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Stock Market Outlook for September 7, 2016

 

Nasdaq Composite moving above resistance, closing at new all-time high.

 

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:

AT&T Inc. (NYSE:T) Seasonal Chart

Sierra Wireless, Inc. (TSE:SW) Seasonal Chart

 

 

The Markets

Equity market gains followed through to the new week as the Nasdaq Composite charted a new all-time high.  The technology heavy index gained half of one percent as it attempts to move above resistance that spans all the way back to the tech bubble peak in 2000.  The strength of the benchmark moving forward will likely be dependent upon whether or not the biotechnology industry can stabilize following another round of negative headlines battering the stocks.  The Nasdaq Biotech ETF (IBB) closed higher by 1.24%, attempting to defend support at its 50 and 200-day moving averages.  Momentum indicators for the industry ETF had become short-term oversold in recent days.  Seasonally, the biotech industry reaches the end of its period of seasonal strength by the start of October, concluding a very profitable run that began at the end of June.  Short-term double-top resistance on the chart of IBB is apparent around $300. 

^IXIC Relative to the S&P 500

Outside of the equity market, a sharp decline in the US Dollar index helped to propel the price of gold back up to around its previous highs.  The Gold ETF (GLD) bounced following Friday’s employment report amidst declining expectations of a rate hike before the end of the year.  Rising trendline support originating from the December low is keeping the prospect of further gains alive.  Resistance at $130 remains a pivotal level to watch.  The recent pullback in the price of the metal led to an even greater decline in the miners, resulting in significant underperformance in the ratio between the two; trendline support has been violated.  When the producers outpace the declines of the commodity, it is typically a warning sign of further weakness ahead.  Both the metal and the miners remain in a period of seasonal strength through the month of September.

In addition to the important employment report released on Friday, a report on factory orders for July was also released, the result of which showed the largest increase with respect to new orders in nine months.  The headline print showed that orders increased by 1.9% in July, marginally below the forecasted increased of 2.0%.  Stripping out seasonal adjustments, the Value of Manufacturers’ New Orders for All Manufacturing Industries was actually down my 9.6%, a bit better than the average change in July of –11.0%.  The year-to-date change remains below the average trend, although the gap is showing signs of improvement.  The year-to-date change in shipments is also moving inline with the historical norm.  It was this time last year when this economic indicator really started to diverge from trend, weighing on equity markets in August and again into the beginning of 2016.  As has been mentioned with other economic reports, factory orders tend to rebound into August and September as manufacturers prepare for the consumer spending season in the fourth quarter.  These upcoming reports will warrant greater attention than the report that is presently in front of us.

Sentiment on Tuesday, as gauged by the put-call ratio, ended bullish at 0.87.

 

 

 

 

Seasonal charts of companies reporting earnings today:

 

S&P 500 Index

 

 

TSE Composite