Equity Clock

Stock Market Outlook for September 14, 2020

The small cap ETF has broken and closed below rising support at its 50-day moving average for the first time in this recovery.

 

 

*** 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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HP Inc. (NYSE:HPQ) Seasonal Chart

Emera Inc. (TSE:EMA.TO) Seasonal Chart

Quarterhill Inc. (TSE:QTRH.TO) Seasonal Chart

Prosperity Bancshares, Inc. (NYSE:PB) Seasonal Chart

Employers Holdings Inc. (NYSE:EIG) Seasonal Chart

Wall Financial Corp. (TSE:WFC.TO) Seasonal Chart

ServisFirst Bancshares, Inc. (NASD:SFBS) Seasonal Chart

Maximus, Inc. (NYSE:MMS) Seasonal Chart

SpartanNash Company (NASD:SPTN) Seasonal Chart

Iberiabank Corp. (NASD:IBKC) Seasonal Chart

Luna Innovations Inc. (NASD:LUNA) Seasonal Chart

 

 

The Markets

Stocks ended mixed on Friday as the rotation away from the overheated technology sector continues.  The S&P 500 Index closed almost unchanged after placing pressure on the rising 50-day moving average at the lows of the session.  The 20-day moving average was tested as resistance during the prior session.  Momentum indicators on the daily look continue to point lower following the sell signals that were generated at the end of last week.  The relative strength index (RSI) is hovering around the lowest levels since the start of April as the near-term path for stocks starts to look threatening.  While a negative momentum divergence can be picked out with respect to MACD, the same cannot be seen with respect to RSI, which had become the most overbought prior to this pullback since January of 2018.  For now, this still appears to be a healthy correction within a rising intermediate-term trend, but it appears unreasonable to expect new all-time highs any time in the immediate future.  Next level of support below the rising 50-day moving average can be pegged around 3250, a horizontal level that the benchmark has reacted to a couple of times this year.

One gauge of risk sentiment to track is the ratio of the Russell 2000 small-cap ETF (IWM) versus the large-cap S&P 500 Index.  The small-cap ETF, on its own, closed below support at its 50-day moving average on Friday and the relative performance is showing signs of turning lower from resistance at its 20-day moving average.  The outperformance of small caps from a low in March suggested a risk-on bias prior to the massive surge in equity prices between the end of March and the beginning of June.  This was followed by a market-perform trend between June and August.  A trend of underperformance may be in the works with the 20-day moving average of the relative trend pointing lower.  Underperformance of small caps relative to large-caps is another sign of risk aversion that warrants monitoring.  Seasonally, small caps tend to underperform large-caps, on average, between now and the end of October.

On the economic front, a report on consumer prices was released before Friday’s opening bell.  The headline print of August’s consumer price index indicated that prices increased by 0.4% in the month, which was marginally stronger than the 0.3% increase that is was forecasted by analysts.  The year-over-year change now sits at +1.3%.  Excluding food and energy, CPI increased by a similar 0.4%, which is twice as strong as the 0.2% increase that was forecasted.  The year-over-year change on this core metric of prices now sits at +1.7%. Subscribers can login to the database to view all of the charts for this report at https://charts.equityclock.com/u-s-consumer-price-index-cpi-producer-price-index-ppi

Sentiment on Friday, as gauged by the put-call ratio, ended close to neutral at 1.00.  Gradually, we are seeing signs that investors are reaching for put protection, but not yet fearful to relinquish the complacency that was prevalent for the past couple of months.  Investors have yet to be “shocked” enough by the recent pull-back to suggest that a washout has occurred, an event that typically leads to enticing buying opportunities.

 

Seasonal charts of companies reporting earnings today:

 

 

S&P 500 Index

 

TSE Composite

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