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Stock Market Outlook for August 9, 2013

Todays_Markets

Upcoming US Events for Today:

  1. Wholesale Trade for June will be released at 10:00am.   The market expects a month-over-month increase of 0.4% versus a decline of 0.5% previous.

 

Upcoming International Events for Today:

  1. China Industrial Production for July will be released.   The market expects a year-over-year increase of 9.0% versus an increase of 8.9% previous.
  2. China Retail Sales for July will be released.   The market expects a year-over-year increase of 13.5% versus 13.3% previous.
  3. Great Britain Merchandise Trade for June will be released at 4:30am EST.   The market expects -8.5B, consistent with the previous report.
  4. Canadian Housing Starts for July will be released at 8:30am EST.   The market expects 191,000 versus 199,586 previous.
  5. Canadian Labour Force Survey for July will be released at 8:30am EST.   The market expects employment to increase by 6,000 versus a decline of 400 previous.   The unemployment rate is expected to remain unchanged at 7.1%.

 

Recap of Yesterday’s Economic Events:

Event Actual Forecast Previous
AUD Employment Change -10.2K 5.0K 9.3K
AUD Unemployment Rate 5.70% 5.80% 5.70%
AUD Full Time Employment Change -6.7K   -5.1K
CNY Trade Balance $17.82B $26.90B $27.12B
CNY Exports (YoY) 5.10% 2.00% -3.10%
CNY Imports (YoY) 10.90% 1.00% -0.70%
JPY Bankruptcies (YoY) -0.09%   -8.00%
JPY Eco Watchers Survey: Current 52.3 53.5 53
JPY Eco Watchers Survey: Outlook 53.6 54.1 53.6
CHF Unemployment Rate 3.00% 2.90% 2.90%
EUR German Trade Balance (euros) 16.9B 15.0B 13.6B
EUR German Current Account (euros) 17.3B 16.0B 11.2B
EUR German Imports s.a. (MoM) -0.80% 0.50% 1.40%
EUR German Exports s.a. (MoM) 0.60% 0.90% -2.00%
CAD New Housing Price Index (MoM) 0.20% 0.10% 0.10%
CAD New Housing Price Index (YoY) 1.80% 1.70% 1.80%
USD Initial Jobless Claims 333K 335K 328K
USD Continuing Claims 3018K 2950K 2951K
USD Mortgage Delinquencies 6.96%   7.25%
USD MBA Mortgage Foreclosures 3.33%   3.55%
USD EIA Natural Gas Storage Change 96 79 59
JPY Tertiary Industry Index (MoM) -0.30% -0.40% 1.30%

 

The Markets

Equities posted modest gains on Thursday following better than expected trade data out of China.    Material stocks were the primary beneficiary as metal prices soared.   Gold gained almost 2%, Copper appreciated by almost 2.5%, while Silver pushed higher by almost 3.5%.   Each of the metals have charted intermediate base building patterns since the end of June suggesting rebounding metal prices as the commodities attempt to trade off of 52-week lows.   Gold and Silver are presently testing resistance at their 50-day moving averages, a level that each metal has struggled to trade away from over recent weeks.   Copper managed to punch through the 50-day average, suggesting strength over the intermediate-term.   Gold and Silver seasonally gain between now and the end of the year, while copper seasonally trades flat to negative over the same period.

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Gold Futures (GC) Seasonal Chart

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Silver Futures (SI) Seasonal Chart

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Copper Futures (HG) Seasonal Chart

Prior to quantitative easing manipulating the commodity markets, the ratio of Copper versus Gold was a fairly reliable indicator of risk sentiment.   As the price of Copper outperformed Gold, positive risk sentiment could be implied, while underperformance of Copper relative to Gold could imply risk aversion; the direction of the ratio often correlated with the direction of equity markets.   The ratio of Copper versus Gold showed a rare deviation from the direction of equity markets last summer as European leaders injected much needed stimulus into the economy amidst faltering economic fundamentals, which put pressure on the relative performance of the industrial metal (Copper) but inflated equity prices.   The path of Copper versus Gold has since returned to a positive trend dating back to the November lows as fundamental data has firmed and manufacturing data rebounds, particularly as of recent.   Although this risk-on trend is not typical during the summer months and the trend could change at any time, risk aversion has yet to be identified within the ratio, which is positive for equity markets as long as the trend continues.   Economic data has increasingly beat expectations over recent weeks, acting as a positive catalyst for risk.

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Seasonal charts of companies reporting earnings today:

URRE CPK FSS HNR JRCC MGA MPAA NRG ZEUS

Sentiment on Thursday, as gauged by the put-call ratio, ended bullish at 0.76.

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S&P 500 Index

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TSE Composite

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Horizons Seasonal Rotation ETF (TSX:HAC)

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2013 Year-to-Date Since Inception (Nov 19, 2009)
HAC.TO 6.84% 35.9%

* performance calculated on Closing NAV/Unit as provided by custodian 

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