The reaction of many equity benchmarks to points of significant resistance makes this a logical point for a market correction.
*** 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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Super Simple Seasonal Portfolio
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The Markets
Stocks closed lower on Tuesday as a shock in the financial sector and ongoing rotation out of technology acted as a drag on broad market benchmarks. The S&P 500 Index shed just over four-tenths of one percent, remaining below the 20-day moving average. At the high of the previous session, the short-term variable hurdle was hit and it has since backed off, confirming the previous level of support now as a point of resistance. Price and the rising 50-day moving average at 4421 are quickly converging on one another in what will provide the next major test of the rising intermediate-term path of the benchmark that has been underway since the October low. The Relative Strength Index (RSI) is showing a rather neutral read around its middle line and MACD remains on a sell signal following the bearish crossover of its signal line that was triggered at the end of July. Within this period of seasonal volatility, levels down to June’s breakout point from horizontal resistance at 4200 are fair game, providing a healthy reset ahead of the best six months of the year for stocks that starts in October. Traditionally, taking advantage of the volatility that is normal in the last two months of the third quarter (and often into the start of October) to accumulate equities upon weakness typically proves to be an effective strategy to add alpha to portfolios. This pattern is already well underway.
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Sectors and Industries entering their period of seasonal strength:
Analysis of the Food Retailers & Wholesalers Industry seasonal charts above shows that a Buy Date of August 9 and a Sell Date of November 17 has resulted in a geometric average return of 2.4% above the benchmark rate of the S&P 500 Total Return Index over the past 20 years. This seasonal timeframe has shown positive results compared to the benchmark in 15 of those periods. This is a good rate of success and the return strongly outperforms the relative buy-and-hold performance of the stock over the past 20 years by an average of 3.99% per year.
Seasonal charts of companies reporting earnings today:
S&P 500 Index
TSE Composite
