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Stock Market Outlook for September 25, 2015

 

Caterpillar breaking significantly below long-term trading range as prospects for the industrial sector continue to look bleak.

 

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:

Wi-LAN Inc. (TSE:WIN) Seasonal Chart

Sherwin-Williams Company (NYSE:SHW) Seasonal Chart

 

The Markets

Stocks remained under pressure on Thursday as shares of biotech and health care companies weighed on broad market benchmarks.  The NYSE Biotechnology Index declined by 1.72%, testing the lows set back in August.  The industry, which is under scrutiny for its pricing practices, peaked in July and has been deteriorating on a technical basis ever since.  Along with 20 and 50 day moving averages pointing lower, momentum indicators have been charting lower-highs and lower-lows for the past two months and relative strength is waning.  Resistance has recently become apparent at its 50-day moving average.  The industry is entering an off-season when performance, both on an absolute and relative basis, is variable through to mid-December.

While health care acted as the largest declining sector during Thursday’s session, weakness in the industrial sector also had an impact as Caterpillar issued lower revenue guidance.  The industrial titan that is highly correlated to the health of emerging market economies, has been on the decline for well over a year, charting a series of lower-highs and lower-lows and resisting below its declining 200-day moving average.  Next level of horizontal support is apparent around the 2011 low at $60.83, around 20% below the now broken 4-year trading range that spanned from around $75 to $105.  Typically, the longer price trades within a tight range, the more pronounced the subsequent break becomes.  Seasonally, Caterpillar remains in a period of weakness through to the end of October.

On the economic front, a report on durable goods orders didn’t help the prospects for the industrial sector on Thursday.  The headline print showed that new orders declined by 2.0% in August, inline with the average analyst estimate.   Excluding  transportation, new orders were unchanged (0.0%), below the consensus estimate of an increase of 0.3%.  Stripping out seasonal adjustments, the Value of Manufacturers’ New Orders for Capital Goods Industries declined by 6.9%, a significant deviation from the average gain of 3.2% for the month of August.  Last month’s decline placed the year-to-date change slightly below the average trend through the first eight months of the year.  Overall, a lacklustre report that fails to improve the economic outlook into the final three months of the year.

Sentiment on Thursday, as gauged by the put-call ratio, ended bearish at 1.03

 

Seasonal charts of companies reporting earnings today:

 

 

S&P 500 Index

 

 

TSE Composite