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Stock Market Outlook for November 8, 2017

Risk aversion suggesting investor uncertainty pertaining to tax reform.

 

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:

  • No stocks identified for today.

 

 

The Markets

Stocks closed mixed on Tuesday as investors showed concerns pertaining to the progress towards tax reform.  The S&P 500 Index shed a mere two basis points, charting a minor doji, indecision candlestick in the process.  The session was notably risk averse with consumer staples and utilities realizing solid gains, while cyclical sectors, mainly consumer discretionary and financials, accounted for the bulk of the losses.  The S&P 500 Utilities sector index closed at a fresh all-time high, seemingly undeterred by the prospect of higher bond yields.  The longer-term trend of higher-highs and higher-lows remains intact.  Investors will typically rotate to these areas of the market in order to trim portfolio beta, hedging themselves in case of a market downturn.  Seasonally, utilities tend to weaken relative to the market through to early December, at which point they strengthen, on average, into the end of the year.

UTILITIES Relative to the S&P 500

Risk-aversion was also evident on the Russell 2000 Index, thought to be a proxy of the Trump tax trade.  The small-cap benchmark fell by 1.26%, trading back to around its rising 50-day moving average.  Short-term resistance is apparent at the 20-day moving average.  A retracement following September’s breakout would be normal and healthy.  Seasonally, we are within the window that investors should be seeking an entry point to the small-cap segment of the market, which tends to outperform large-cap counterparts closer to the end of November.  November and December have tended to be strong months for the benchmark, gaining an average of 2.0% and 2.9%, respectively, over the past 20 years.  The index is heavily weighted in financial stocks, therefore a bet on the direction of this sector of the market is often appropriate.

^RUT Relative to the S&P 500

On the economic front, the Job Openings and Labor Turnover Survey showed an upbeat result pertaining to the number of opportunities available.  The headline print indicated that openings were marginally higher in September, hitting 6.093 million from 6.090 million previous.  Stripping out the seasonal adjustments, openings were actually lower by 1.5%, better than the average decline for September of 2.1%.  The year-to-date change is running around 1% above average, fuelled by gains in the durable good manufacturing and the professional/business services segments of the economy.  The skills miss-match amongst potential applicants remains an ongoing problem getting open positions filled.  As for hires, activity was down by 11.1%, more than double the 4.9% average decline for this last month of the third quarter.  Weakness was spread fairly evenly across the four regions covered in the report.  Quits, a gauge of the confidence of workers to leave the current positions, were lower by 12.0%, better than the 15.7% average decline for the month.  Overall, while plenty of positions are available, filling them with the economy in a state of full employment is proving to be difficult.  Weak wage growth and a pool of applicants without the required skills could constrain further payroll growth into the future.

Job Openings: Total Nonfarm Seasonal Chart

      

Sentiment on Tuesday, as gauged by the put-call ratio, ended bearish at 1.02.

 

 

 

 

Seasonal charts of companies reporting earnings today:

          

 

 

S&P 500 Index

 

 

TSE Composite