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Stock Market Outlook for August 10, 2017

S&P 500 once again holds short-term support at 2465.

 

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:

Verisign, Inc.  (NASDAQ:VRSN) Seasonal Chart

Verisign, Inc. (NASDAQ:VRSN) Seasonal Chart

 

 

The Markets

Stocks drifted lower on Wednesday as investors reacted to the risks posed by rising tensions with North Korea.  The S&P 500 Index ended lower by four basis points (0.04%), primarily dragged down by the consumer discretionary sector following the release of earnings from Disney.  The large-cap benchmark tested short-term horizontal support at 2465 at the lows of the session.  As mentioned in a previous report, a break of this level suggests downside risks towards 2445, around the rising 50-day moving average.

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With fear setting into the market, the price of gold caught a bid, gapping higher from support around its 20 and 50-day moving averages.  Bond prices also traded higher.  And benefitting from the threat of war were defense stocks, which charted fresh all-time highs on Wednesday.  Stocks in this industry are higher by around 20% year-to-date, strongly outperforming the market as investors bet on greater defense spending under a Trump presidency.  Seasonally, while we typically advocate for a defensive posture in equity markets during the summer months, investors have also historically been well suited investing in defense at this time of year.  The defense industry tends to outperform the S&P 500 Index in the summer as the companies are less prone to the seasonal fluctuations that dominate the broader market.  Industry constituents are significantly overbought at present, making it very difficult to initiate new positions at this late stage in the seasonal cycle.  The industry tends to peak relative to the S&P 500 Index around the end of September.

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General Dynamics Corporation  (NYSE:GD) Seasonal Chart

GD Relative to the S&P 500GD Relative to the Sector

GD Monthly Averages

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Lockheed Martin Corporation  (NYSE:LMT) Seasonal Chart
LMT Relative to the S&P 500LMT Relative to the Sector

LMT Monthly Averages

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Northrop Grumman Corporation  (NYSE:NOC) Seasonal Chart
NOC Relative to the S&P 500NOC Relative to the Sector

NOC Monthly Averages

Aside from the price of gold, oil was also up on the day following the latest weekly petroleum status report.  The EIA indicated that oil stockpiles fell by 6.5 million barrels last week, while gasoline inventories increased by 3.4 million barrels.  The drawdown in oil puts stockpiles of the commodity below the level in which they entered the year at, the first time since 2014 that the year-to-date change in inventories has been negative in the summer.  The days of supply of oil at 27.4 is the lowest in a year and a half, suggesting recent efforts to limit production from OPEC member countries are having some impact, albeit very marginal.  Inventories remain around 6 days above average , indicating much more work needs to be done to alleviate the supply glut.  There is only a few weeks left in the high demand summer driving season and it is becoming doubtful that significant headway will be made to take the supplies down to levels that would be considered average before injection season begins in October and November.  The price of oil added around three-quarters of one percent following the report’s release, continuing to pressure declining trendline resistance around $50.

Weekly U.S. Days of Supply of Crude Oil excluding SPR  (Number of Days) Seasonal Chart

Weekly U.S. Days of Supply of Crude Oil excluding SPR (Number of Days) Seasonal Chart

Weekly U.S. Ending Stocks excluding SPR of Crude Oil Seasonal ChartWeekly U.S. Field Production of Crude Oil Seasonal ChartWeekly U.S. Commercial Crude Oil Imports Excluding SPR Seasonal Chart

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Weekly U.S. Days of Supply of Total Gasoline  (Number of Days) Seasonal Chart

Weekly U.S. Days of Supply of Total Gasoline (Number of Days) Seasonal Chart

Weekly U.S. Ending Stocks of Total Gasoline Seasonal Chart Weekly U.S. Refiner and Blender Adjusted Net Production of Finished Motor Gasoline Seasonal Chart Weekly U.S. Product Supplied of Finished Motor Gasoline Seasonal Chart

Related to summer driving, demand for new automobiles continues to wane, at least according to the recent report on vehicle sales for the month of July.  Total vehicle sales declined by 4.2%, more than the average decline for the month of July of 2.5%.  An almost 20% plunge in heavy truck sales weighed on the result.  Sales of automobiles have been trending well below average this year, in part due to the shift in seasonal purchases away from the spring period and towards the end of the year.  Also, the simple fact that Americans are comfortable with maintaining their current vehicles rather than purchasing new is limiting upward momentum in sales activity, a threat to the growth of auto manufacturers in the US; auto part makers, however, continue to benefit from above average sales activity as the average age of automobiles on the road in the US nears 12 years.  Seasonally, vehicle sales tend to decline into the fall then spike in the month of December as consumers take advantage of the end of year/holiday deals.

Total Vehicle Sales Seasonal Chart

Monthly Total Vehicle Sales Data

Total Vehicle Sales Seasonal Chart

Motor Vehicle Retail Sales: Domestic and Foreign Autos Seasonal Chart Motor Vehicle Retail Sales: Light Weight Trucks Seasonal Chart Motor Vehicle Retail Sales: Heavy Weight Trucks Seasonal Chart

Also on the economic front, a report on Wholesale Trade was released during Wednesday’s session.  We have uploaded the charts to the Seasonal Chart Database at http://charts.equityclock.com/u-s-wholesale-trade-sales-and-inventories.

Sentiment on Wednesday, as gauged by the put-call ratio, ended bearish at 1.06.

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Seasonal charts of companies reporting earnings today:

Aegon NV (AEG) Seasonal Chart Algonquin Power & Utilities Corp. (AQN) Seasonal Chart Bellatrix Exploration Ltd (BXE) Seasonal Chart CAE Inc (CAE) Seasonal Chart   Coca-Cola European Partners plc (CCE) Seasonal Chart Kohl's Corporation (KSS) Seasonal Chart Macy's Inc (M) Seasonal Chart News Corporation (NWSA) Seasonal Chart Nordstrom, Inc. (JWN) Seasonal Chart NVIDIA Corporation (NVDA) Seasonal Chart Perrigo Company (PRGO) Seasonal Chart U.S. Auto Parts Network, Inc. (PRTS) Seasonal Chart Wheaton Precious Metals Corp. (WPM) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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