Stock Market Outlook for January 8, 2015

Real Time Economic Calendar provided by Investing.com.

**NEW** As part of the ongoing process to offer new and up-to-date information regarding seasonal and technical investing, we are adding a section to the daily reports that details the stocks that are entering their period of seasonal strength, based on average historical start dates.   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:

No stocks identified for today

 

The Markets

Stocks jumped on Wednesday, fuelled by a better than expected employment report for the month of December and a reassurance from the Fed that it would be patient in starting the process to raise rates.   Major benchmarks in the US closed higher by over one percent, chipping away at the losses accumulated over the past few days.   The move in equity prices followed gains in the US Dollar Index, which touched the highest level in over 11 years.   The currency benchmark is presently pressuring its way through resistance presented by the 2005 at 92.33, perhaps the last hurdle to overcome as it charts a new long-term uptrend.   The index recently broke above a 7 year basing pattern, which held the currency index around the lowest levels since the benchmark was created in 1973.   As mentioned in a previous report, it is the commodities priced in the domestic currency and material stocks that tend to be negatively impacted by the strength in the dollar, a trend that has certainly been apparent when looking at the CRB commodity index, which is down by around 27% since mid last year.  January is seasonally the strongest month of the year for the Dollar Index, which benefits from companies repatriating currency from around the globe following the conclusion of the previous calendar year.   Strength is typically maintained throughout the first quarter.  

Among the stocks that topped the leaderboard during Wednesday’s session were homebuilders following news that President Obama was set to reduce Federal Housing Administration (FHA) mortgage insurance premiums.   The move is expected to benefit first-time home buyers by making home ownership more affordable.   The jump in shares of homebuilding stocks comes at the tail end of the period of seasonal strength for the industry, which has gained over 21% since bottoming in October.   Positive seasonal tendencies reach an average peak at the start of February, ahead of the spring home buying season.   Looking at the iShares Dow Jones US Home Construction ETF (ITB), price is pushing back up against long-term resistance at $26 as it seeks a catalyst to break higher.   The ETF has been outperforming the S&P 500 throughout its period of strength that began in October, providing the momentum required to fuel a breakout, assuming the broad market continues trending higher.   The ETF remains around 44% below the all-time peak of the ETF of $44.60 that was charted when the fund was launched at the height of the housing bubble.

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Looking outside of the US, the chart of the MSCI Emerging Markets ETF is starting to become interesting.   The fund bounced along with the market during Wednesday’s session, gaining just over 2% by the closing bell.   A higher short-term low, above the December low, may be in the works, suggesting a conclusion to the intermediate negative trend that began in September.   A positive divergence with respect to MACD suggests fading downside pressures, typically a precursor to a positive move ahead.   The emerging markets index is seasonally strong between January and May, following the similar seasonal trend as equity markets in developed nations.   Confirmation of the higher low would be provided upon a break above short-term resistance at $39.63.

Sentiment on Wednesday, as gauged by the put-call ratio, ended close to neutral at 0.97.