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Stock Market Outlook for March 12, 2018

A tale of two markets and economies: Canada and the US

 

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:

Ampco Pittsburgh Corp. (NYSE:AP) Seasonal Chart

Ampco Pittsburgh Corp. (NYSE:AP) Seasonal Chart

National Presto Inds Inc. (NYSE:NPK) Seasonal Chart

National Presto Inds Inc. (NYSE:NPK) Seasonal Chart

Consolidated Water Co. Ltd. (NASD:CWCO) Seasonal Chart

Consolidated Water Co. Ltd. (NASD:CWCO) Seasonal Chart

Triumph Group, Inc. (NYSE:TGI) Seasonal Chart

Triumph Group, Inc. (NYSE:TGI) Seasonal Chart

Federal Signal Corp. (NYSE:FSS) Seasonal Chart

Federal Signal Corp. (NYSE:FSS) Seasonal Chart

CTS Corp. (NYSE:CTS) Seasonal Chart

CTS Corp. (NYSE:CTS) Seasonal Chart

SUPERVALU INC.  (NYSE:SVU) Seasonal Chart

SUPERVALU INC. (NYSE:SVU) Seasonal Chart

Loews Corporation  (NYSE:L) Seasonal Chart

Loews Corporation (NYSE:L) Seasonal Chart

General Dynamics Corporation  (NYSE:GD) Seasonal Chart

General Dynamics Corporation (NYSE:GD) Seasonal Chart

Willis Towers Watson (NASD:WLTW) Seasonal Chart

Willis Towers Watson (NASD:WLTW) Seasonal Chart

Illinois Tool Works Inc.  (NYSE:ITW) Seasonal Chart

Illinois Tool Works Inc. (NYSE:ITW) Seasonal Chart

Live Nation Entertainment (NYSE:LYV) Seasonal Chart

Live Nation Entertainment (NYSE:LYV) Seasonal Chart

Triumph Group, Inc. (NYSE:TGI) Seasonal Chart

Triumph Group, Inc. (NYSE:TGI) Seasonal Chart

Natural Gas Services Group, Inc. (NYSE:NGS) Seasonal Chart

Natural Gas Services Group, Inc. (NYSE:NGS) Seasonal Chart

 

 

The Markets

Stocks jumped on Friday following the release of February’s employment report, which exceeded the top end of analyst estimates.  The headline print indicated that a staggering 313,000 jobs were added in the month, far surpassing estimates that called for a 205,000 rise.  The unemployment rate remained steady at 4.1% and average hourly earnings rose by 0.1%, just shy of the forecasted rise of 0.2%.  Stripping out the seasonal adjustments, 1.224 million jobs were added in this second month of the year, translating to an increase of 0.8%, double the average increase for the month.  The result matches in the largest percentage increase for the month of February in over 50 years.  This puts the year-to-date change slightly above the pace set last year as the rebound from the 2009 low attempts to maintain strength into these late stages of the economic cycle.  Parsing the details, the manufacturing and construction segments factor prominently in the report as unseasonably warm weather seemed to kick off an earlier than average ramp-up in activity following the colder winter months.  Construction employment is running 4.8% above the seasonal norm this year, while manufacturing employment is running nine-tenths of one percent above the average trend.  On the flipside, weakness remained embedded in the transportation sector as courier employment continues to unwind following the holiday surge.  This is part of a longer-term evolution in the industry, which will tend to see significantly higher gains in employment in the back half of the year as shipping companies respond to the large fluctuations in online shopping into the holiday season.  The change in transportation and warehousing employment is now 1.9% below the seasonal norm for the year, which is better than the 2.3% below average pace seen this time last year.  Overall, this was a strong report that saw significant benefits from the manufacturing economy, which continues to soar even after last year’s stellar results.  Weather was an additional boost, which could cause some ebb-and-flow in the months ahead should weather trends normalize, as they appear to be doing into the month of March.  The strongest gains of the year in employment are typically realized in March, April, and May as economic activity ramps up following the winter slowdown.  So while February’s result may have borrowed from the months ahead, above average employment growth through the first half of the year is expected as employers and consumers benefit from the tax legislation implemented at the end of last year.  For a breakdown of all of the categories in the report, you can access the seasonal charts via the following link http://charts.equityclock.com/u-s-employment-situation.

Total Nonfarm Seasonal Chart

Monthly Total Nonfarm Data

Construction Seasonal ChartManufacturing Seasonal ChartTransportation and warehousing Seasonal Chart

As for wage growth, which had investors concerned following January’s report, the Average Hourly Earnings of Production and Nonsupervisory Employees was higher by 0.1%, non-seasonally adjusted, which is slightly below the 0.2% average gain for the month.  Wage growth in 2018 remains around a tenth of a percent above average, inline with last year’s pace, which at the end of the year saw growth in wages that was well below the historical trend.  In this low inflation economy, calendar year growth in wages of 2.4% to 2.5% is probably more representative of what to expect for the near future, therefore rates significantly above or below this bogey may warrant response in the bond and equity markets.  The headline print indicates that the year-over-year growth is 2.6%, certainly much more subdued than the 2.9% growth reported previously that caused the gyrations in equity markets at the start of February.  Seasonally, wage growth tends to be subdued in the month of March then spike in April as summer hiring demand fuels wage inflation.

http://charts.equityclock.com/seasonal_charts/economic_data/CEU0500000008_seasonal_chart.PNG

The result fuelled an immediate reaction US equity indices, which saw the S&P 500 Index gain 1.5%, gapping above its 50-day moving average that had been scrutinized over recent days.  The benchmark is now testing the February high around 2785.  Gap support between 2740 and 2750 provides a level for investors to shoot off of as the benchmark attempts to return to all-time high levels.

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For the week, the prior week’s bearish outside reversal candlestick is being offset by a bullish engulfing candlestick, at least on an opening and closing basis.  The week’s range was just short of surpassing the lows and the highs, but, regardless of this rather confusing candlestick pattern, support remains intact around the 20-week average, approximately equivalent to the 100-day average.  Weekly momentum indicators continue to hold in bullish territory with the Relative Strength Index (RSI) and Stochastics above 50 and MACD holding positive ground.  Last week’s bounce also comes around the mid-point to the long-term rising trend channel that has been intact since 2009.  The benchmark is showing its ability to shake off the adversity that rattled investors within the past couple of weeks and focus on the positive tendencies that are common for this time of year. 

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North of the border, stocks did not see the same rally as American counterparts as employment in this country came in less than expectations.  The headline print indicated that 15,400 jobs were added last month, short of the 20,000 gain that was forecasted.  Stripping out the adjustments, 42,300 jobs were added in the month, or a gain of 0.2%, which is half of the average increase of 0.4% for the month.  Strength in part-time employment was offset by weakness in full-time positions, which fell by 0.3%.  The average change in full time employment in February is a gain of 0.3%.  Parsing the details, the results appear even less encouraging as economic performance appears to be negatively diverging from the US.  Weakness in manufacturing, finance, professional services, and retail trade are weighing on the labour market into the first two months of the year, separating from the strength that both Canada and the US have been benefitting from over the past year.  Manufacturing employment is now lower on the year by 2.5%, a notable shift from the 5.1% gain recorded for all of 2017, the best in 15 years.  While a giveback following last year’s strong results may be reasonable, signs of struggle in Canada’s manufacturing economy have already started to emerge, even before the implementation of the Trump tariffs.  The new tax landscape in the US would certainly act as a factor as the Canadian economy becomes less competitive by comparison.  For a complete breakdown of the report, the charts are available in the database at http://charts.equityclock.com/canada-labour-force-survey.

Canada Employment Seasonal Chart

Canada Employment full-time Seasonal Chart Canada Employment part-time Seasonal Chart Canada Unemployment Seasonal Chart

Canada’s equity benchmark, the TSX Composite, closed the session higher by a mere quarter of one percent, a fraction of the gains seen south of the border.  The benchmark continues to struggle with its 200-day moving average, which is typically a big hurdle for longer-term investors.  Zooming out, we can’t help but notice the appearance of what could end up being a head-and shoulders pattern.  Keep in mind the most important part of the bearish setup is a lower longer-term low, which, albeit is possible, has yet to be confirmed.  The Canadian benchmark has underperformed its US counterparts through its period of seasonal strength that has recently come to an end; the benchmark tends to underperform the S&P 500 Index in March and April.  Despite this sluggish historical performance through the months ahead, positive seasonal tendencies in the energy and financial sectors warrant monitoring for potential impacts on this unloved market.

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Sentiment on Friday, as gauged by the put-call ratio, ended bullish at 0.81.

 

 

 

 

 

 

Seasonal charts of companies reporting earnings today:

21Vianet Group, Inc. (VNET) Seasonal Chart Advanced Emissions Solutions, Inc. (ADES) Seasonal Chart American Vanguard Corporation (AVD) Seasonal Chart Amphastar Pharmaceuticals, Inc. (AMPH) Seasonal Chart Avid Bioservices, Inc. (CDMO) Seasonal Chart Bovie Medical Corporation (BVX) Seasonal Chart  InnerWorkings, Inc. (INWK) Seasonal Chart Investors Real Estate Trust (IRET) Seasonal Chart Kronos Worldwide Inc (KRO) Seasonal Chart  Mistras Group Inc (MG) Seasonal Chart National CineMedia, Inc. (NCMI) Seasonal Chart  Tilly's, Inc. (TLYS) Seasonal Chart TTEC Holdings, Inc. (TTEC) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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