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Stock Market Outlook for March 29, 2018

REITs bouncing between support and resistance within period of seasonal strength.

 

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:

ATRION Corp. (NASD:ATRI) Seasonal Chart

ATRION Corp. (NASD:ATRI) Seasonal Chart

Scientific Games Corp.  (NASDAQ:SGMS) Seasonal Chart

Scientific Games Corp. (NASDAQ:SGMS) Seasonal Chart

CAE, Inc.  (TSE:CAE) Seasonal Chart

CAE, Inc. (TSE:CAE) Seasonal Chart

HSBC Holdings PLC (NYSE:HSBC) Seasonal Chart

HSBC Holdings PLC (NYSE:HSBC) Seasonal Chart

GlaxoSmithKline plc (ADR) (NYSE:GSK) Seasonal Chart

GlaxoSmithKline plc (ADR) (NYSE:GSK) Seasonal Chart

Petrochina Co. (NYSE:PTR) Seasonal Chart

Petrochina Co. (NYSE:PTR) Seasonal Chart

ATS Automation Tooling Systems Inc. (TSE:ATA) Seasonal Chart

ATS Automation Tooling Systems Inc. (TSE:ATA) Seasonal Chart

Apartment Investment and Management Co.  (NYSE:AIV) Seasonal Chart

Apartment Investment and Management Co. (NYSE:AIV) Seasonal Chart

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

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

American Express Company (NYSE:AXP) Seasonal Chart

American Express Company (NYSE:AXP) Seasonal Chart

 

 

The Markets

Stocks dipped slightly on Wednesday as markets maintained a risk-off bias going into month-end.    REITs, Consumer Staples, and Health Care topped the leaderboard as investors continued to flee from some of the FANG names, notably Amazon and Netflix.  The MSCI US REIT Index added over 2%, coming back to test its declining 50-day moving average.  The sector was hit through the first month of the year as the cost of borrowing jumped, pushing the yield on the 10-year treasury note very close to resistance at 3%.  Support on the REIT index has been solid around 1010 ever since the lows hit in February.  Seasonally, REITs benefit from strength in March and April, encompassing the spring selling season for the housing market.  The outperformance versus the market since the end of February has certainly been a benefit to seasonal traders.

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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

The strength in US REITs also benefitted counterparts north of the border with the S&P/TSX Capped REIT Index adding just over one percent.  Gap resistance around 301 has proven to be a significant hurdle over the past couple of months, but support around the 200-day moving average may give the market sector the base it needs to move higher.  Momentum indicators have advanced into bullish territory and performance relative to market benchmarks has been firmly positive since the start the start of February, despite all of the concerns pertaining to rising interest rates.  Longer-term, the Canadian REIT benchmark is closing in on the peak of a triangle pattern, the lower limit of which was violated briefly in February.  A break would likely see significant follow-through in the direction of the move.

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S&P/TSX Capped Real Estate Index Seasonal Chart

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

$SPTRE Monthly Averages

The downfall in the technology sector in recent week has taken a toll on benchmarks in the US, which are heavily weighted towards the market segment.  This has allowed stocks outside of the US to outperform, forcing investors to shift their focus more internationally.  The MSCI EAFE, while remaining around the lows of the year, has significantly outperformed the S&P 500 Index since early March, in part due to the 6% weighting in Technology for the European benchmark, compared with the approximately 25% weight in the S&P 500 Index.  The EAFE remains in this intermediate consolidation range than has seen a series of lower highs since the January peak and a break of key psychological support around 2000 could see a swift move lower.  Seasonally, the MSCI EAFE has outperformed the S&P 500 Index in 60% of Aprils over the past 20 years in what has been a strong month for risk assets.

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As always for this mid-week session, the Energy Information Administration (EIA) released its tally of oil inventories for the week prior.  The EIA indicated that oil inventories expanded by 1.6 million barrels last week, while gasoline inventories declined by 3.5 million barrels.  The result continued to eat away at the days of supply of each commodity with oil falling by a third of a day to 26.1 and gasoline falling by two-thirds of a day to 25.6, inline with the seasonal average.  Oil days of supply peaked at 26.9 early in March and has been declining for the past two weeks, hinting that the seasonal peak in supplies as a factor of demand has been charted, well ahead of the average peak at the end of March.  Inventories themselves tend to peak in the middle of May, suggesting more builds in stockpiles should be expected in the weeks ahead.  The pace of growth in ending stocks of crude has been well below average this year, a welcome change versus the above average growth that has been consistent through the first quarter over the past ten years.  Domestic production of oil continues to rise and imports in the latest week were firmly higher, but this had little impact on storage levels given the strong rate of production for the underlying products.  Production of finished motor gasoline hit the highest level of the year last week, continuing to rise well ahead of the average start to the seasonal uptrend through April and May.  Refiners are attempting to keep pace with the above average gains in the level of product supplied, a gauge of demand.

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 results of the EIA report remain conducive to supporting the price of oil around these multi-year highs, but with the US dollar index firmly higher on Wednesday, the price of oil pulled back slightly on the day.  A double top around $66.50 could halt the near-term advance, particularly if the dollar strength persists.  Seasonally, the price of oil typically climbs through the spring into the start of the summer driving season.

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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 US International Trade was released before Wednesday’s opening bell.  The headline print indicated that exports increased by 2.2% in February, while imports increased by 1.4%.  The result kept the trade deficit for the month relatively unchanged at $75.4 Billion.  The consensus called for a deficit of $74.0 Billion.  Stripping out the seasonal adjustments, exports actually increased by 2.1%, while imports declined by 8.1%.  The average change for each in the second month of the year is +2.0% and –4.3%, respectively.  The result leaves the year-to-date change in exports below its average trend, while imports relinquished the above average pace that was realized in January.  While imports may be shifting in a direction that the Trump administration may want to see, exports still leave much to be desired.  Diving through the details of the export side, capital goods and food continue to act as a drag, while the consumer goods and auto categories are maintaining an above average pace.  Europe recently reported that its Purchasing Managers Index (PMI), a gauge of manufacturing activity, continued to decline in March, coming in below expectations.  It is suggested that the strength in the global manufacturing economy has reached a peak, weighing on exports related to this activity. Export activity in the US tends to hit an important peak in the month of March as the spring manufacturing rebound ramps up following the colder winter months.

US International Trade - Imports Seasonal Chart

Monthly US International Trade - Imports Data

US International Trade – Imports Seasonal Chart

US International Trade - Exports Seasonal Chart

Monthly US International Trade - Exports Data

US International Trade – Exports Seasonal Chart

US Foods, Feeds, Beverages Exports Seasonal Chart US Industrial Supplies Exports Seasonal Chart US Capital Goods Exports Seasonal Chart US Automotive Vehicles, etc. Exports Seasonal Chart US Consumer Goods Exports Seasonal Chart

The peak in growth for the manufacturing sector has led to a pullback in the price of copper since the year began, falling amidst positive seasonal tendencies at this time of year.  The price of the commodity is back to around longer-term support at the rising 200-day moving average, a break of which could see a calculated move lower to around previous resistance at $2.70.  Momentum indicators are attempting to hold above oversold territory.  Seasonally, the price of copper tends to peak at the end of April, on average.

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Copper Futures (HG) Seasonal Chart
FUTURE_HG1 Relative to the S&P 500FUTURE_HG1 Relative to Gold

FUTURE_HG1 Monthly Averages

Sentiment on Wednesday, as gauged by the put-call ratio, ended bearish at 1.35.  Investors remain very cautious of this market, which , from a contrarian point of view, has typically been positive for stocks.

 

 

Seasonal charts of companies reporting earnings today:

Constellation Brands Inc (STZ) Seasonal Chart Fang Holdings Limited (SFUN) Seasonal Chart Galectin Therapeutics Inc. (GALT) Seasonal Chart Lindsay Corporation (LNN) Seasonal Chart Medley Management Inc. (MDLY) Seasonal Chart Movado Group Inc. (MOV) Seasonal Chart Remark Holdings, Inc. (MARK) Seasonal Chart SCIENCE APPLICATIONS INTERNATIONAL CORPORATION (SAIC) Seasonal Chart Sigma Designs, Inc. (SIGM) Seasonal Chart Synnex Corporation (SNX) Seasonal Chart The Finish Line, Inc. (FINL) Seasonal Chart Titan Machinery Inc. (TITN) Seasonal Chart voxeljet AG (VJET) Seasonal Chart Worthington Industries, Inc. (WOR) Seasonal Chart 

 

 

S&P 500 Index

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TSE Composite

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