its period of strength, which runs through the start of May. The sector will be a key tell of whether the period of seasonal strength for stocks is cyclically dominated, as is typical, or a hybrid of risk-on and risk-off amidst ongoing economic concerns.
Meanwhile, the number of new 52-week highs on the NYSE is on a rebound. At the start of October, the level of new highs hit a low of 16, hovering around levels seen in the fourth quarter of last year during the market swoon. The level is now up to 205, moving back into a range that is consistent with higher equity prices on a broader scale. This is also helping the NYSE Cumulative Advance-Decline line, which is charting new all-time highs. Weakness in these two indicators were two of the technical signals that hinted of a downturn in stocks through the last three months of last year; clearly the warning signs are not present this time around.
Sentiment on Wednesday, as gauged by the put-call ratio, ended bullish at 0.87.
Seasonal charts of companies reporting earnings today:
S&P 500 Index
TSE Composite
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