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Stock Market Outlook for January 15, 2020


Gamma exposure (GEX) at an all-time high going into options expiration at the end of this week.

 

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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Cinedigm Digital Cinema Corp. (NASD:CIDM) Seasonal Chart

Cinedigm Digital Cinema Corp. (NASD:CIDM) Seasonal Chart

TransAlta Renewables Inc. (TSE:RNW.TO) Seasonal Chart

TransAlta Renewables Inc. (TSE:RNW.TO) Seasonal Chart

iShares Global Energy ETF (NYSE:IXC) Seasonal Chart

iShares Global Energy ETF (NYSE:IXC) Seasonal Chart

Canadian Natural Resources Ltd. (TSE:CNQ.TO) Seasonal Chart

Canadian Natural Resources Ltd. (TSE:CNQ.TO) Seasonal Chart

Unilever PLC (NYSE:UL) Seasonal Chart

Unilever PLC (NYSE:UL) Seasonal Chart

Invesco S&P 500 Pure Value ETF (NYSE:RPV) Seasonal Chart

Invesco S&P 500 Pure Value ETF (NYSE:RPV) Seasonal Chart

Gamestop Corp. (NYSE:GME) Seasonal Chart

Gamestop Corp. (NYSE:GME) Seasonal Chart

Finning Intl, Inc. (TSE:FTT.TO) Seasonal Chart

Finning Intl, Inc. (TSE:FTT.TO) Seasonal Chart

Baytex Energy Corp. (TSE:BTE.TO) Seasonal Chart

Baytex Energy Corp. (TSE:BTE.TO) Seasonal Chart

Amphenol Corp. (NYSE:APH) Seasonal Chart

Amphenol Corp. (NYSE:APH) Seasonal Chart

Netflix, Inc. (NASD:NFLX) Seasonal Chart

Netflix, Inc. (NASD:NFLX) Seasonal Chart

 

 

The Markets

Stocks closed mixed on Tuesday as investors reacted to a report that, despite a Phase 1 trade deal, US tariffs on Chinese goods enacted previously would remain intact through the end of the year.  The S&P 500 Index shed less than two-tenths of one percent, hardly a blip in the context of the overall move in the past few months as investors wait to receive the full context of what a Phase 1 deal entails.  The agreement is slated to be signed on Wednesday and market participants will be anxious to parse the details.  The next few days delivers a number of catalysts for investors.  The signing of the trade deal has already been highlighted and the release of earnings reports remains ongoing.  A slew of economic reports, including retail sales, industrial production, and housing starts, will give indication of the health of the economy through the final month of 2019.  And, if that wasn’t enough, Friday is options expiration, which could force investors to reshuffle their portfolios around the event.  Gamma exposure (GEX), which is a dollar-denominated measure of option market-makers’ hedging obligations, recently hit an all-time high according to a chart by SqueezeMetrics.com.  The website notes that “when GEX is high, the option market is implying that volatility will be low. When GEX is low, volatility is high, and while we expect a choppy market, further losses are unlikely.”  High levels in the GEX have historically coincided with short to intermediate-term peaks in equity prices, particularly around option expiration events, which force portfolio managers to reshuffle the deck.

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Looking at the hourly chart of the large-cap benchmark, the index continues to grind along trendline resistance that has maintained a steep pace over the past couple of months.  Momentum indicators continue to show bullish characteristics following the recent advance, but this does not mitigate the prospect of a near-term pullback as investors digest the gains from the past few months.  Negative momentum divergences can still be picked out on the chart, suggesting waning buying pressures.

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On the economic front, the consumer price index for December was released before Tuesday’s opening bell.  The headline print showed a month-over-month increase of 0.2%, elevating the year-over-year change to 2.3%, inline with the consensus analyst estimate. Less food and energy, the inflation gauge ticked higher by a tenth of a percent, which kept the year-over-year pace unchanged at 2.3%. Stripping out the seasonal adjustments, the consumer price index for all urban consumers declined by 0.1% in the last month of the year, which is stronger than the 0.2% decline that is average for December. For 2019, overall, CPI was higher by 2.3%, which is the strongest pace since 2011 and a tenth of a percent above the seasonal norm.  We sent out further insight to subscribers intraday, including what the results imply for the path of monetary policy in the year ahead.  Subscribe now to receive our report.

Sentiment on Tuesday, as gauged by the put-call ratio, ended bullish at 0.76.  The 20-day moving average of the put-call ratio is hovering around the lowest levels since the start of February 2018.  Back then, the moving average of the sentiment gauge bottomed just ahead of the pullback in the benchmark that took stocks sharply lower into the second month of that year.  The gauge continues to point to complacency, which makes stocks vulnerable should a shock event be realized.

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Seasonal charts of companies reporting earnings today:

Bank of America Corporation Seasonal Chart UnitedHealth Group Incorporated Seasonal Chart U.S. Bancorp Seasonal Chart Goldman Sachs Group, Inc. (The) Seasonal Chart BlackRock, Inc. Seasonal Chart PNC Financial Services Group, Inc. (The) Seasonal Chart Hancock Whitney Corporation Seasonal Chart Alcoa Corporation Seasonal Chart Eagle Bancorp, Inc. Seasonal Chart Volt Information Sciences, Inc. Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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