Stock Market Outlook for July 29, 2024
The Treasury Yield Curve is attempting another push towards normalization, threatening to impose a headwind against equity prices ahead.
*** 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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Purpose Core Dividend Fund (TSE:PDF.TO) Seasonal Chart
Marsh and McLennan Co. (NYSE:MMC) Seasonal Chart
Invesco S&P SmallCap 600 Pure Value ETF (NYSE:RZV) Seasonal Chart
BMO Canadian Dividend ETF (TSE:ZDV.TO) Seasonal Chart
Vanguard FTSE Canadian High Dividend Yield Index ETF (TSE:VDY.TO) Seasonal Chart
HomeTrust Bancshares, Inc. (NASD:HTBI) Seasonal Chart
Ingles Markets, Inc. (NASD:IMKTA) Seasonal Chart
Purpose Enhanced Dividend Fund (TSE:PDIV.TO) Seasonal Chart
TELUS Corp. (TSE:T.TO) Seasonal Chart
BMO MSCI USA High Quality Index ETF (TSE:ZUQ.TO) Seasonal Chart
BMO Monthly Income ETF (TSE:ZMI.TO) Seasonal Chart
Invesco Canadian Dividend Index ETF (TSE:PDC.TO) Seasonal Chart
Arrow Financial Corp. (NASD:AROW) Seasonal Chart
CBOE Global Markets Inc. (AMEX:CBOE) Seasonal Chart
The Markets
Stocks snapped back from early week losses on Friday as end-of month positioning alleviates the selling pressures that have coincided with the start of the period of volatility for the equity market. The S&P 500 Index closed with a gain of 1.11%, moving back above its 50-day moving average (5436). A couple of gaps remain open overhead, including Wednesday’s downside open between 5508 and 5550, adding multiple layers of resistance overhead that have capped the now past summer rally period. For the period surrounding the last few days of July and the first few sessions of August, there is typically a slight elevation in equity prices that is normal as the market takes a breather from the start of the period of volatility that ramps up in a more significant way in August, September, and October and this is what can be assumed to be playing out now. But the short-term downside gaps from the past couple of weeks are bound to be tough nuts to crack as seasonal tendencies increasingly lean negative and as the fundamental backdrop in the economy degrades. Defensive assets and volatility hedges are certainly preferred at this time of year. At the start of the period of volatility for stocks, covered call strategies can be your friend to replicate benchmark holdings (eg. S&P 500 Index) and provide yield to portfolios, while buffering against the erratic trading. The optimal holding period of the Global X S&P 500 Covered Call ETF (XYLD) starts today (July 29th), resulting in an average return of around half of one percent above the S&P 500 Total Return Index through to the 18th of October, encompassing the period of volatility for stocks.
Today, in our Market Outlook to subscribers, we discuss the following:
- Weekly look at the large-cap benchmark
- The normalization attempt of the treasury yield curve and the implications for stocks
- The change in Margin Debt in trading accounts
- The decline of shipping volumes/expenditures and the degradation of economic fundamentals
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Sentiment on Friday, as gauged by the put-call ratio, ended bearish at 1.05.
Seasonal charts of companies reporting earnings today:
S&P 500 Index
TSE Composite
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