Stock Market Outlook for January 5, 2024
There is nothing actionable, as of yet, to suggest abandoning risk over a sustainable, intermediate-term timeframe.
*** 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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Invesco Defensive Equity ETF (NYSE:POWA) Seasonal Chart
Crescent Point Energy Corp. (TSE:CPG.TO) Seasonal Chart
Smith AO Corp. (NYSE:AOS) Seasonal Chart
Hudson Pacific Properties Inc. (NYSE:HPP) Seasonal Chart
Sun Communities, Inc. (NYSE:SUI) Seasonal Chart
SPAR Group, Inc. (NASD:SGRP) Seasonal Chart
Invesco CurrencyShares Swiss Franc Trust (NYSE:FXF) Seasonal Chart
The Markets
The struggle for stocks early into the new year continues as traders book profits following the very strong rally that played out through the last couple of months of 2023. The S&P 500 Index closed lower by just over a third of one percent, pushing below short-term support at its rising 20-day moving average for the first time since the start of November. The break opens the door for a test of the rising 50-day moving average that currently sits at 4530, although the more likely hurdle to support the benchmark in the near-term is previous resistance at 4600. Momentum indicators have rolled over from overbought territory, although they are still showing characteristics of a bullish trend above their middle lines. The short-term trend remains vulnerable, but the intermediate-term path stemming from the October of 2022 low remains positive; it is the intermediate direction of the market that is of most importance to our seasonal investment strategy. While the market has pulled back early in the new year, we have yet to observe any panic, the areas that are leading the pullback were the strongest performers in 2023, and there is no discernible impact to market breadth. This all suggest that this is not a race to the exists in preparation for a more sustained correction ahead, rather this is just a healthy digestion of the significant strength that was recorded to end 2023 amidst the hesitation among investors to book some of the significant profits at year-end. We can point to the signal of a failed Santa Claus rally period, concerning leading indications of economic activity, and the poor seasonal tendencies for the equity market during the first couple of months of the year as presenting caution, but there is nothing actionable, as of yet, to suggest abandoning risk over a sustainable, intermediate-term timeframe. Buying the short-term dip is likely going to prove to be prudent, should you have cash to deploy.
Today, in our Market Outlook to subscribers, we discuss the following:
- Breadth indicators have yet to show any material deterioration
- The path of the yield curve remains favourable for risk assets
- Weekly Jobless Claims and the health of the labor market
- A look ahead at what to expect of December’s Non-Farm Payroll report
- The change we are making in the Super Simple Seasonal Portfolio
- US Vehicle Sales
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Sentiment on Thursday, as gauged by the put-call ratio, ended slightly bullish at 0.93.
Seasonal charts of companies reporting earnings today:
S&P 500 Index
TSE Composite
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