Equity Clock

Stock Market Outlook for September 30, 2020

Respiratory illness season effectively begins now, leading to a ramp in the level of infections through the next few weeks and months.

 

 

 

*** 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:

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Sally Beauty Holdings Inc. (NYSE:SBH) Seasonal Chart

PDF Solutions, Inc. (NASD:PDFS) Seasonal Chart

STMicroelectronics NV (NYSE:STM) Seasonal Chart

Global X China Financials ETF (NYSE:CHIX) Seasonal Chart

 

 

The Markets

Stocks slipped on Tuesday as coronavirus concerns once again captured investor attention.  The S&P 500 Index shed almost half of one percent, pulling back slightly from resistance at 20 and 50-day moving averages.  The shorter-term average (20-day) is turning lower towards its longer-term (50-day) average in what could become a bearish crossover event.  The 20-day moving average has trended above its 50-day since April, conducive to maintaining a positive intermediate-term bias; this intermediate-term trend is now under threat.  Rejection from the 50-day moving average would confirm the intermediate-term hurdle as a level of resistance, sending a bearish signal to the market that could apply further downside pressure.  We don’t want to jump the gun until the rejection is finally realized.  For now, a short-term negative trend has already been confirmed, but an intermediate-term negative trend would expand the timeframe of the correction in the market from weeks to months.

Weakness during Tuesday’s session was attributed to an uptick in the positivity rate of coronavirus tests in New York, fuelling concerns of another economic shutdown.  In our monthly report to subscribers, which will be released in the coming day, we note the risk to the economy and the market resulting from the start of respiratory illness season.  Respiratory illness season, as gauged by influenza-like illnesses, effectively begins now, ramping up through the month of October and peaking in the middle of February, on average.  The drier climate, lack of sunlight, and greater tendency to congregate indoors creates the ideal environment to spread these type of illnesses, which the coronavirus qualifies as.  While COVID cases are back on the rise in countries around the globe, instances of the flu are remaining fairly muted.  Following an abnormal uptick in flu cases in June and July (some of which may have been COVID related), the case count has since declined as the precautions meant to combat the coronavirus impact the flu tally.  The percent of patients at reporting health care providers being treated for the flu presently sits at 0.98%, below the 1.32% rate that is average at this point in the year.  In addition to COVID precautions (eg. mask wearing, sanitization measures, etc.), the hesitancy of patients to visit health care institutions amidst the pandemic, the lack of international travel, and the impact of earlier than usual vaccinations against the flu would all be factors placing downward pressure on reported flu cases.  Still, we know by the COVID case counts that respiratory illnesses are still spreading and, if seasonal norms hold true, the rise may just be getting started.  The severity of the respiratory illness season will depend on the effectiveness of precautionary measures (eg. social distancing, etc.) and whether we as a society have let down our guard after over six months of self-isolation measures.  While viruses are not typically our focus in the work that we do, they are seasonal in nature, so we must be cognizant of the impact on the normal functioning of economic activity.

Sentiment on Tuesday, as gauged by the put-call ratio, ended bullish at 0.80. 

 

 

Seasonal charts of companies reporting earnings today:

 

 

S&P 500 Index

 

 

TSE Composite

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