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RoboStreet – November 23, 2018
Tis The Season for a Stock Market Rally
America’s consumers have a special penchant for Black Friday. Following Thanksgiving Day, tens of millions of holiday shoppers are eager to hit the malls, go online, and scour for the best deals that merchants are putting out. I anticipate that this year shoppers will be able to take advantage of what will assuredly be a promotional extravaganza across the retail landscape.
For many, Black Friday shopping is a rite of holiday passage. For others, it is something they would take a pass on just to avoid the crowds. While we do not know where our RoboStreet readers are regarding that matter, we do know this holiday selling season has the makings of being a really good one for the market when taking the most recent data into consideration.
The National Retail Federation’s 2018 holiday sales forecast calls for year-over-year growth between 4.3% and 4.8%, excluding sales of automobiles, gasoline, and restaurants. That compares favorably to an average annual increase of 3.9% over the past five years, although it should be noted that it is less than the 5.3% growth rate achieved in 2017. To be fair, the forecast is off a larger base, so we wouldn’t make too much of the projected deceleration in the growth rate.
Several economic signs point to a healthy pickup in holiday spending and a decent probability that things will be even better than expected when the final tabulations are made. The 3.7% unemployment rate is at a 49-year low. Real average hourly earnings growth isn’t robust, yet it is higher than it was a year ago. Consumer confidence is close to an 18-year high, underpinned by favorable views about income expectations and job security.
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Notwithstanding the recent correction in stock prices and some softening in the housing market, the wealth effect is still intact. The S&P 500 (-1.0%) and Nasdaq Composite (+1.0%) are flat for the year and reports indicate homeowners have a record amount of available home equity. So, while recent declines in stock prices have dampened investor expectations of returns that rival anything close to 2017, December is the time when the bulls can make a good showing.
From a historical standpoint, now is a seasonally good time to be invested. Seasonality is a tricky thing to quantify because it is characterized by investor sentiment, business confidence, year-end pension funding, and the close of thefourth quarter that is defined by a heavy dose of portfolio window-dressing. There are typically bullish spending trends by state and local governments (use it or lose it) along with high levels of year-end business activity to make “their numbers” and good feelings generated by the holidays that translate into elevated consumer spending.
While some of these seasonal factors are to some extent anecdotal, my Tradespoon AI platform brings to light some historical technical analysis that supports the whole notion of ‘seasonality’ and what investors might anticipate. The Tradespoon Seasonal Chart below shows a very high probability of the market trading higher over the next 20-50 days, which implies a strong December-January rally following an almost two-month stock market correction.
Putting my artificial intelligence against a purely technical backdrop, we can see from the Barchart.com graph that the SPDR S&P 500 ETF Trust (SPY), coveringthe past five years, that primary bull trend is still in place. The thick black line at the bottom is the 200-week moving average that was last tested in early 2016. There have also been two very sharp rally phases for the market in 2018 – in early January and then again in September when the SPY traded well above its long-term up-and-to-the-right trading range.
The recent volatility in thepast two months has the SPY testing a key level that will either hold or give way further momentum-driven downside pressure. The fact that high-speed trading and algorithms control over 75% of daily trading on the major exchanges makes the market especially sensitive to technical levels that are triggered by upside breakouts and downside breakdowns. It’s just a reality of the investing world we live in that has evolved with high-speed execution of trades, the elimination of the downtick rule and instantaneous news feed.
Black Friday is a shortened trading session, but an important one from the standpoint of kicking off the mood and tone for investors and the market in the two weeks prior to the fourth quarter earnings season. Investors also have two other key events to consider over the near term – the G20 meeting in Argentina on November 30-December 1 that will be highlighted by a trade meeting between President Trump and China’s President Xi and the Federal Open Market Committee meeting on December 19 where another rate hike is on the table.
To say there are a lot of moving parts as to how the year closes out is an understatement, but against the economic data and likelihood the Fed takes a more dovish stance even if they do raise Fed Funds, global money flows should benefit U.S. bond and stock markets versus other foreign equity markets carrying much higher levels of risk and uncertainty. Assuming my AI data is accurate and the historical phenomenon of ‘seasonality’ unfolds, we should see the bulls re-take the high ground for the month of December and into 2019.
There’s going to be a lot of money to be made these next couple of months and my Tradespoon tools will maximize finding where the best risk/reward trades are for subscribers of my RoboInvestor advisory service. Our investment capital has been hard at work all year and we’ve been diligent about booking profits all along the way wherever and whenever they are able to be harvested. 2018 has been one of the most difficult years for most investors to manage and maintain portfolio gains, but with the power of AI at work, the probability of outperformance goes way up. RoboInvestor is the gift that keeps on giving. Sign up today and have a happier holiday season.
Subscribe now for less than the cost of one year at the regular rate!
With gains of 930%, and a 76% win-rate, a lifetime Membership could easily turn $100,000 into $1,030,010 and if the next few years are as good as the last, . . . $2.000,000. . .$5.000,000 or more.
Tradespoon Premium Service is the only trading system you’ll ever need for timely buy/sell trading calls.
Prices are going up significantly soon, so sign up before you miss out!
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