S&P 500 Index tests its 200-day moving average as it awaits the outcome of the uncertain events ahead.
**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:
Another day of losses for stocks brings the tally of consecutive declining sessions for the S&P 500 Index to 8, the longest stretch of losses since October of 2008; the large-cap benchmark fell over 20% in just the week and a half period as the economy fell into a recession. Fortunately, for equity investors, the losses haven’t been as extreme this time around with the main market benchmark down a mere 2.91% since the last positive session on October 24th. The benchmark is now back to around its 200-day moving average, a significant pivot point within any long-term trend. Often when approaching significant uncertain events, such as Friday’s employment report or the election, investors will tend to hold the tape steady around significant moving averages, providing a level to shoot off of as the news is digested by market participants. So we’ll wait and see what the results reveal and, more importantly, the reaction to it. With regards to the monthly employment report for October, analysts are presently forecasting 178,000 new payrolls, an improvement versus September’s gain of 156,000. On a non-adjusted basis, the average increase in payrolls for the month of October is 0.5%, dominated by the ramp-up in hiring ahead of the holiday season. The year-to-date change in payrolls had started to show signs of drifting off of the pace of the average trend in September, therefore October’s report will be important in confirming whether the previous print was a one-off or the start of a diverging trend. Weekly jobless claims continue to be solid, although initial claims are starting to climb above the seasonal average, perhaps an indication of increasing slack in the workforce. We’ll have the breakdown of the October payroll report on Monday.
On the economic front, a report on factory orders showed better than expected growth in the month of September. Factory orders had increased by 0.3% in the last month of the third quarter, edging out estimates calling for a 0.2% increase. Stripping out the seasonal adjustments, the increase in the Value of Manufacturers’ New Orders for All Manufacturing Industries was actually 1.8%, which is shy versus the 3.1% average gain, based on data from the past 20 years. The year-to-date change in this aggregate read continues to lag the seasonal average, in many cases the result of depressed commodity prices. Seasonally, factory orders tend to chart a peak for the second half of the year in September.
Sentiment on Thursday, as gauged by the put-call ratio, ended bearish at 1.19.
Seasonal charts of companies reporting earnings today:
S&P 500 Index