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Stock Market Outlook for September 16, 2015

 

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

Jitters in the bond market ahead of the 2-day FOMC meeting sent fixed income investors fleeing on Tuesday, positioning instead towards equity investments given the interest rate risk this week.  The yield on the 2-year note broke above resistance to close at the highest level in over four years.  The yield on the 10-year note broke firmly above its 50-day moving average, confirming support around the longer-term 200-day moving average after a recent test.  Only three weeks remain in the period of seasonal strength for treasury bonds, a period that has certainly been complicated by the threat of a rate hike.

Meanwhile, back to our short-term look at the S&P 500 Index, rising trendline support continues to hold, now closer to 1960, and resistance remains apparent at 1990.   These are now the levels to watch into this two day Fed event, where a break below the lower limit will continue with the intermediate negative trend and a break above resistance will likely see a test of the upper limit of the range of resistance that extends from 1970 to 2040.    Know your limits and play within it.

With the plethora of economic reports released on Tuesday morning, it was easy for the media to point to the dataset as reason to Tuesday’s equity market strength.  However, the data was not that upbeat.  Retail Sales, Industrial Production, and a report on manufacturing in the New York region all missed consensus estimates.  However, upward revisions to retail sales for July did maintain optimism that strength in the consumer remains intact.  Retail Sales advanced 0.2% in August, missing estimates calling for an increase of 0.3%.  Excluding Gas & Autos, sales increased by 0.3%, still one-tenth of a percent short of estimates.   Stripping out seasonal adjustments, Total Retail Trade actually rose by 0.1%, which is a long ways away from the 2.7% average gain for August, based on data from the past 20 years.  The year-to-date change is now four-tenths of a percent below average, the first time it has been below the average trend since February in the midst of the inclement winter weather conditions in the US northeast.  Weak results for August were apparent in most of the report’s components, but probably most apparent in the non-store retailers and gasoline stations, which showed abnormal declines.  It is unclear how the later than average Labor Day holiday factored into the results, suggesting the diminished activity may be recouped into the typically weak month of September.   Retail trade hasn’t shown monthly increase in September on a non-seasonally adjusted basis since record keeping of sales data began in 1992.

Meanwhile, the headline print for Industrial Production indicated a disappointing contraction of 0.4%, missing estimates of a decline of 0.2%.  The manufacturing component was reported at –0.5%, versus expectations calling for –0.3%.  Stripping out seasonal adjustments/manipulations, production actually increased by 2.0%, still well below the average for August of an increase of 3.3%.  After inching briefly above average in July, the year-to-date change has reverted back to its below average position in August, suggesting the July report was impacted by timing differences in the summer factory shutdown period.  Of course Oil and Gas Drilling remains well below average through the first two-thirds of the year, as are other components influenced by lower commodity prices.  September is the last month of the year of average gains to industrial production before it enters a soft patch in the fourth quarter.  Obviously, the opportunity for this segment of the economy to close the gap between the actual and average trend before the year is complete is becoming slimmer and slimmer.

The Empire State Manufacturing Report failed to provide confidence that the gap in industrial production will be closed by yearend.   General Business Conditions in the New York region remained severely depressed in September, reporting a –14.67, indicating a contraction.  The average reading for this time of year, based on data from the past 13 years, is +14.81, almost the exact opposite of what was actually reported.  The indictor typically declines further through the end of the year as manufacturing activity contracts.   None of the reports released today provide an ideal setup to the fourth quarter, which is typically the strongest three month period of the year for economic output.

Sentiment on Tuesday, as gauged by the put-call ratio, ended bearish at 1.17.

 

Seasonal charts of companies reporting earnings today:

 

 

S&P 500 Index

 

 

TSE Composite