Stock Market Outlook

North American Indices faltered yet again on Friday as the economic news released in the session previous had investors debating the growth prospects for the remainder of the year. A catalyst for the market to move higher continues to be sought, but unfortunately remains unavailable.

Seasonal patterns and market tendencies at this point in the economic recovery both reveal a weaker market for the remainder of the third quarter. The market is in a period of correction that typically initiates coming off the second quarter earnings season in mid-term election years. This weakness persists into October. In addition, coming off of periods of economic recovery with rapid market growth, a corrective period lasting at least 5-months subjects markets to a period of slow growth as prospects dry up from various economic stimuli. Presently we are in the 4th month of this stagnant growth period that initiated at the end of April. Based on past history, these corrections have lasted anywhere from five months to one year. However, this market weakness is not expected to lead to a double-dip recession.

The technical sell signal granted in the second week of August remains in place. Oversold indicators continue to plague key indices, which may result in a short-term bounce to clear this technical classification. Until technical indicators give reason to believe otherwise, the trend for the intermediate-term period remains down. (more)

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