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Stock Market Outlook for September 23, 2016

 

Existing home sales slightly weaker in August, but still on a solid trend.

 

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:

Canadian Tire Corp. Ltd. (TSE:CTC) Seasonal Chart

 

 

The Markets

Stocks continued to climb on Thursday, reacting positively to Wednesday’s announcement from the Fed, who kept rates unchanged.  The Nasdaq Composite charted another all-time high and the small cap Russell 2000 index achieved a multi-month high, emphasizing the risk-on stance that investors are maintaining during this typically risk-off period.  The S&P 500 Index made progress in closing the gap from the plunge decline recorded two weeks ago, halting the advance on the session at the upper limit of what could remain a significant hurdle at 2180.  Each benchmark has cleared their respected 20 and 50-day moving averages as they attempt to overcome the average tendency of weak performance in the month of September.  Aside from a sprinkling of Fed speakers scheduled to speak, the next major catalyst for stocks may be the first presidential candidate debate on Monday, when investors will get a better sense of who has the better probability of taking the top office.

On the economic front, a report on existing home sales reiterated the slowdown in housing activity as we progress through the back half of the year.   Sales were lower in August by 0.9% to a seasonally adjusted annual rate of 5.33 million, missing estimates calling for a rate of 5.44 million.  Stripping out the seasonal adjustments, sales of existing homes were actually higher by 5.5%, firmly above the average increase for August of 3.5%.  The year-to-date change remains below the seasonal trend following a much weaker than average print for the month of July.  Looking through the regions, only the south recorded a below average increase in the month, higher by 5.9% versus the August average increase of 7.0%.  As highlighted in a previous report, inclement weather conditions that caused flooding in Texas and Louisiana likely held back activity.  Sales activity typically falls off into the last four months of the year as the desire to move lessens ahead of the winter and amidst the new school year.  Despite a slight decline in prices in the month, a dip in housing inventory is keeping the months of supply at a very constrained 4.6, keeping the trend in prices elevated above the seasonal average.  Typically, six months of supply is considered to be a balanced market.  Overall, the housing market remains on solid footing, continuing to lean towards a sellers market as buyers clamour for whatever they can get their hands on given that mortgage rates remain at exceptionally low levels.

In other news, the weekly report on jobless claims continues to suggest strength in the labour market.  The headline print indicated that initial claims fell last week by 8,000 to 252,000, well below the consensus estimate calling for 261,000.  Unadjusted, initial claims ticked marginally higher by 12,460, recouping half of the decline that was recorded in the week following labour day.  The year-to-date trend is inline with the average trend through the middle of September, a sign of a healthy labour market.  Continuing claims have also moved inline with the seasonal average, closing a gap versus this average trend that was apparent throughout August.  Both employment indicators typically rise through the remaining months of the year.

Sentiment on Thursday, as gauged by the put-call ratio, ended around neutral at 0.97.

 

 

 

 

Sectors and Industries entering their period of seasonal strength:

^SSMI Relative to the S&P 500

 

 

Seasonal charts of companies reporting earnings today:

 

 

S&P 500 Index

 

 

TSE Composite