Last year’s winners are turning into this year’s laggards.
*** 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 had a tough showing in the first session of the new year as former growth darlings came under pressure amidst a normal start of the year rotational pattern towards the prior year’s laggards. The S&P 500 Index closed down by just less than six-tenths of one percent, continuing to show sluggish momentum around the all-time high that was charted two years ago around 4800. MACD remains on a sell signal following the bearish crossover that was realized last week and the Relative Strength Index (RSI) is showing a short-term divergence versus price, hinting of upside exhaustion around these heights. These are short-term signals of a near-term pause in trajectory, which could last merely days or weeks; the intermediate-term trend, supported by major moving averages, continues to lean positive. The 20-day moving average just below 4700 is a good initial downside target should the pullback in the market proceed, but the more logical hurdle remains previous resistance, now support, at 4600. The market is still within the traditional Santa Claus rally period that runs through the first couple of days of the year and, despite a very strong December performance for the market, there is still a risk of seeing a flat to negative Santa Claus rally return. As highlighted in a recent study, a negative result at this time of year when stocks tend to realize the positive drift amidst the slower holiday timeframe has portended poorly for equity market performance through the month of January and the first quarter overall, not to mention that below average full year performance for the large-cap benchmark is the norm. Our definition of what the Santa Claus rally encompasses spans the remainder of this week and, after Tuesday’s decline, the benchmark only has half of one percent of upside leeway before a negative return for this typically upbeat timeframe is realized.
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Seasonal charts of companies reporting earnings today:
S&P 500 Index
TSE Composite
