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Stock Market Outlook for March 1, 2018

S&P 500 Index has averaged a gain of 1.2% in March; positive in 66% of periods.

 

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:

Stuart Olson Inc. (TSE:SOX) Seasonal Chart

Stuart Olson Inc. (TSE:SOX) Seasonal Chart

Credit Suisse Group (NYSE:CS) Seasonal Chart

Credit Suisse Group (NYSE:CS) Seasonal Chart

Conn's, Inc. (NASD:CONN) Seasonal Chart

Conn’s, Inc. (NASD:CONN) Seasonal Chart

B&G Foods Inc. (NYSE:BGS) Seasonal Chart

B&G Foods Inc. (NYSE:BGS) Seasonal Chart

CenterPoint Energy, Inc.  (NYSE:CNP) Seasonal Chart

CenterPoint Energy, Inc. (NYSE:CNP) Seasonal Chart

DTE Energy Company  (NYSE:DTE) Seasonal Chart

DTE Energy Company (NYSE:DTE) Seasonal Chart

United Natural Foods, Inc. (NASD:UNFI) Seasonal Chart

United Natural Foods, Inc. (NASD:UNFI) Seasonal Chart

UGI Corp Holding Co. (NYSE:UGI) Seasonal Chart

UGI Corp Holding Co. (NYSE:UGI) Seasonal Chart

NiSource Inc.  (Public, NYSE:NI) Seasonal Chart

NiSource Inc. (Public, NYSE:NI) Seasonal Chart

Black Hills Corp. (NYSE:BKH) Seasonal Chart

Black Hills Corp. (NYSE:BKH) Seasonal Chart

 

 

The Markets

Stocks closed sharply lower on the final trading day of February, capping off the worst month for stocks since January of 2016.  The S&P 500 Index shed 3.89% over the 28-day period as yields shot to new multi-year highs amidst increasing inflation concerns.  The result is a significant shift from the 0.2% average gain in this second month of the year, a month that stocks typically gyrate following the conclusion of earnings season.  Energy was by far the weakest sector for the month, falling by 11.34% as investors reacted to growing supplies of oil, something that is typical for this time of year.  And the more defensive sector of consumer staples provided little refuge from the selling pressure, falling by almost 8% on its own.  The lack of places to hide in this weak and volatile market helps to explain why panic flourished in the month as the low volatility trade unwound in a big way.  Technology was the only sector to mitigate much of the losses with the S&P 500 Technology Sector Index closing essentially flat on the month as investors used the dip to reload in these high momentum names.  The activity from a sector level is very much contrary to seasonal norms for the month, which typically sees strength in energy and materials; technology typically weakens.  But given the shock realized across equity benchmarks in the month, it is not surprising to see investors stick with what has worked and shy away from areas of uncertainty.

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Momentum indicators on the monthly look at the S&P 500 Index are rolling over, setup to trigger sell signals should the selling continue.  The benchmark was just short of charting an outside reversal month, which would have been fulfilled by a close below the January low at 2682.  But, without squabbling over a few points, the candlestick setup still appears fairly threatening, warranting some concern for the month ahead.  Trend channel support on this long-term look is closer to 2400.

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Looking ahead, March is typically a strong month for stocks with the S&P 500 Index gaining an average of 1.2% over the past 50 years.  The benchmark has closed higher in 66% of periods, representing the fourth best monthly gain frequency of the year.  Returns have ranged from a loss of 10.2% in March of 1980 to a gain of 9.7% in March of 2000.  Unlike other months where you could slice the period up into slices of strength, the average trend shows a consistent rise throughout the 31-day span.  A ramp up in economic activity following the slower winter months, anticipation of first quarter earnings season, and fund inflows amidst the tax season are among the factors that fuel stocks higher over this last month of the first quarter.

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As for the sector performance in the third month of the year, financials have realized the best performance for the month, averaging a gain of 3.1% based on the past 20 years of data.  This is followed by energy, consumer discretionary, and industrials, each of which saw average gains of around 2.6% as cyclical sectors outpaced defensive counterparts amidst the stronger economic conditions.  Health care and consumer staples performed the weakest, returning one percent or less during the timeframe.  Real Estate enters a period of strength in the month, moving higher between March 3rd and May 10th, on average.  In the commodity space, Natural Gas enters its seasonal stride on March 13h, and live cattle exits is average seasonal period on March 12th.

Financial Sector Seasonal Chart

FINANCIAL Relative to the S&P 500
FINANCIAL Relative to the S&P 500

FINANCIAL Monthly Averages

MSCI US REIT Index Seasonality

$RMZ Relative to the S&P 500
$RMZ Relative to the S&P 500

Monthly Seasonal MSCI US REIT Index

Natural Gas Futures (NG) Seasonal Chart

FUTURE_NG1 Relative to the S&P 500
FUTURE_NG1 Relative to the S&P 500

FUTURE_NG1 Relative to Gold
FUTURE_NG1 Relative to Gold

FUTURE_NG1 Monthly Averages

The list of individual names that start their period of strength in the month includes CSX (CSX) , Illinois Tool Works (ITW), BCE (BCE), ATS Automation (ATA), Rogers Communications (RCI), AmerisourceBergen (ABC), Kellogg (K), CAE (CAE), Dollarama (DOL), Baidu (BIDU), Mondelez (MDLZ), General Dynamics (GD), Coca-Cola (KO), Citigroup (C), American Express (AXP), Avis Budget (CAR), Waste Management (WM), Pepsico (PEP), and Boeing (BA).  Of the 326 stocks identified in the database as starting their seasonal run in the month, most fall in the industrial (67), financial (62), consumer discretionary (44), and energy (37) sectors.  The rest of the sectors account for the remaining third of seasonal start dates in the month.  A cyclical bias is easily apparent.

On the economic front, the weekly petroleum status report caught investors off-guard with a larger than expected build in inventories.  The EIA indicated that oil stockpiles increased by 3.0 million barrels last week, while gasoline inventories rose by 2.5 million barrels.  The result lifted the days of supply of oil by two-tenths to 26.2, around three and a half days above normal for this time of year.  US domestic production of oil ticked to another all-time high, continuing its above average increase on the year, and imports rebounded from the lows seen in the week prior.  As for gasoline, the half day increase to supply is a divergence from seasonal norms, which calls for tightening supply through the spring.  Gasoline inventories are higher by 8.0% on the year, about two and a half percent above the average change through this late February period.  Weakening demand in the past couple of weeks when the weather was warmer than average looks to be a factor behind the result.  Demand, as gauged by the change in the level of gasoline product supplied, continues to trend above average, providing fundamental support to the price of the refined commodity into the spring.

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

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

The price of oil fell by over two percent following the report, moving back below its 20 and 50-day moving averages.  A lower high on the chart sets up a topping pattern that could see a test of the 200-day moving average, now around $53.  Seasonally, the price of oil typically rises through May.

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Crude Oil Futures (CL) Seasonal Chart
FUTURE_CL1 Relative to the S&P 500FUTURE_CL1 Relative to Gold

FUTURE_CL1 Monthly Averages

Sentiment on Wednesday, as gauged by the put-call ratio, ended bearish at 1.08.

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Seasonal charts of companies reporting earnings today:

Algonquin Power & Utilities Corp. (AQN) Seasonal Chart Ambarella, Inc. (AMBA) Seasonal Chart AMC Entertainment Holdings, Inc. (AMC) Seasonal Chart American Outdoor Brands Corporation (AOBC) Seasonal Chart Anheuser-Busch Inbev SA (BUD) Seasonal Chart Atlantic Power Corporation (AT) Seasonal Chart Barnes & Noble, Inc. (BKS) Seasonal Chart Best Buy Co., Inc. (BBY) Seasonal Chart Canadian Natural Resources Limited (CNQ) Seasonal Chart Cott Corporation (COT) Seasonal Chart Crescent Point Energy Corporation (CPG) Seasonal Chart Gap, Inc. (The) (GPS) Seasonal Chart   Kohl's Corporation (KSS) Seasonal Chart Nordstrom, Inc. (JWN) Seasonal Chart NRG Energy, Inc. (NRG) Seasonal Chart Patterson Companies, Inc. (PDCO) Seasonal Chart Pinnacle Foods, Inc. (PF) Seasonal Chart Sotheby's (BID) Seasonal Chart Southwestern Energy Company (SWN) Seasonal Chart Toronto Dominion Bank (The) (TD) Seasonal Chart TransAlta Corporation (TAC) Seasonal Chart U S Concrete, Inc. (USCR) Seasonal Chart Vermilion Energy Inc. (VET) Seasonal Chart Vmware, Inc. (VMW) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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Seasonal Advantage Portfolio by CastleMoore

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