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Stock Market Outlook for February, 19, 2018

Inside week for stocks as S&P 500 Index tests previous trendline resistance.

 

Real Time Economic Calendar provided by Investing.com.

 

*** 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:

Star Bulk Carriers Corp. (NASD:SBLK) Seasonal Chart

Star Bulk Carriers Corp. (NASD:SBLK) Seasonal Chart

Universal Health Services (NYSE:UHS) Seasonal Chart

Universal Health Services (NYSE:UHS) Seasonal Chart

SunTrust Banks, Inc.  (NYSE:STI) Seasonal Chart

SunTrust Banks, Inc. (NYSE:STI) Seasonal Chart

Huntington Bancshares Incorporated  (NASDAQ:HBAN) Seasonal Chart

Huntington Bancshares Incorporated (NASDAQ:HBAN) Seasonal Chart

Amazon.com, Inc. (NASDAQ:AMZN) Seasonal Chart

Amazon.com, Inc. (NASDAQ:AMZN) Seasonal Chart

Gartner Group, Inc. (NYSE:IT) Seasonal Chart

Gartner Group, Inc. (NYSE:IT) Seasonal Chart

Ecolab Inc.  (NYSE:ECL) Seasonal Chart

Ecolab Inc. (NYSE:ECL) Seasonal Chart

Martin Marietta Materials (NYSE:MLM) Seasonal Chart

Martin Marietta Materials (NYSE:MLM) Seasonal Chart

Essex Property Trust, Inc.  (NYSE:ESS) Seasonal Chart

Essex Property Trust, Inc. (NYSE:ESS) Seasonal Chart

Regions Financial Corporation  (NYSE:RF) Seasonal Chart

Regions Financial Corporation (NYSE:RF) Seasonal Chart

 

 

The Markets

Stocks closed generally flat on Friday, capping off a strong week for equity markets as values rebounded from the lows charted one week ago.  The S&P 500 Index closed higher by a mere point as defensive sectors of utilities, staples, and health care helped to keep the benchmark out of the red as former market darlings in the discretionary, technology, and financial sectors closed mildly lower.  For the week, the S&P 500 Index gained 4.30% in what can be categorized as an inside week (the week’s range was within that of the week prior when stocks fell victim to a steep selloff).  The bounce comes on volumes that are third less than the week prior as investors remain sceptical of the snapback.  Support at the rising 200-day moving average on the large-cap index continues to factor prominent in investment decisions, but the apparent ease of the trade is leaving many on edge.  Momentum indicators on this weekly look remain bullish and support at major weekly moving averages (20 and 50 week) continue to support the ongoing positive trend for stocks.  While the economic fundamentals remain solid (despite what recent reports on retail and industrial activity suggested on a seasonally adjusted basis) and the technical trends remain positive, a retest of the lows cannot be discounted.  Markets remain in this period when positive influences pertaining to earnings have passed, leaving investors to react to the news flow, which has been enough detract focus from the above average growth the economy is benefiting from.  Positive tendencies for stocks pickup closer to the first quarter earnings season in April.

On the economic front, a report on housing starts showed surprising strength as the rebuilding effort in the South looks to have taken on a second leg.  The headline print indicated that housing starts in the US rose 9.7% to a seasonally adjusted annual rate of 1.326 million, the second highest level of the ongoing expansion.  Permits, meanwhile, jumped 7.4% to a rate of 1.396 million, the best level of the recovery.  Stripping out the seasonal adjustments, housing starts actually increased by 10.8% in January, representing the best start to a year since 2011.  Last year, housing starts declined by 6.0% amidst the limited supply of labor and plots of land on which to build, but with the new year and wage pressures increasing, the outlook for the industry is certainly optimistic.  As alluded to, the south was a large contributor to the aggregate result with starts in this region surging by 17.2%, which is above the seasonal norm by 11.2%.  Strength in the northeast was also particularly strong, albeit this is a smaller region of the bunch.  As for permits, the 5.4% increase last month is the largest January increase since 2001.  This is a rare positive divergence in a month that typically sees a decline in the level of permits in 4 out of 5 instances.  Housing units completed, which has been a more stable gauge of activity in the new home segment, is showing a change for the first month of the year that is inline with historical norms.  Overall, the report expresses significant optimism amongst builders that demand for housing will be strong in the year ahead as Americans benefit from this new tax era.  Whether rising mortgage rates spoil the party is up for debate.  Home building activity kicks into high gear in March and April when weather conditions become more favourable for construction projects.  The price of lumber is typically a beneficiary by this uptick in demand.  Lumber prices are higher by over 25% since the period of seasonal strength began in October.

Housing Starts Seasonal Chart

Monthly Housing Starts Data

Housing Starts Seasonal Chart

Housing Starts: Northeast Region Seasonal Chart Housing Starts: Midwest Region Seasonal Chart Housing Starts: South Region Seasonal Chart Housing Starts: West Region Seasonal Chart Building Permits Seasonal Chart Housing Units Authorized, But Not Started Seasonal Chart Housing Units Completed Seasonal Chart

Lumber Futures (LB) Seasonal Chart

FUTURE_LB1 Relative to the S&P 500FUTURE_LB1 Relative to Gold

FUTURE_LB1 Monthly Averages

North of the border, Statscan released its final look at manufacturing sales for 2017.  The headline print indicates that manufacturing activity declined by 0.3% in December, a prominent shift compared to the gain of 3.4% recorded for November.  Stripping out the seasonal adjustments, the sales of goods manufactured (shipments) actually fell by 9.9%, much more than the 7.6% average decline for the last month of the year.  For all of 2017, manufacturing sales were higher by 2.1%, falling below the seasonal average change by 0.6%.  Unfilled orders, a gauge of the backlog facing manufacturers, meanwhile, showed another decline in December, ending the year lower by 1.7%, one of the weakest calendar year performance outside of a recession in the past 20 years.  The average calendar year gain in this category is 7.2%.  As for inventories, much like the US, they are increasing.  The 7.8% gain is the largest change since 2011 and well above the average change for the year of 2.4%.  Looking through the categories, non-durable goods categories held up better than the durable side for the calendar year as weakness in motor vehicles acted as a strain on the latter.  But, overall, strength in the manufacturing economy remained apparent with above average gains in machinery, cement, wood, and paint, products, more or less the items used in the construction industry.  The items that are lagging, excluding autos, are generally less exposed to the fluctuations in economic conditions, such as food and pharmaceuticals.  While Canada may still benefit from the strength in the manufacturing economy south of the border, strength in the Canadian dollar is proving to be a hurdle that could continue to cause underperformance versus American counterparts.  The value of the domestic currency, relative to the US dollar, is presently gyrating around support at its rising 50-day moving average.  Early year strength in Canadian manufacturing activity attributed to a falling currency has clearly come to an end.  Seasonally, the Canadian Dollar tends to rise through April, following the strength in the price of oil.

Sales of goods manufactured (shipments) Seasonal Chart

Monthly Sales of goods manufactured (shipments) Data

Sales of goods manufactured (shipments) Seasonal Chart

New orders, estimated values of orders received during month Seasonal Chart Unfilled orders, estimated values of orders at end of month Seasonal Chart Raw materials, fuel, supplies, components, estimated values at end of month Seasonal Chart Goods or work in process, estimated values at end of month Seasonal Chart Finished goods manufactured, estimated values at end of  month Seasonal Chart Total inventory, estimated values of total inventory at end of the month Seasonal Chart

Canadian Dollar Forex (CAD) Seasonality

Monthly Seasonal Canadian Dollar Forex (CAD)

Sentiment on Friday, as gauged by the put-call ratio, ended bullish at 0.93.

 

 

Sectors and Industries entering their period of seasonal strength:

NY Harbor Blendstock RBOB Futures (RB) Seasonal Chart
FUTURE_RB1 Relative to the S&P 500FUTURE_RB1 Relative to Gold

FUTURE_RB1 Monthly Averages

 

 

Seasonal charts of companies reporting earnings today:

America's Car-Mart, Inc. (CRMT) Seasonal Chart  Hi-Crush Partners LP (HCLP) Seasonal Chart Macro Bank Inc. (BMA) Seasonal Chart Mosaic Company (The) (MOS) Seasonal Chart Superior Energy Services, Inc. (SPN) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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