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Stock Market Outlook for November 29, 2016

 

Next sell-on-news event is upon us as the Canadian banks begin to report.

 

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:

  • No stocks identified for today

 

 

The Markets

Stocks ended slightly lower on Monday as investors start to book profits following the three week rally.  Financials and energy led the declines as investors rotated into utility and staple stocks, suggesting a mean-reversion trade before the end of the month; the areas of the market that had performed well over the course of the month are being sold in favour of those that underperformed.  The S&P 500 Index pulled back to the psychologically important 2200 level, coming close to testing support at the previous all-time high of 2193.81.  Daily momentum indicators are starting to show signs of rolling over as stocks retrace recent gains.  Downside risk is towards the 50-day moving average around 2150, should the previous all-time high fail to act as support.

One of the areas of the market that showed heavy losses during Monday’s session was the retail industry, which, according to the S&P Retail ETF (XRT), shed 1.22%.  This, of course, follows some of the best days of the year for retailers from Black Friday to Cyber Monday as Americans go bargain hunting.  This big retail event typically acts as the catalyst for profit-taking as investors take the opportunity to sell the news.  As a result, returns in the month of December are almost evenly distributed between gains and losses, providing little incentive to retain exposure amidst the year-end holidays.  The industry typically remains out of favour through to late January when the next period of strength begins.  The Retail ETF tested gap support at the lows of Monday’s session around $45.80, a break of which would see a move back to 20 and 50-day moving averages at $44.00 and $43.56, respectively.

S5RETL Index Relative to the S&P 500

The next sell on news event is now upon us as the Canadian banks begin to release earnings reports for the fourth quarter.  Bank of Nova Scotia (BNS) starts the parade today with its report before the opening bell.  Following the event, returns of BNS have historically faded relative to the market and to the sector as buying demand subsides.  Similar results have been realized amongst the other Canadian banks, suggesting better alternatives outside of this market segment.  The industry picks up again in late January, running through the month of April.  Support for Scotiabank is presently apparent around its rising 20 and 50-day moving average lines at $71.74 and $70.93, respectively.

Sentiment on Monday, as gauged by the put-call ratio, ended bullish at 0.92.

 

Seasonal charts of companies reporting earnings today:

 

S&P 500 Index

 

 

TSE Composite