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Stock Market Outlook for December 10, 2018

Equity benchmarks back to the October/November lows, but breakdown could present buying opportunity.

 

Real Time Economic Calendar provided by Investing.com.

 

*** 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:

Brookfield Infrastructure Partners L.P. (NYSE:BIP) Seasonal Chart

Analogic Corp. (NASD:ALOG) Seasonal Chart

Teck Resources (TSE:TECK-B) Seasonal Chart

Morneau Shepell (TSE:MSI) Seasonal Chart

Maple Leaf Foods Inc. (TSE:MFI) Seasonal Chart

Annaly Capital Management, Inc. (NYSE:NLY) Seasonal Chart

Platinum Group Metals (TSE:PTM) Seasonal Chart

Dream Office REIT (TSE:D-UN) Seasonal Chart

Mobile Mini, Inc. (NASD:MINI) Seasonal Chart

Premium Brands Holdings (TSE:PBH) Seasonal Chart

Constellation Software (TSE:CSU) Seasonal Chart

Manulife Financial Corp. (TSE:MFC) Seasonal Chart

 

 

The Markets

Another tough day for stocks saw major benchmarks in the US shed over two percent as investors continue to position around the ongoing trade negotiations between the US and China.  The S&P 500 Index closed lower by 2.33%, moving back to the October and November lows.   The large-cap benchmark had initially traded up to its declining 20-day moving average at the highs of the session amidst a benign payroll report released before the opening bell, but as the session progressed it became apparent that investors wanted to shed their exposure to risk given the ongoing volatility and weakness  The S&P 500 Index has now shown resistance at its declining 20, 50, and 200-day moving averages, suggesting negative trends over multiple timescales.  The risks of an undercutting of the October/November lows is growing given that the market is chipping away at this level for a third time.  However, a downfall below this level could present appealing buying opportunities for the Santa Claus rally period that is typically realized in the back half of December.  In the Seasonal Advantage Portfolio that we manage in partnership with CastleMoore, we took decisive and aggressive action earlier in the week to become defensive given the resistance realized at some of the major moving averages overhead.  Opportunities to redeploy funds are now being sought.  Interested in learning more about our proprietary approach, incorporating seasonal, fundamental, and technical analysis?  Visit the following link or email us at seasonalportfolio@equityclock.com for more information: http://www.equityclock.com/About/Seasonal-Advantage-Portfolio/

On the economic front, the Nonfarm Payroll report for the month of November had headlines suggesting weakness in the result. The headline print indicated that 155,000 jobs were added last month, which is short of the 190,000 increase forecasted by analysts. The previous report was also revised lower from 250,000 to 237,000. The unemployment rate remained unchanged at 3.7% and average hourly earnings ticked higher by 0.2%, slightly missing the 0.3% estimate. Stripping out the seasonal adjustments, payrolls actually increased by 475,000, or 0.3%, which is precisely inline with the average increase for this time of year. (Note: A previous report of ours incorrectly stated that the average increase in payrolls for November is 0.2%). Year-to-date, payrolls have increased by 1.82%, which is still firmly above the seasonal average trend that sees a 1.57% increase by this point in the year. Payrolls are on track to show the best calendar year performance since 2015.  The charts for this report are accessible via the database at the following link: https://charts.equityclock.com/u-s-employment-situation

As for wages, average hourly earnings of production and nonsupervisory employees actually increased by 0.2%, which is inline with the average change for this time of year. The year-to-date change of +3.0% is the strongest pace since 2008, but it still remains a full percentage point below the seasonal average trend. Earnings rise by 0.2%, on average, in the last month of the year, implying that if realized could result in a calendar-year change of +3.2%. The year-over-year seasonally adjusted rate presently sits at +3.1%.  Overall, the report continues to reiterate strength in the economy, despite headlines that may be pouring cold water on the weaker than expected release. Seasonally, employment tends to flatline in the month of December, then decline in the month of January as holiday workers are laid off.  Subscribers to our service were given more details on what is driving payroll growth in America and the investment implications that stem from this report.  To subscribe, please visit the following link: https://charts.equityclock.com/subscribe

North of the border, the employment situation in Canada looks to have improved in November.  The headlines state that employment in Canada increased by 94,100 last month, driven by an 89,900 increase in full-time employment.  The consensus estimate was for an increase of 15,000.  The unemployment rate ticked down by two-tenths to 5.6%, also better than the forecast of 5.8%.  Stripping out the seasonal adjustments, employment in Canada actually increased by 48,900, or 0.3%, which is a positive divergence compared to the 0.3% decline that is average for the second to last month of the year.  There has only been two other instances in the past 20 years when employment has been higher in November.  Employment is now up by 1.4% year-to-date, which is about half of a percent below the seasonal average trend.  Last month that spread between the actual and average trend was – 1.1%.  Full-time employment actually declined by 36,000 or 0.2%, while part-time employment gained 84,800, or 2.4%.  The average change for each in the month is -0.8% and +1.6%, respectively.  The year-to-date change in full-time employment is running 0.2% below average, while part-time employment is running 1.7% below its seasonal average trend.  But perhaps what is most encouraging in the report is the 1.9% actual decline in unemployment, a divergence from the 2.6% increase that is average for the month.  There has only been 5 other instances in the past 20 years when unemployment has declined in the month of November.   Seasonally, employment in Canada typically declines into the month of January, then rebounds into the spring as manufacturing activity gets back up to speed following the winter months.  A report providing further analysis and investment implications was forwarded to subscribers intraday, the charts from which can be accessed via the following link: https://charts.equityclock.com/canada-labour-force-survey

We’ve also updated our charts for US Vehicle Sales for November and Wholesale trade for October.  You can access this data via the following links:

https://charts.equityclock.com/u-s-vehicle-sales

https://charts.equityclock.com/u-s-wholesale-trade-sales-and-inventories

Sentiment on Friday, as gauged by the put-call ratio, ended bearish at 1.14.

 

 

 

 

Seasonal charts of companies reporting earnings today:

    

 

 

S&P 500 Index

 

 

TSE Composite

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