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Stock Market Outlook for October 19, 2015

 

Probability of success of the best six months of the year for equity markets could be dependent upon the trading activity over the next seven sessions.

 

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:

Callaway Golf Co (NYSE:ELY) Seasonal Chart

West Fraser Timber Co. Ltd. (TSE:WFT) Seasonal Chart

Yahoo! Inc. (NASDAQ:YHOO) Seasonal Chart

Time Warner Inc. (NYSE:TWX) Seasonal Chart

The AES Corporation (NYSE:AES) Seasonal Chart

Ball Corporation (NYSE:BLL) Seasonal Chart

The Toro Company (NYSE:TTC) Seasonal Chart

Cincinnati Bell Inc. (NYSE:CBB) Seasonal Chart

Xilinx, Inc. (NASDAQ:XLNX) Seasonal Chart

Teradyne, Inc. (NYSE:TER) Seasonal Chart

Monster Worldwide, Inc. (NYSE:MWW) Seasonal Chart

Lexmark International, Inc. (NYSE:LXK) Seasonal Chart

Interpublic Group of Companies, Inc. (NYSE:IPG) Seasonal Chart

Carnival Corporation (NYSE:CCL) Seasonal Chart

American Electric Power Company, Inc. (NYSE:AEP) Seasonal Chart

Analog Devices, Inc. (NYSE:ADI) Seasonal Chart

 

The Markets

Stocks closed higher on Friday, notching a third week of gains following the double-bottom low charted at the end of September.  For the week, the S&P 500 Index ended up nine-tenths of one percent, inching closer to critical resistance presented between 2040 and 2060, the area just beneath the 200-day moving average line.  Reaction to this area of resistance could have a significant impact on the long-term direction of the equity market.  Should the large-cap benchmark fail to get back to levels above the 200-day moving average, investors will use the variable level of resistance as a place to book short and intermediate-term gains, potentially constraining upside momentum over the months to follow, just as the period of seasonal strength for the broad market gets set to begin.  Certainly, declines during the period of seasonal strength for the broad market between October and May are rare.  Over the past 60 years, the S&P 500 Index has gained 80% of the time during the strongest period of the year for stocks.  That frequency of success balloons to 100% when isolating periods that began (October 28th) and ended (May 5th) with the S&P 500 Index trading above its 200-day moving average.  So that leaves the periods that the large-cap index has either started below its 200-day moving average, ended below its 200-day moving average, or both in which all of the negative periods have been recorded.  Keeping with the past 60 years of data, only 44% of seasonally strong periods, from October to May, have shown gains when the benchmark traded below its 200-day moving average on the average start and end date.  While many months remain between now and the end to the period of seasonal strength for the broad market on May 5th, the average start date on October 28th is a mere week away and the market performance during these next seven sessions could be critical in determining the success of the best six months of the year.

On the economic front, the latest report on Industrial Production in the US was released on Friday and the results provided little to be encouraged of.  Headline print showed that production declined by 0.2% in September, mildly better than the consensus estimate calling for a decline of 0.3%.  Stripping out seasonal adjustments, total production actually declined by 1.83%, a significant shift when compared to the average gain for September of 1.0%.  Weakness remains centered around production of non-durable goods, a segment that has been severely depressed due to struggling commodity prices.  Overall, the year-to-date trend for many of the components of this report continues to run below average, emphasizing the struggles that have been apparent in recent reports on Manufacturing.  Seasonally, industrial production typically declines in the last quarter of the year, a trend that could result in a full year contraction for this segment of the economy.  The last time industrial production produced a full year decline was in 2009, in the midst of the great recession.

Sentiment on Friday, as gauged by the put-call ratio, ended bullish at 0.87.

 

 

Sectors and Industries entering their period of seasonal strength:

S5STEL Index Relative to the S&P 500

 

 

Seasonal charts of companies reporting earnings today:

 

 

S&P 500 Index

 

 

TSE Composite