Stock Market Outlook for January 8, 2020
Momentum indicators on the S&P 500 Index trigger new technical sell signals as investor uncertainty over geopolitical concerns persist.
*** 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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Allegion Public Ltd. Co. (NYSE:ALLE) Seasonal Chart
Northrop Grumman Corp. (NYSE:NOC) Seasonal Chart
Vanguard Total International Stock ETF (NASD:VXUS) Seasonal Chart
iShares U.S. Consumer Services ETF (NYSE:IYC) Seasonal Chart
Sandstorm Gold Ltd. (TSE:SSL.TO) Seasonal Chart
Trinseo, SA (NYSE:TSE) Seasonal Chart
iShares MSCI Poland Capped ETF (NYSE:EPOL) Seasonal Chart
iShares S&P Mid-Cap 400 Growth ETF (NYSE:IJK) Seasonal Chart
VanEck Vectors Retail ETF (NYSE:RTH) Seasonal Chart
The Markets
Stocks closed lower on Tuesday as investors weigh the geopolitical risks with stocks in the US hovering around all-time highs. The S&P 500 Index fell just less than three-tenths of one percent, remaining firmly above major moving averages, which continue to point higher. Following last week’s sell signal with respect to the Relative Strength Index (RSI), MACD and stochastics have now produced sell signals of their own. The 14-day full stochastic oscillator crossed below 80, the dividing line for an overbought classification. Similarly, MACD crossed below its signal line for the first time since the end of November, changing the status of the broad market, at least according to this indicator, from buy to sell. Back at the end of November the decline that resulted from the MACD sell signal was very muted, showing losses over only two sessions; the benchmark quickly snapped back on trade optimism leading to the stellar December gain. Momentum indicators continue to show a trend of higher-highs and higher-lows, despite the sell triggers, indicating that there is still buying demand behind this market and that any pullback, if realized, should be shallow. Major moving averages are in a position of support, any violation of which would change the short and intermediate-term profiles of the market.
On the economic front, data on trade in both Canada and the US was released before the opening bell. The US commerce department notes that the trade deficit fell to the lowest level in three years in November, but this may not have the positive implications that the headline suggests. The headline print indicated that the trade gap fell by 8.2% to $43.1 billion in November, the result of a 0.7% increase in exports and a 1.0% decline in imports. Stripping out the seasonal adjustments, the deficit actually declined by 19.4% to $62.9 billion, the result of a 3.6% decline in exports and a 9.1% decline in imports. The year-to-date change in imports has fallen into negative territory, well below the seasonal average trend, as businesses restrict activity amidst the now de-escalated tariff war. The announcement of a Phase 1 trade deal is conducive to alleviating the uncertainties amongst businesses that rely on imports, but we’ll wait for the data to confirm. We’ve uploaded the charts for US and Canada trade to the chart database for subscribers to access via the following links: US https://charts.equityclock.com/u-s-international-trade-data | CANADA https://charts.equityclock.com/canadian-international-merchandise-trade-exports-imports
Also on the economic front, US Factory Orders for November were released during Tuesday’s session. The headline print indicated that new orders fell by 0.7% in the month, inline with the consensus analyst estimate. Stripping out the seasonal adjustments, the Value of Manufacturers’ New Orders for All Manufacturing Industries actually fell by 6.9%, which is much weaker than the 4.5% decline that is average for the second to last month of the year. The year-to-date trend is hovering 2.7% below the seasonal average trend, the weakest pace since 2015. Subscribers can login and view the seasonal charts for this report via the following link: https://charts.equityclock.com/u-s-factory-orders
Sentiment on Tuesday, as gauged by the put-call ratio, ended bullish at 0.83.
Seasonal charts of companies reporting earnings today:
S&P 500 Index
TSE Composite
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