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Stock Market Outlook for February 4, 2020


US Construction Spending was higher by 5.2% last year, firmly better than the 3.9% increase that is average for the calendar year.

 

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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Laboratory Corporation of America Holdings (NYSE:LH) Seasonal Chart

Laboratory Corporation of America Holdings (NYSE:LH) Seasonal Chart

Citi Trends, Inc. (NASD:CTRN) Seasonal Chart

Citi Trends, Inc. (NASD:CTRN) Seasonal Chart

Invesco Dynamic Food & Beverage ETF (NYSE:PBJ) Seasonal Chart

Invesco Dynamic Food & Beverage ETF (NYSE:PBJ) Seasonal Chart

 

 

The Markets

Stocks rebounded on Monday as start of the month inflows and bargain hunting supported equity benchmarks.  The S&P 500 Index gained just less than three-quarters of one percent, bouncing from support around the 50-day moving average.  The 20-day moving average remains in a position of resistance, a level that was tested at the highs of Monday’s session.

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On the hourly chart of the large-cap benchmark, the moving average hurdle to take note of is the 50-hour, which has constrained each rally attempt over the past week.  Declining trend line resistance currently hovers around 3265.  Momentum indicators on this short-term look continue to show bearish characteristics with RSI below 50 and MACD below 0.  The upper limit of the now filled gap around 3290 continues to present a cap on the intermediate positive trend for stocks, at least until a positive catalyst can be achieved.

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Obviously, the culprit for the recent weakness in equity benchmarks around the globe is the fear and uncertainty that surrounds the outbreak of the coronavirus.  With the outbreak bringing China’s economy to a halt, global growth prospects will likely have to be re-tabulated the longer the pandemic progresses.  As of the time of writing, the current tally of those infected with the virus sits just a hair below 20,000, but the parabolic path that has become apparent in just the past couple of weeks suggests that we have yet to see a slowing of the viral pace.  The chart warrants monitoring as any alleviation of this parabolic path would bring comfort to investors, allowing them to set foot back into risk assets.  Until then, the short-term trend in stocks remains lower.

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On the economic front, a report on construction spending in the US was released during Monday’s session.  The headline print indicated that spending on construction projects fell by 0.2% in December, a miss versus the consensus analyst estimate that called for a 0.5% increase.  The year-over-year increase currently sits at 5.0%, up from 4.6% previous.  Stripping out the seasonal adjustments, US construction spending actually fell by 10.2% in December, which is weaker than the 9.6% decline that is average for the last month of the year.  With 12 months in the books, the calendar year increase can be seen to be 5.2%, which is stronger than the 3.9% rise that has been average over the past 20 years.  This is the best calendar year increase since 2016.  In this election year, infrastructure spending may be the lone issue that both Democrats and Republicans can agree upon, therefore, regardless of who wins in this November’s election, heavy construction stocks may be poised to benefit.  The above average pace in construction sending leading into the political event presents a tailwind.  Subscribers can login and view the seasonal charts for this report via the following link: https://charts.equityclock.com/u-s-construction-spending

http://charts.equityclock.com/seasonal_charts/economic_data/TTLCON_seasonal_chart.PNG

Sentiment on Monday, as gauged by the put-call ratio, ended bullish at 0.72.  Coming into the recent volatility in equity markets, sentiment had reached complacent extremes, leaving stocks vulnerable to an abrupt decline.  Typically, it is at the point when sentiment swings to the other extreme that it is safe to dip toe back into risk assets.  Monday’s options activity failed to deliver.   The ratio of puts to calls fell to a low of 0.66 at the height of the day’s gain in equity benchmarks, suggesting that investors are still in the belief that this market has nowhere to go but up.  Clearly, more work is required on the sentiment front to raise a certain degree of scepticism that is conducive for another leg higher in prices.

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Seasonal charts of companies reporting earnings today:

Walt Disney Company (The) Seasonal Chart BP p.l.c. Seasonal Chart Sony Corp Ord Seasonal Chart Fiserv, Inc. Seasonal Chart Gilead Sciences, Inc. Seasonal Chart Chubb Limited Seasonal Chart ConocoPhillips Seasonal Chart L3Harris Technologies, Inc. Seasonal Chart Emerson Electric Company Seasonal Chart Ferrari N.V. Seasonal Chart Simon Property Group, Inc. Seasonal Chart Eaton Corporation, PLC Seasonal Chart Aflac Incorporated Seasonal Chart Allstate Corporation (The) Seasonal Chart Centene Corporation Seasonal Chart Prudential Financial, Inc. Seasonal Chart Ford Motor Company Seasonal Chart Transdigm Group Incorporated Seasonal Chart Sirius XM Holdings Inc. Seasonal Chart Zimmer Biomet Holdings, Inc. Seasonal Chart KLA Corporation Seasonal Chart McKesson Corporation Seasonal Chart Cummins Inc. Seasonal Chart Royal Caribbean Cruises Ltd. Seasonal Chart Chipotle Mexican Grill, Inc. Seasonal Chart Microchip Technology Incorporated Seasonal Chart Cerner Corporation Seasonal Chart Match Group, Inc. Seasonal Chart Clorox Company (The) Seasonal Chart Markel Corporation Seasonal Chart Seagate Technology PLC Seasonal Chart Waters Corporation Seasonal Chart Gartner, Inc. Seasonal Chart Atmos Energy Corporation Seasonal Chart Jacobs Engineering Group Inc. Seasonal Chart Plains All American Pipeline, L.P. Seasonal Chart Jack Henry & Associates, Inc. Seasonal Chart Globe Life Inc. Seasonal Chart Aramark Seasonal Chart Crown Holdings, Inc. Seasonal Chart Amdocs Limited Seasonal Chart Neurocrine Biosciences, Inc. Seasonal Chart Lennox International, Inc. Seasonal Chart Ralph Lauren Corporation Seasonal Chart RenaissanceRe Holdings Ltd. Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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