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Stock Market Outlook for January 3, 2020


The positive timeframe for stocks that spanned the fourth quarter concludes today, on average.

 

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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Ellington Financial LLC (NYSE:EFC) Seasonal Chart

Ellington Financial LLC (NYSE:EFC) Seasonal Chart

Transcontinental Realty Investors Inc. (NYSE:TCI) Seasonal Chart

Transcontinental Realty Investors Inc. (NYSE:TCI) Seasonal Chart

iShares Russell 3000 ETF (NYSE:IWV) Seasonal Chart

iShares Russell 3000 ETF (NYSE:IWV) Seasonal Chart

Eastern Co. (NASD:EML) Seasonal Chart

Eastern Co. (NASD:EML) Seasonal Chart

iShares MSCI Emerging Markets Asia ETF (NASD:EEMA) Seasonal Chart

iShares MSCI Emerging Markets Asia ETF (NASD:EEMA) Seasonal Chart

Vipshop Holdings Ltd. (NYSE:VIPS) Seasonal Chart

Vipshop Holdings Ltd. (NYSE:VIPS) Seasonal Chart

Vanguard Consumer Discretionary ETF (NYSE:VCR) Seasonal Chart

Vanguard Consumer Discretionary ETF (NYSE:VCR) Seasonal Chart

Riocan Real Estate Investment Trust (TSE:REI/UN.TO) Seasonal Chart

Riocan Real Estate Investment Trust (TSE:REI/UN.TO) Seasonal Chart

Blue Bird Corp. (NASD:BLBD) Seasonal Chart

Blue Bird Corp. (NASD:BLBD) Seasonal Chart

 

 

The Markets

Stocks surged in the first day of trading of 2020 as investors bought into technology and industrial stocks amidst ongoing risk-taking.  The S&P 500 Index added just over eight-tenths of one percent, continuing to hold well above major moving averages and fulfilling a start of the year target that we have been proposing for many months between 3250 and 3300.  The benchmark closed the session at 3257.85, another all-time high.  The target was based on classic seasonal patterns that call for strength through the fourth quarter and into the start of the new year.  This includes the normally strong back half of December, which has been tied into the Santa Claus rally period spanning the last five trading sessions of the year and the first two sessions of the new year.  The benchmark is higher, as of the time of writing, by 2.8% through this historically strong timeframe.  The seasonally strong timeframe concludes today, on average.  Looing to find out what the seasonal playbook has in store for us next?  Demand for our January 2020 outlook has been tremendous.  You’ll receive this and full access to everything that Equity Clock offers when you subscribe.  Signup now.

S&P 500 Index Seasonal Chart

While the market continues to grind higher, we must be cognizant not to become complacent given the bullishness that is proliferating.  The 50-day moving average of the put-call ratio has fallen to the lowest level since last May, ahead of the approximately 7% drawdown, from peak to trough, that followed.  The large-cap benchmark has been floating around some of the most overbought levels since January of 2018, also a notable intermediate peak in the evolution of the longer-term trend.  The market appears frothy at present levels and the near parabolic trend since the breakout of the summer trading range between 2800 and 3025 presents downside risks.

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One of the factors acting as the fuel for this market rally has been the alleviation of the tariff war between the US and China; a Phase 1 deal will be signed in the coming weeks.  According to recent trade data, the deal is coming into fruition when trade data was deteriorating further going into the final months of the year.  In November, US exports fell by 3.6%, while imports, which have been impacted by the Trump tariff tirade, showed a decline of 9.1%.  For imports, this is much weaker than the 5.1% decline that is average for the second to last month of the year.  The year-to-date change in imports, as of the end of November, fell into negative territory, a situation akin to en economic recession.  The areas of the economy where the strains of the tariffs appeared the most threatening now have the ability to recuperate, but we’ll have to wait quite a few months to verify that this is in fact taking place.   Bottom line is that there have been risks of broader economic weakness if the tariff war continued and/or escalated, but those risks have have now faded.  It is up to the data to confirm that businesses, particularly manufacturers, have returned to a path of growth, warranting recent investor optimism.  We’ve uploaded further charts on the export side of the economy to the chart database at https://charts.equityclock.com/u-s-international-trade-data.

US International Trade - Imports Seasonal Chart

Monthly US International Trade - Imports Data

US International Trade – Imports Seasonal Chart

US International Trade - Exports Seasonal Chart

Monthly US International Trade - Exports Data

Sentiment on Thursday, as gauged by the put-call ratio, ended bullish at 0.83.

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Seasonal charts of companies reporting earnings today:

  • No significant earnings scheduled for today

 

S&P 500 Index

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TSE Composite

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