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Stock Market Outlook for November 12, 2015

 

When investing in Retail, best to know what you’re invested in.

 

Real Time Economic Calendar provided by Investing.com.

 

**NEW** As part of the ongoing process to offer new and up-to-date information regarding seasonal and technical investing, we are adding a section to the daily reports that details the stocks that are entering their period of seasonal strength, based on average historical start dates.   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:

Corus Entertainment Inc. (TSE:CJR.B) Seasonal Chart

Louisiana-Pacific Corporation (NYSE:LPX) Seasonal Chart

Sotheby’s (NYSE:BID) Seasonal Chart

Convergys Corporation (NYSE:CVG) Seasonal Chart

 

The Markets

Stocks traded lower on Wednesday, led by the energy sector as the price of oil continued to slide.  The S&P 500 Energy sector shed almost 2%, retracing recent gains after trading up to resistance around the declining 200-day moving average.  The weekly oil inventory report that is typically released on Wednesday will be release on Thursday as a result of the Veterans Day holiday.

While the perception is that lower oil prices are a positive for retailers, the strength for the industry has not been broad-based.  Outside of the energy sector, retail was one of the weakest industries during Wednesday’s session, fuelled, in part, by a disappointing earnings report from Macy’s, which fell around 14%.  The company is citing the unseasonably warm weather as reason for the decline in sales as consumers hold off on purchasing cold weather apparel.  The warmer than average weather risks pushing back holiday related purchases more towards the end of the year, until consumers can get into the “holiday spirit.”  Despite the strength in the industry not being broad-based, it has been evident.  While the S&P Retail Index ETF (XRT) remains well off of the all-time highs charted this past summer, the S&P 500 Retailing Industry Index continues to hold around the all-time peak, charted just days ago.  The reason for the deviation in performance is the fact that the constituents in XRT are equal-weighted and the S&P 500 Retailing Industry Index is capitalization weighted, granting a larger weight to the more dominant constituents in the industry, such as Amazon.  Understanding the return stream from any ETF is an important lesson for any investor.  Major moving averages for the S&P 500 Retailing Index continue to point higher, implying a positive trend on a short, intermediate, and long-term basis; outperformance versus the market has also been apparent in recent weeks.  Seasonally, the retail industry typically gains between the end of October and the end of November, benefitting from the run-up to the end-of-year holiday season.

S5RETL Index Relative to the S&P 500

On to economic news, a report on Wholesale Trade for September was released on Tuesday, the result of which was little influence on the overall market.  Headline print indicated that both sales and inventories grew by 0.5%, which was better than the consensus estimate of a gain of 0.1%.   Stripping out seasonal adjustments, sales grew by 4.1% and inventories grew by 1.4%; average change for each in the month of September is –1.4% and +0.9%, respectively.  The year-to-date trend for each through September remains below average, mainly as a result of depressed commodity prices.  One component in the report has moved back inline with the average trend: sales of apparel, piece goods, and notions.  Coincidentally, the equivalent retail industry category holds the largest weight in the S&P Retail Index.

Sentiment on Wednesday, as gauged by the put-call ratio, ended bullish at 0.88.

 

 

 

Seasonal charts of companies reporting earnings today:

 

 

S&P 500 Index

 

 

TSE Composite