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Stock Market Outlook for March 22, 2018

Flag pattern maturing; watch for the direction of the break.

 

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:

Cenveo Inc. (NASD:CVO) Seasonal Chart

Cenveo Inc. (NASD:CVO) Seasonal Chart

Verint Systems, Inc. (NASD:VRNT) Seasonal Chart

Verint Systems, Inc. (NASD:VRNT) Seasonal Chart

Graco, Inc. (NYSE:GGG) Seasonal Chart

Graco, Inc. (NYSE:GGG) Seasonal Chart

Thermo Fisher Scientific Inc.  (NYSE:TMO) Seasonal Chart

Thermo Fisher Scientific Inc. (NYSE:TMO) Seasonal Chart

Rogers Communications, Inc. (NYSE:RCI) Seasonal Chart

Rogers Communications, Inc. (NYSE:RCI) Seasonal Chart

Movado Group, Inc. (NYSE:MOV) Seasonal Chart

Movado Group, Inc. (NYSE:MOV) Seasonal Chart

H. B. Fuller Co. (NYSE:FUL) Seasonal Chart

H. B. Fuller Co. (NYSE:FUL) Seasonal Chart

Pioneer Energy Services Corp. (NYSE:PES) Seasonal Chart

Pioneer Energy Services Corp. (NYSE:PES) Seasonal Chart

 

 

The Markets

Stocks in the US closed marginally lower on Wednesday as investors reacted to comments from Fed Chair Jerome Powell.  The Fed raised the overnight rate by a quarter of a percent, inline with expectations.  But the upgrade to the economy and increased expectations for the fed funds rate in 2019 gave the perception of a more hawkish fed, leading investors to sell stocks into the close.  The S&P 500 Index shed just less than two-tenths of one percent, falling from gap resistance that was tested at the highs of the session.  Moving average resistance at the 20 and 50-day is also keeping a lid on the upside momentum of this market.  The appearance of a bear-flag setup is becoming mature, suggesting a resolution should soon be expected.  The short-term consolidation range spans from 2710 on the downside to 2820 on the upside.  A move beyond either of these limits is likely to see significant follow-through in the direction of the break.

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On schedule for the Wednesday session, the EIA released their tally of oil and gas inventories for the week just past.  The report indicated that oil inventories declined by 2.6 million barrels, while gasoline declined by 1.7 million barrels.  The result stripped around half of a day of supply of each commodity, hinting of an earlier than average peak to the days of supply of oil.  Supply of the raw input now sits around three days above the seasonal norm, but, with demand for products remaining strong, this spread may start to narrow going into the spring.  Above average growth in the domestic production of oil remains the push-back from achieving a quicker return to normal levels.  Seasonally, oil inventories typically rise into the month of May.  As for gasoline, the 26.2 days of supply is approximately inline with seasonal norms.  The above average levels of supply seen at the start of the month have quickly been alleviated as production and product supplied, a gauge of demand, jump ahead of the spring season.  Supplies of gasoline typically decline through the spring and summer as driving season gets underway (chart of Vehicle Miles Travelled below).

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 bullish inventory report provided an additional lift to the price of oil, which is moving above the pennant, continuation pattern highlighted last week.  The intermediate-term trend is that of higher-highs and higher-lows, suggesting a move above the January peak around $66.66 may be in store.  Seasonally, the price of oil typically rises through to the start of May.

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Crude Oil Futures (CL) Seasonal Chart

The jump in the price of the commodity spiked energy stocks on both sides of the border.  The S&P 500 Energy sector index moved back above its flattening 200-day moving average, while the S&P/TSE Energy sector index moved back to and tested the equivalent hurdle.  A short-term double-bottom pattern on the Canadian benchmark projects upside to around $192, or around 6.5% above Wednesday’s close.  In addition to the moving averages, horizontal resistance at 181 is directly overhead.   Seasonally, the energy sector tends to rise through to the start of May.

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Energy Sector Seasonal Chart

ENERGY Relative to the S&P 500
ENERGY Relative to the S&P 500

ENERGY Monthly Averages

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S&P/TSX Capped Energy Seasonal Chart

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

$SPTEN Monthly Averages

On the economic front, sales of existing homes rebounded slightly in February, but not enough to maintain the above average pace that was realized in January.  The headline print indicated that sales of new homes rebounded by 3.0% last month to a seasonally adjusted annual rate of 5.54 million.  The consensus estimate was for a print of 5.42 million.  Stripping out the seasonal adjustments, sales in this segment of the housing market actually gained 1.9%, well short of the 5.3% average gain for the second month of the year.  The result has left the year-to-date change 1.9% below the seasonal norm early in this new year, weighed down by weak results in the North-east and Midwest.  As for prices, despite an above average increase in inventories for the month, prices continue to trend above the seasonal norm, now 1.5% above average through the first two months of the year.  Inventories are higher by 9.3%, coming close to doubling the 5.5% average increase by the end of February.  The lack of inventory throughout 2017 was a contributing factor to the above average gains in prices over the same timeframe, but an injection of available units from which to buy could turn down the heat in the housing market in the year ahead.  Headwinds pertaining to rising mortgage rates are battling the positive influence of a robust jobs market, possibly leading to some push and pull in activity in 2018.  Seasonally, sales of existing homes typically ramp-up between March and June as the spring buying period draws buyers out of hibernation, but with the inclement weather that has been common along the east coast, don’t be surprised to see another below average result in the next report.

Existing Home Sales Seasonal Chart

Monthly Existing Home Sales Data

Existing Home Sales Seasonal Chart

Existing Home Sales - Northeast Seasonal Chart Existing Home Sales - Midwest Seasonal Chart Existing Home Sales - West Seasonal Chart Existing Home Sales - South Seasonal Chart

Inventory of Existing Homes for Sale Seasonal Chart

Inventory of Existing Homes for Sale Seasonal Chart

Median Sales Price of Existing Homes Seasonal Chart

Median Sales Price of Existing Homes Seasonal Chart

Also released on Wednesday was the latest batch of transportation data from the Bureau of Transportation Statistics.  Focussing on one of the categories that we always take interest in, public transit ridership declined by 4.8% in 2017, 5.6% below the average calendar year change.  Now you may ask yourself what the importance of this indicator is.  Quite simply, it is a gauge of the financial stress facing consumers as they seek to get to work or otherwise.  During periods of financial strain, public transit ridership tends to rise above average as more people leave the car at home and choose to save money by taking this more economical mode of transportation.  The opposite is true when times are good.  The below average pace through 2017 suggests that consumers are not feeling the pinch in their budgets, an indication of healthy economic conditions.  This indicator will warrant closer attention  the longer we progress in this economic cycle as signs of consumer strain are sought, a leading indication that a recession is looming.

Public Transit Ridership Seasonal Chart

Vehicle Miles Traveled Seasonal ChartRail Freight Intermodal Traffic Seasonal Chart Air Revenue Passenger Miles Seasonal Chart Natural Gas Consumption Seasonal Chart Rail Freight Carloads Seasonal Chart Tonnage for Internal U.S. Waterways Seasonal Chart Pipeline Petroleum Movement Seasonal Chart

Sentiment on Wednesday, as gauged by the put-call ratio, ended bearish at 1.16.

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Seasonal charts of companies reporting earnings today:

Accenture plc (ACN) Seasonal Chart  Carnival Corporation (CCL) Seasonal Chart Cato Corporation (The) (CATO) Seasonal Chart Cintas Corporation (CTAS) Seasonal Chart Commercial Metals Company (CMC) Seasonal Chart ConAgra Brands, Inc. (CAG) Seasonal Chart Darden Restaurants, Inc. (DRI) Seasonal Chart G-III Apparel Group, LTD. (GIII) Seasonal Chart JinkoSolar Holding Company Limited (JKS) Seasonal Chart KB Home (KBH) Seasonal Chart Lands' End, Inc. (LE) Seasonal Chart Micron Technology, Inc. (MU) Seasonal Chart Neogen Corporation (NEOG) Seasonal Chart Nike, Inc. (NKE) Seasonal Chart Nomad Foods Limited (NOMD) Seasonal Chart  Superconductor Technologies Inc. (SCON) Seasonal Chart The Michaels Companies, Inc. (MIK) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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