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Stock Market Outlook for March 15, 2018

S&P 500 Index falling back to gap support as the 50-day moving average once again becomes a factor.

 

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:

Huaneng Power Intl, Inc. (NYSE:HNP) Seasonal Chart

Huaneng Power Intl, Inc. (NYSE:HNP) Seasonal Chart

Casella Waste Systems, Inc. (NASD:CWST) Seasonal Chart

Casella Waste Systems, Inc. (NASD:CWST) Seasonal Chart

Horizon North Logistics (TSE:HNL) Seasonal Chart

Horizon North Logistics (TSE:HNL) Seasonal Chart

Titan Intl, Inc. (NYSE:TWI) Seasonal Chart

Titan Intl, Inc. (NYSE:TWI) Seasonal Chart

Franklin Covey Co. (NYSE:FC) Seasonal Chart

Franklin Covey Co. (NYSE:FC) Seasonal Chart

Intuitive Surgical, Inc. (NASD:ISRG) Seasonal Chart

Intuitive Surgical, Inc. (NASD:ISRG) Seasonal Chart

Select Medical Holdings Corp. (NYSE:SEM) Seasonal Chart

Select Medical Holdings Corp. (NYSE:SEM) Seasonal Chart

 

 

The Markets

Stocks in the US closed firmly lower on Wednesday as investors remained concerned by the prospect of a trade war with China.  Shares of Industrial and Material companies, two sectors most exposed to the potential trade spat, led the market decline.  The S&P 500 Industrial and Materials sector benchmarks posted losses of 1.13% and 1.32%, respectively, turning lower from around their 50-day moving averages.  Momentum indicators on these two economically sensitive sectors are rolling over as investors trim their exposure to these areas that had previously seen significant benefits surrounding the passage of tax reform at the end of last year.  Underperformance versus the broad market has been apparent since the mid-January peak in stocks.  Seasonally, the industrial and material sectors typically outperform the market through the spring in the midst of the ramp-up in manufacturing activity, but the threat of tariffs has shed a dark cloud over this trade until further clarity is obtained.

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Industrials Sector Seasonal Chart

INDUSTRIAL Relative to the S&P 500
INDUSTRIAL Relative to the S&P 500

INDUSTRIAL Monthly Averages

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Materials Sector Seasonal Chart

MATERIALS Relative to the S&P 500
MATERIALS Relative to the S&P 500

MATERIALS Monthly Averages

Looking at the current state of the S&P 500 Index, the benchmark has retraced virtually all of Friday’s breakout gains, now testing support around the open gap that immediately preceded Friday’s surge.  The 50-day moving average at 2747 is once again proving to be the level that investors are flocking to in this period of uncertainty.  A break of this important pivot point would likely coincide with significant selling pressures.  The bulls need to hold gap support between 2740 to 2750 in order to mitigate the threat of another test of the early February lows.  In a couple of weeks, attention will likely shift from the geopolitical concerns towards corporate fundamentals as earnings season gets underway.  This distraction typically proves to be positive for equity markets as investors bid stocks higher into the event.

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On schedule for this time of week is the petroleum status report for the week ending March 9th.  The EIA is indicating that 5.0 million barrels of oil were added to stockpiles last week, but this was more than offset by the drawdown in product inventories, which, in the case of gasoline, saw a 6.3 million barrel draw.  The result was enough to quickly deflate the days of supply of gasoline by over a full day to 26.6, just slightly above the seasonal norm for this time of year of 26.4.  Strong demand, as gauged by the change in the level of product supplied, elevated the level of production, which are both trending well above average for the year.  This strong demand continues to be conducive to keeping the stockpiles of oil under control, even as domestic production of the raw input climbs to another record high.  Seasonally, oil inventories typically reach a peak for the year in May, but should the strong demand trends for the resulting products continue, an earlier than average peak may be on the horizon, even at the current pace of production.

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 closed little changed on Wednesday, continuing to battle with a short-term pennant pattern, which is typically a continuation setup.  Seasonally, oil typically gains through the spring as demand for the products improves.

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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

On the economic front, a report on retail sales is providing doubt that the recently enacted tax cuts and announced bonuses will boost consumer spending this year.  The headline print for February’s Retail Trade indicated that sales were lower by 0.1%, a significant divergence from the 0.4% increase forecasted by analysts.  Less gas and autos, the result shifted positive by three-tenths of one percent, which was still short of estimates that called for a 0.4% gain.  Stripping out the seasonal adjustments, sales were actually lower by 2.1%, much lower than the 0.1% decline that is average for the month of February.  The result puts the year-to-date trend three-tenths of one percent below the average trend, not far off from the result seen this time last year.  Its unclear the impact, if any, that unseasonably warm weather had on results, but the areas of lag are evident in the auto, gasoline, furniture, and health stores, while clothing, typically most sensitive to weather, showed above average results.  Colder than average temperatures in the present month, March, could restrict activity in this typically strong month for retail activity.  The consumer accounts for approximately 70% of GDP and this report pours cold water on the prospect of a strong print for the first quarter. 

Retail Trade: Total Seasonal Chart

Monthly Retail Trade: Total Data

Retail Trade: Total Seasonal Chart

Retail Trade: Nonstore Retailers Seasonal Chart Retail Trade: Auto and Other Motor Vehicles Seasonal Chart Retail Trade and Food Services, excluding Auto Seasonal Chart Retail Trade: Furniture and Home Furnishings Stores Seasonal Chart Retail Trade: Building Materials, Garden Equipment and Supplies Dealers Seasonal Chart Retail and Food Services Sales Seasonal Chart Retail Trade: Food and Beverage Stores Seasonal Chart Retail Trade: Electronics and Appliance Stores Seasonal Chart Retail Trade: Health and Personal Care Stores Seasonal Chart Retail Trade: Sporting Goods, Hobby, Book, and Music Stores Seasonal Chart Retail Trade: Miscellaneous Store Retailers Seasonal Chart Retail Trade: General Merchandise Stores Seasonal Chart Retail Trade: Motor Vehicle and Parts Dealers Seasonal Chart Retail Trade: Clothing and Clothing Accessory Stores Seasonal Chart Retail Trade: Gasoline Stations Seasonal Chart Retail Trade: Department Stores (Excluding Leased Departments) Seasonal Chart Retail Trade: Grocery Stores Seasonal Chart Retail Trade: Food Services and Drinking Places Seasonal Chart

Retail stocks reacted negatively to the result with SPDR S&P Retail ETF (XRT) falling by almost six-tenths of one percent.  The industry ETF has rolled over from its 50-day moving average, which itself is also showing signs of decline.  Seasonally, the sector has historically shown gains through to mid-April.

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Retail Industry Seasonal Chart
S5RETL Index Relative to the S&P 500S5RETL Index Relative to the Sector

S5RETL Index Monthly Averages

Sentiment on Wednesday, as gauged by the put-call ratio, ended bearish at 1.05.

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Seasonal charts of companies reporting earnings today:

Adobe Systems Incorporated (ADBE) Seasonal Chart   Avid Technology, Inc. (AVID) Seasonal Chart B2Gold Corp (BTG) Seasonal Chart Broadcom Limited (AVGO) Seasonal Chart Cara Therapeutics, Inc. (CARA) Seasonal Chart Dollar General Corporation (DG) Seasonal Chart Fortuna Silver Mines Inc. (FSM) Seasonal Chart Gastar Exploration Inc. (GST) Seasonal Chart Genesco Inc. (GCO) Seasonal Chart  Infinity Pharmaceuticals, Inc. (INFI) Seasonal Chart Jabil Inc. (JBL) Seasonal Chart Overstock.com, Inc. (OSTK) Seasonal Chart Revlon, Inc. (REV) Seasonal Chart Rockwell Medical, Inc. (RMTI) Seasonal Chart Shenandoah Telecommunications Co (SHEN) Seasonal Chart Superior Industries International, Inc. (SUP) Seasonal Chart Ulta Beauty, Inc. (ULTA) Seasonal Chart Zumiez Inc. (ZUMZ) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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