Tech Talk Financial Network
0
All posts from Tech Talk Financial Network
Tech Talk Financial Network in Equity Clock,

Stock Market Outlook for November 23, 2015

 

The correlation of the S&P 500 Index with these three fundamental indicators is raising concerns.

 

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:

DENTSPLY International Inc. (NASDAQ:XRAY) Seasonal Chart

Red Hat, Inc. (NYSE:RHT) Seasonal Chart

ProLogis (NYSE:PLD) Seasonal Chart

CIGNA Corporation (NYSE:CI) Seasonal Chart

Cemex SAB de CV (ADR) (NYSE:CX) Seasonal Chart

ATS Automation Tooling Systems Inc. (TSE:ATA) Seasonal Chart

Major Drilling Group Int’l Inc. (TSE:MDI) Seasonal Chart

Patterson Companies, Inc. (NASDAQ:PDCO) Seasonal Chart

Kimco Realty Corporation (NYSE:KIM) Seasonal Chart

Lennar Corporation (NYSE:LEN) Seasonal Chart

HCP, Inc. (NYSE:HCP) Seasonal Chart

Denbury Resources Inc. (NYSE:DNR) Seasonal Chart

AvalonBay Communities, Inc. (NYSE:AVB) Seasonal Chart

First Quantum Minerals Limited (TSE:FM) Seasonal Chart

Descartes Systems Group Inc (TSE:DSG) Seasonal Chart

Rent-A-Center, Inc (NASDAQ:RCII) Seasonal Chart

The New York Times Company (NYSE:NYT) Seasonal Chart

Gannett Co., Inc. (NYSE:GCI) Seasonal Chart

 

 

The Markets

Stocks posted marginal gains on Friday, albeit ending well off of the highs of the session, led by an uptick in retail stocks as investors prepare for the busiest shopping week of the year.  With US Thanksgiving on Thursday, followed by black Friday, investors will tend to price in expectations for holiday spending before the calendar flips to December.  The black Friday event typically provides ideal selling opportunities to book profits in this holiday influenced trade.  For the week, the S&P 500 Retail Industry Index has averaged a gain of 1.39% over the past 25 years.  Looking broader, gains in the holiday week ahead typically extend well beyond the retail sector.  Since 1950, the S&P 500 Index has produced gains almost 68% of the time during the Thanksgiving week, returning an average gain of 0.72%.  The buoyant trading the day before and the day after the Thanksgiving Thursday accounts for the bulk of the positive “bump” in equity prices.

 

S&P 500 Index Returns around the US Thanksgiving
Year Thanksgiving Week Wednesday before Thanksgiving Friday after Thanksgiving
2014 0.20% 0.28% -0.25%
2013 0.06% 0.25% -0.08%
2012 3.62% 0.23% 1.30%
2011 -4.69% -2.21% -0.27%
2010 -0.86% 1.49% -0.75%
2009 0.01% 0.45% -1.72%
2008 12.03% 3.53% 0.96%
2007 -1.24% -1.59% 1.69%
2006 -0.02% 0.23% -0.37%
2005 1.60% 0.35% 0.21%
2004 1.05% 0.41% 0.08%
2003 2.21% 0.43% -0.02%
2002 0.62% 2.80% -0.27%
2001 1.03% -0.49% 1.17%
2000 -1.90% -1.85% 1.47%
1999 -0.38% 0.89% -0.03%
1998 2.47% 0.33% 0.46%
1997 -0.80% 0.09% 0.40%
1996 1.11% -0.13% 0.27%
1995 -0.02% -0.31% 0.26%
1994 -1.99% -0.04% 0.52%
1993 0.10% 0.29% 0.15%
1992 0.82% 0.37% 0.23%
1991 -0.24% -0.37% -0.35%
1990 -0.64% 0.23% -0.29%
1989 0.69% 0.68% 0.60%
1988 0.29% 0.67% -0.66%
1987 -0.69% -0.93% -1.54%
1986 1.37% 0.24% 0.18%
1985 0.32% 0.93% -0.18%
1984 1.72% 0.20% 1.46%
1983 1.27% 0.07% 0.13%
1982 -1.56% 0.71% 0.75%
1981 2.78% 0.44% 0.84%
1980 1.01% 0.60% 0.25%
1979 0.85% 0.19% 0.75%
1978 1.45% 0.49% 0.32%
1977 1.43% 0.42% 0.21%
1976 1.21% 0.44% 0.72%
1975 1.91% 0.25% 0.33%
1974 1.55% 0.68% 0.04%
1973 -4.27% 1.11% -0.32%
1972 1.54% 0.59% 0.32%
1971 0.36% 0.19% 1.78%
1970 2.64% 0.37% 0.99%
1969 -0.54% 0.36% 0.58%
1968 1.95% 0.47% 0.57%
1967 1.16% 0.59% 0.27%
1966 -0.50% 0.68% 0.80%
1965 -0.23% 0.17% 0.10%
1964 -1.30% -0.34% -0.33%
1963 5.20% -0.18% 1.36%
1962 2.29% 0.60% 1.20%
1961 0.31% -0.11% 0.20%
1960 0.56% 0.14% 0.59%
1959 1.28% 0.16% 0.45%
1958 -0.42% 1.72% 1.12%
1957 2.08% 2.89% 1.14%
1956 -1.31% -0.49% 1.05%
1955 0.31% 0.13% -0.09%
1954 3.29% 0.56% 0.96%
1953 0.90% 0.08% 0.57%
1952 1.54% 0.63% 0.55%
1951 -1.84% -0.18% -1.06%
1950 2.32% 1.41% 0.79%
Average 0.72% 0.36% 0.35%
Gain Frequency 67.69% 78.46% 72.31%

 

Looking at the hourly chart of the S&P 500 Index going into this holiday week, momentum indicators for the benchmark are once again showing signs of rolling over from overbought levels.  This follows the substantial bounce from oversold territory during the past week.  The risk to the seasonally positive week ahead is that stocks may have exhausted upside returns based on last week’s performance.  With support for the S&P 500 Index directly below around some of the significant daily moving averages, such as the 20-day at 2079 and the 200-day at 2065, and resistance firmly intact around the all-time high of 2133, both downside and upside potential may be limited.  A busy week of economic data precedes the holiday Thursday and a quiet Friday, which sees the NYSE close early at 1:00pm.  The potential catalysts are many, but the direction of the market is bound to be influenced by the expectation that the Fed will raise rates at its next meeting in December.

While investors speculate upon the short-term trend of the equity market leading up to the mid-December FOMC meeting, the correlation of the equity market to a few fundamental charts suggests that stocks may continue to be range bound into the near future, or at least until the fundamentals change.  While the influence of the Fed on the equity market appears obvious, the chart of the US Treasury securities held by the Federal Reserve seems to do a good job at portraying the impact.  During each stage of quantitative easing, the gains in equity prices were sure to follow as money flowed into stock markets.   Now that the fed has ceased purchasing US treasuries, equity market gains have also come to a halt.  Fortunately for equity investors, the level of US treasuries held by the fed is not expected to decline anytime soon, but it is certainly not expected to increase either.

A similar correlation can be found on the chart of the 12-month forward EPS.  When earnings expectations remain positive, leading to an upward sloping forward EPS line, stocks tend to gain.  The opposite is also true.  The 12-month forward EPS has been range bound for the past year and stocks have seemingly gone nowhere for much of that period.  With companies confirming an earnings recession, as defined by back-to-back quarters of earnings declines, and the rising US Dollar expected to continue to have a negative impact on future results of domestic entities, there may be little reason for analysts to raise expectations anytime soon.

And finally, the other day we reported that Industrial Production was poised to chart its first full year decline since 2009.  The change in this economic indicator also has a strong correlation with equity market returns; gains and losses in the equity market tend to be positively correlated with the trend of industrial production.  Industrial production has been dragged lower over the past year as a result of depressed commodity prices and diminished export demand resulting from a strong US Dollar.  A similar commodity and currency move was recorded in the late 1990s, however, the industrial production index was unaffected and equity markets moved strongly higher.  If industrial production cannot decouple from the rise in the US Dollar and subsequent decline in commodity prices, the equity market may suffer.

Sentiment on Friday, as gauged by the put-call ratio, ended bullish at 0.94.

 

 

Sectors and Industries entering their period of seasonal strength:

 

 

Seasonal charts of companies reporting earnings today:

 

 

S&P 500 Index

 

 

TSE Composite