Stock Market Outlook for February 17, 2022
The 20-day moving average on the S&P 500 Index is poised to cross below its 200-day in what would be the first bearish crossover event since March of 2020.
*** 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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PIMCO Global Income Opportunities Fund (TSE:PGI/UN.TO) Seasonal Chart
iShares Convertible Bond Index ETF (TSE:CVD.TO) Seasonal Chart
iShares Canadian HYBrid Corporate Bond Index ETF (TSE:XHB.TO) Seasonal Chart
Vanguard Utilities ETF (NYSE:VPU) Seasonal Chart
Invesco S&P 500 Equal Weight Utilities ETF (NYSE:RYU) Seasonal Chart
BMO Real Return Bond Index ETF (TSE:ZRR.TO) Seasonal Chart
Kellogg Co. (NYSE:K) Seasonal Chart
Portland General Electric Co. (NYSE:POR) Seasonal Chart
AAON, Inc. (NASD:AAON) Seasonal Chart
Sempra Energy (NYSE:SRE) Seasonal Chart
The Markets
Stocks closed flat on Wednesday as investors digested the latest meeting minutes from the Fed. The S&P 500 Index closed with a gain of just less than a tenth of one percent, erasing losses recorded earlier in the session amidst ongoing developments pertaining to tensions between Russia and Ukraine. The benchmark remains above both its 20 and 200-day moving averages, which are converging on one another in what appears poised to be a bearish crossover event. If realized, it would be the first such occurrence since March of 2020. Over the past decade, bearish crossovers of the 20-day moving average with the 200-day has resulted in negative implications for stocks that have spanned months from the point of the previous peak. Given that the market, as gauged solely by the S&P 500 Index, peaked just over one month ago, we may not be out of the woods of this correction yet. Characteristics of a bearish trend remain intact. We don’t foresee any imminent crash in stocks, but the setup of the market is certainly not enticing enough to hold a full allocation to risk given that the catalysts that have lifted the market higher through the pandemic are a thing of the past, including accommodative monetary policy, government stimulus, and expanding consumer spending. We are certainly not going into a recession, which would warrant abandoning risk altogether, but there is not the tailwind behind the market either to stick our necks out on the risk spectrum.
Today, in our Market Outlook to subscribers, we discuss the following:
- US Retail Sales, what is driving activity, and the category that is expressing the sentiment of the consumer at this stage of the cycle
- US Industrial Production, the weather influence, and the increasing strength in this segment of the economy
- Canadian Manufacturing Sales
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Sentiment on Wednesday, as gauged by the put-call ratio, ended close to neutral at 0.96.
Seasonal charts of companies reporting earnings today:
S&P 500 Index
TSE Composite
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