Equity Clock

Stock Market Outlook for August 25, 2020

The S&P 500 Index has jumped through resistance presented around the pre-pandemic highs as market strength starts to broaden.

 

 

 

*** 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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Costco Wholesale Corp. (NASD:COST) Seasonal Chart

E.I. du Pont de Nemours & Company (NYSE:DD) Seasonal Chart

International Game Tech (NYSE:IGT) Seasonal Chart

Cracker Barrel Old Country Store, Inc. (NASD:CBRL) Seasonal Chart

PTC, Inc. (NASD:PTC) Seasonal Chart

ATN International, Inc. (NASD:ATNI) Seasonal Chart

First Business Financial Services, Inc. (NASD:FBIZ) Seasonal Chart

iShares U.S. Regional Banks ETF (NYSE:IAT) Seasonal Chart

iShares North American Tech-Software ETF (NYSE:IGV) Seasonal Chart

 

 

The Markets

Stocks gained to start the new week as investors reacted to positive developments pertaining to coronavirus treatments and vaccines.  The S&P 500 Index gained exactly one percent, jumping past psychological resistance at 3400.  The large-cap benchmark is now back into overbought territory with the relative strength index pushing beyond 70.  This is the highest level for the RSI since the start of June, just before the abrupt 6% single-session drawdown that followed.  Back then, stocks moved higher in a parabolic manner as market participants raced to buy everything they could get their hands on, from defensives to cyclicals.  Today, cyclicals are just now appearing to attract buying demand following many weeks of technology in the lead.  Energy and financials topped the leaderboard on Monday, resulting in gains of over 2% for each market segment.

As stocks advance beyond levels of horizontal resistance, points of reference to use as our guide become fewer.  One pattern, however, caught our eye, more so as a point of interest.  Over the past couple of years, the S&P 500 Index has maintained declining trendline support and rising trendline resistance, resulting in a broadening megaphone pattern.  We have seen some calls that this represents a topping pattern, but the psychology doesn’t necessarily coincide with this contention.  A market that is showing lower-lows and lower-highs could, quite obviously, be deemed negative, while a trend of higher-highs and higher-lows deemed positive.  Each of these trends would be expected to persist for some time.  But this pattern essentially shows pieces of both, although the more recent trend favours the higher-high and higher-low view.  Resistance, according to the rising trendline overhead, can be seen around 3550.  We have suggested that should the benchmark push past resistance at the previous peak charted in February that an additional 3% to 5% of upside was in the cards.  A 5% gain from the February closing peak of 3386 would hit the 3550 level of resistance, almost precisely.  While this is not a forecast, it does leave something to ponder.

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Sentiment on Monday, as gauged by the put-call ratio, ended bullish at 0.74.

 

 

 

 

Seasonal charts of companies reporting earnings today:

 

 

S&P 500 Index

 

 

TSE Composite

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