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Stock Market Outlook for October 15, 2015

 

Despite Walmart’s pessimistic guidance, all may not be lost within the retail sector.

 

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:

The Cheesecake Factory Incorporated (NASDAQ:CAKE) Seasonal Chart

 

The Markets

Stocks dipped on Wednesday following a weak profit forecast from Walmart, which acted as a significant weight on the Dow Jones Industrial Average.  Shares of Walmart plunged just over 10%, charting a new 52-week low.  Resistance remains firmly intact around the declining 50-day moving average.  Seasonally, shares of Walmart typically perform well into the end of the year, benefitting from strength in consumer spending around the holiday season; October and November have recorded gains 75% and 70% of the time, respectively, over the past 20 years.  Clearly, this is a case where the technicals are not aligning with the seasonal tendencies.  The negative outlook from this dominant player in the retail industry presents a concerning precedent going into the period of seasonal strength for consumer related stocks ahead.

While Walmart set a negative tone, a report on Retail Sales for September failed to improve investor attitudes towards this segment of the market.  The headline print indicated that sales rose by 0.1% last month, inline with the consensus estimate.  Stripping out seasonal adjustments, total retail trade declined by 5.8%, which is slightly better than the average change for September of –7.0%.  The year-to-date change in retail sales remains inline with the average, setting up well for the end of year increase in sales activity.  Looking at the components, retail trade excluding autos continues to run above average through the first nine months of the year, fuelled by strength in Miscellaneous, General Merchandise, and Clothing/Apparel stores.  Sales at Gasoline stations continue to be a drag, for obvious reasons.  Overall, this middle-ground report continues to buck the trend of lagging activity that has been evident in other areas of the economy, such as manufacturing.  Should retail activity remain on course, gains between October and December would be expected as consumers gear up for the holiday season.  Retail sales gain an average of 3.3%, 1.7%, and 17.4%, respectively, over the next three months, peaking following the conclusion of the Christmas spending season.

While the news pertaining to the retail industry on Wednesday was notable, the plunge in the US Dollar was influential, driving energy and material stocks higher on the day.  The US Dollar Index is nearing support around 93, representing the lower limit of a descending triangle pattern.  This bearish setup would be confirmed by a move below support at 93, calculating a decline to around 86, or around 8% below present levels.  The resulting moves in commodity prices has been significant with a number of materials recording double-digit percent increases since recent lows charted in August.  While energy stocks generally remain out of favour through the end of the year, material stocks tend to come into favour around the month of October, gaining through the end of the year.  The S&P 500 Materials Sector Index recently moved above resistance presented by its declining 20-day moving average and is now hovering below previous support around 290.  As with other sectors, the 200-day moving average continues to roll over, presenting concerns to the longer-term trend of the cyclically sensitive market segment.

Sentiment on Wednesday, as gauged by the put-call ratio, ended bullish at 0.96.

 

 

 

Seasonal charts of companies reporting earnings today:

 

 

S&P 500 Index

 

 

TSE Composite