Technical Seasonalities

Transcription

1 Equity Clock: Seasonality Analysis October 5, 2015 Technical Seasonalities eresearch Corporation is pleased to provide technical opinions on the market from a seasonality standpoint, courtesy of Equity Clock, a division of the Tech Talk Financial Network. eresearch also posts, daily, the regular technical opinions provided by affiliate: Tech Talk: TimingTheMarket. Equity Clock ( is a market analysis company that provides, completely FREE, technical, fundamental and seasonality analysis on a daily basis via TimingTheMarkets.com and EquityClock.com. Equity Clock s mission is to identify periods of re-occurring strength among individual equities in the market using methodologies presented by some of the top analysts in the industry, including those of Donald Vialoux, author of TimingTheMarkets.com. Donald Vialoux, co-founder of Tech Talk, is a past president and director of the Canadian Society of Technical Analysts (CSTA). He holds the designation of Chartered Market Technician (CMT). Mr. Vialoux has 45 years of experience in the investment industry, including prominent positions held at Richardson Greenshields and RBC Investments. He is the author of a daily letter on equity markets, which is available free at Mr. Vialoux is also the author of a weekly column published at GlobeAndMail.com that combines technical, fundamental, and seasonality analysis. He is a frequent presenter on Business News Network (BNN) Television. eresearch was established in 2000 as Canada's first equity issuer-sponsored research organization. As a primary source for professional investment research, our Subscribers (subscription is free!!!) benefit by having written research on a variety of small- and mid-cap, under-covered companies. We also provide unsponsored research reports on middle and larger-sized companies, using a combination of fundamental and technical analysis. We complement our corporate research coverage with a diversified selection of informative, insightful, and thought-provoking research publications from a wide variety of investment professionals. We provide our professional investment research and analysis directly to our extensive subscriber network of discerning investors, and electronically through our website: Bob Weir, CFA: Director of Research Note: All of the comments, views, opinions, suggestions, recommendations, etc., contained in the TechTalk/Timing The Market articles, reports, files, documents, essays, etc., and which are distributed by eresearch Corporation, are strictly those of TechTalk/Timing The Market and do not necessarily reflect those of eresearch Corporation. eresearch Corporation 78 Cameron Crescent, Suite 202 Toronto, Ontario M4G 2A3

2 Stock Market Outlook for Monday, October 5, 2015 HEADLINE: Friday s employment report showed the lowest September increase in Average Hourly Earnings in over 50 years. The Markets Stocks closed sharply higher on Friday, despite a lacklustre employment report that fuelled speculation that the Fed would be unable to act, in terms of raising rates, until as far out as Bond yields initially plunged, along with equity prices, in a knee-jerk reaction to the economic headlines. But as sell orders faded within the first five minutes of trade, buy orders started to flood in from investors looking for bargains, particularly in the energy, materials, and health care sectors. Biotech, Oil Exploration and Production, and Mining stocks posted significant one-day returns, lifting their respective sectors from oversold territory. Seasonal tendencies, however, are not favourable for these industries into the month of October, averaging flat to negative returns through what is typically a transition period for the broad market. <charts follow> <continued> eresearch Corporation ~ 2 ~

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6 The decline in the US Dollar Index certainly acted as a benefit, supporting some of these commodity sensitive sectors as the currency benchmark resisted once again around its 50-day moving average. The US Dollar index remains in a period of weakness through October. eresearch Corporation ~ 6 ~

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8 The positive swing in the broad market on Friday was a significant reversal, encompassing a trading range greater than the previous session. Looking at the S&P 500 Index ETF (SPY), a reversal candlestick was charted, typically a positive event that indicates that support is present beneath the market; the selling momentum is no longer strong enough to push the market lower over the near-term. This candlestick pattern, combined with double bottom support, which has been highlighted over the past couple of sessions, has the potential to act as a strong catalyst for investors to step into the market, shedding negative bets, particularly ahead of earnings season. The bullish setup has the potential to propel the benchmark back towards long-term resistance presented at the 200-day moving average, the break of which fuelled the waterfall selloff in August. At this point, with the 200-day moving average pointing lower, a certain amount of scepticism remains warranted, particularly if resistance around this significant average becomes apparent. eresearch Corporation ~ 8 ~

9 As mentioned, Friday s knee-jerk reaction in stocks resulted from the rather lacklustre employment report for September. Headline print indicated that 142,000 payrolls were added last month, well off of the consensus estimate of 203,000. Investors had become accustomed to monthly employment gains greater than 200,000 with the majority of reports since the spring of 2014 achieving this significant level of job creation. Change in average hourly earnings was also weak, recording no change versus the expectation of a gain of 0.2%. Stripping out seasonal adjustments, 558,000 payrolls were added, or an increase of four-tenths of one percent, almost half of the average September gain of 0.7%. Earnings grew by 0.14%, non-adjusted, the lowest September increase in over 50 years and nowhere near the 1.3% average gain for September, based on data from the past 50 years; the previous lowest increase for September was recorded in 2010 when average hourly earnings rose by 0.4%. Weakness was fuelled by a decline in manufacturing and wholesale trade payrolls, as well as payrolls often related to seasonal employment held by students, such as leisure and hospitality. It appears that the later than usual labour day weekend was a factor behind the strength in August, leading to later factory shutdowns and seasonal employment declines. Yet, despite the weak report, the year-to-date trend is back in line with the average trend, hovering around a gain of 0.8%. Looking forward, gains in retail and transportation help to influence payrolls higher through the end of the year, corresponding with the increase in consumer spending around the holiday season. Seasonally, these industries of the market (retail and transportation stocks) tend to perform well over the same timeframe, peaking around Black Friday in November. eresearch Corporation ~ 9 ~

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17 The other report released on Friday was Factory Orders for August, which was equally as disappointing. The headline print showed a month-over-month contraction of 1.7%, worse than the consensus estimate of a contraction of 1.3%. Stripping out seasonal adjustments, the Value of Manufacturers New Orders for All Manufacturing Industries increased by 0.9%, a significant lag of the 8.6% average gain for August, based on data from the past 20 years. The year-to-date trend of the overall report is now well below the average trend through the first eight months of the year, but, as we ve now seen with the employment report, the later than usual Labour day holiday may have had an impact in distorting some of these monthly numbers this past summer, suggesting the true read may not be available until September s report is released. The lag in non-durable goods, which has been impacted by weak commodity prices, is certainly a significant factor behind the weak report. With areas of lag within the economy, the ability for the Fed to normalize rates is certainly constrained due to the risk that the areas of the economy that are performing well, those pertaining directly to the consumer, may be negatively impacted by an increase in the cost of borrowing. The minutes from the latest FOMC meeting are due to be released this Thursday. eresearch Corporation ~ 17 ~

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20 Put-Call Ratio Sentiment on Friday, as gauged by the put-call ratio, ended bearish at Seasonal Charts A. Sectors and Industries Entering Period of Seasonal Strength Today None B. Stocks Entering Period of Seasonal Strength Today Akamai Technologies, Inc. (NASDAQ:AKAM) Seasonal Chart eresearch Corporation ~ 20 ~

21 The Gap Inc. (NYSE:GPS) Seasonal Chart Intel Corporation (NASDAQ:INTC) Seasonal Chart C. Seasonal Charts of Companies Reporting Earnings Today No significant earnings reports scheduled for today <continued> eresearch Corporation ~ 21 ~

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23 TSE Composite eresearch Corporation ~ 23 ~

24 Special Free Services Available through Equityclock.com is offering free access to a data base showing seasonal studies on individual stocks and sectors. The data base holds seasonality studies on over 1000 big and moderate cap securities and indices. Notice that most of the seasonality charts have been updated recently. To login, simply go to ########## BW: Information on Equity Clock is provided below. Equity Clock Equity Clock is a division of the Tech Talk Financial Network, a market analysis company that provides technical, fundamental, and seasonality analysis on a daily basis via TimingTheMarkets.com and EquityClock.com. Equity Clock s mission is to identify periods of reoccurring strength among individual equities in the market using methodologies presented by some of the top analysts in the industry, including that of Don Vialoux, author of TimingTheMarkets.com. Feel free to use any of the content or seasonality studies (charts, timelines, or otherwise) presented as long as a link-back to this site at EquityClock.com is provided. For further information on indicators used in reports presented on this site, please visit our reference page. Equity Clock Website: ############ eresearch Corporation ~ 24 ~