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Stock Market Outlook for February 18, 2020


While broad equity benchmarks continue to chart record closing highs, the activity beneath the surface is not exactly bullish.

 

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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West Pharmaceutical Services (NYSE:WST) Seasonal Chart

West Pharmaceutical Services (NYSE:WST) Seasonal Chart

Hilltop Holdings Inc. (NYSE:HTH) Seasonal Chart

Hilltop Holdings Inc. (NYSE:HTH) Seasonal Chart

Canadian Crude Oil Index ETF (TSE:CCX.TO) Seasonal Chart

Canadian Crude Oil Index ETF (TSE:CCX.TO) Seasonal Chart

WPT Industrial Real Estate Investment Trust (TSE:WIR-U.TO) Seasonal Chart

WPT Industrial Real Estate Investment Trust (TSE:WIR-U.TO) Seasonal Chart

iShares Global Consumer Staples ETF (NYSE:KXI) Seasonal Chart

iShares Global Consumer Staples ETF (NYSE:KXI) Seasonal Chart

Exelon Corp. (NYSE:EXC) Seasonal Chart

Exelon Corp. (NYSE:EXC) Seasonal Chart

Alibaba Group Holding Ltd. (NYSE:BABA) Seasonal Chart

Alibaba Group Holding Ltd. (NYSE:BABA) Seasonal Chart

iShares Global Real Estate Index ETF (TSE:CGR.TO) Seasonal Chart

iShares Global Real Estate Index ETF (TSE:CGR.TO) Seasonal Chart

Nuveen Global High Income Fund (NYSE:JGH) Seasonal Chart

Nuveen Global High Income Fund (NYSE:JGH) Seasonal Chart

PIMCO Dynamic Credit Income Fund (NYSE:PCI) Seasonal Chart

PIMCO Dynamic Credit Income Fund (NYSE:PCI) Seasonal Chart

Vanguard Utilities ETF (NYSE:VPU) Seasonal Chart

Vanguard Utilities ETF (NYSE:VPU) Seasonal Chart

BRP Inc. (TSE:DOO.TO) Seasonal Chart

BRP Inc. (TSE:DOO.TO) Seasonal Chart

iShares Canadian Select Dividend Index ETF (TSE:XDV.TO) Seasonal Chart

iShares Canadian Select Dividend Index ETF (TSE:XDV.TO) Seasonal Chart

 

 

The Markets

Stocks managed to squeeze out a gain on Friday, seemingly rebounding back from the lows of the session following headlines that the White House is considering a tax incentive to get more Americans invested in stocks.  The S&P 500 Index added just less than two-tenths of one percent, achieving yet another record closing high.  The large-cap benchmark remains stretched above major moving averages and momentum indicators, while still pointing higher, are showing signs of stalling.

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For the week, the large-cap benchmark was higher by 1.58%, remaining overbought according to the Relative Strength Index (RSI) and Stochastics.  The 20-week moving average, which has provided support to the intermediate and long-term trend higher, now sits at 3165; the 50-week now sits at 3010.  This suggests downside risks of 6% to 11%, should investors start to hit the sell button.  Keep in mind that evidence of a peak has not yet been observed.

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While we don’t have a daily or a weekly sell signal that suggests an imminent change in the intermediate-term trend, a number of indicators are suggesting waning strength beneath the surface.  Advance-decline lines all peaked in the middle of January and have essentially been negatively diverging from price.  The percent of stocks trading above 50 and 200-day moving averages are showing the same.  These are indications of weakening breadth and provide evidence of waning buying pressures.

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As well, investors have re-adopted the defensive trade.  REITs and Utilities are each charting new record highs, outperforming the market in the process.  This follows further downside pressures in the cost of borrowing as fixed income investments rise alongside the equity market.  We indicated in a recent report that things do not look right with stocks at record highs and these divergences could be foretelling of a pullback ahead.  Seasonally, while February tends to be a weaker month of the year, it typically provides opportunities to aggressively add to pro-cyclical bets.  As of present, it is difficult to suggest adding risk to investment portfolios when buying demand appears to be struggling.

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On the economic front, retail sales for January were released before Friday’s opening bell.  The headline print indicated that retail trade increased by 0.3% last month, which is inline with the increase that was expected by analysts. Less gas and autos, retail trade was up by 0.4%, which is marginally better than the 0.3% increase that was expected. Stripping out the seasonal adjustments, retail sales actually fell by 21.0% versus the month prior. This is stronger than the 22.5% decline that is average for January. The result follows a stellar 2019 when overall retail trade was higher by 6.4%, the best pace since the 6.7% increase recorded in 2010 as the economy emerged from the recession.  We sent out further insight to subscribers intraday, including the investment implications.  Signup now and we’ll send you our report.

Retail Trade: Total Seasonal Chart

Also released on Friday was a report on Industrial Production.  We’ve uploaded the seasonal charts for this report at the following link: https://charts.equityclock.com/u-s-industrial-production

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

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Seasonal charts of companies reporting earnings today:

Walmart Inc. Seasonal Chart Medtronic plc Seasonal Chart Ecolab Inc. Seasonal Chart Verisk Analytics, Inc. Seasonal Chart Agilent Technologies, Inc. Seasonal Chart American Water Works Seasonal Chart Nutrien Ltd. Seasonal Chart Vulcan Materials Company Seasonal Chart TransUnion Seasonal Chart Leidos Holdings, Inc. Seasonal Chart Concho Resources Inc. Seasonal Chart Westinghouse Air Brake Technologies Corporation Seasonal Chart Extra Space Storage Inc Seasonal Chart Vornado Realty Trust Seasonal Chart Allegion plc Seasonal Chart Expeditors International of Washington, Inc. Seasonal Chart Diamondback Energy, Inc. Seasonal Chart Advance Auto Parts Inc Seasonal Chart Devon Energy Corporation Seasonal Chart Westlake Chemical Corporation Seasonal Chart Chemed Corp. Seasonal Chart American Campus Communities Inc Seasonal Chart Amedisys Inc Seasonal Chart Choice Hotels International, Inc. Seasonal Chart Herbalife Nutrition Ltd. Seasonal Chart HealthEquity, Inc. Seasonal Chart Enphase Energy, Inc. Seasonal Chart PS Business Parks, Inc. Seasonal Chart Ternium S.A. Seasonal Chart QTS Realty Trust, Inc. Seasonal Chart Sunstone Hotel Investors, Inc. Seasonal Chart Advanced Energy Industries, Inc. Seasonal Chart KAR Auction Services, Inc Seasonal Chart Franklin Electric Co., Inc. Seasonal Chart Fluor Corporation Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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