Contact | RSS Feed

Stock Market Outlook for May 11, 2018

Benchmarks breaking a pattern of lower-highs.

 

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:

Scholastic Corporation  (NASDAQ:SCHL) Seasonal Chart

Scholastic Corporation (NASDAQ:SCHL) Seasonal Chart

BioCryst Pharmaceuticals, Inc. (NASD:BCRX) Seasonal Chart

BioCryst Pharmaceuticals, Inc. (NASD:BCRX) Seasonal Chart

Amicus Therapeutics, Inc. (NASD:FOLD) Seasonal Chart

Amicus Therapeutics, Inc. (NASD:FOLD) Seasonal Chart

Crawford & Co. (NYSE:CRD-A) Seasonal Chart

Crawford & Co. (NYSE:CRD-A) Seasonal Chart

Newfoundland Capital Corp. Ltd. (TSE:NCC-A) Seasonal Chart

Newfoundland Capital Corp. Ltd. (TSE:NCC-A) Seasonal Chart

CME Group Inc. (NASD:CME) Seasonal Chart

CME Group Inc. (NASD:CME) Seasonal Chart

Amgen, Inc.  (NASDAQ:AMGN) Seasonal Chart

Amgen, Inc. (NASDAQ:AMGN) Seasonal Chart

Envestnet Inc. (NYSE:ENV) Seasonal Chart

Envestnet Inc. (NYSE:ENV) Seasonal Chart

Wellgreen Platinum (TSE:WG) Seasonal Chart

Wellgreen Platinum (TSE:WG) Seasonal Chart

Nature's Sunshine Products, Inc. (NASD:NATR) Seasonal Chart

Nature’s Sunshine Products, Inc. (NASD:NATR) Seasonal Chart

 

 

The Markets

Stocks tacked on another day of strong gains as inflation data came in lighter than expected.  The S&P 500 Index ended higher by 0.94%, closing above short-term resistance at 2717.49, bringing an end to the intermediate trend of lower-highs.  It was during Wednesday’s session that the benchmark broke declining trendline resistance that had constrained the broad market benchmarks for the past few months.  The activity is suggestive that the consolidation pattern that dominated stocks since the January peak has now passed and the resumption of the longer-term rising trend is underway.  A short-term double bottom pattern on the large-cap benchmark calculates upside potential towards 2835, at which point a major hurdle would be presented.  The index gapped lower from its parabolic run at the end of January, providing technical justification to lighten up on positions following the low volatility run-up that spanned the better part of 2017.  In the range between 2840 and 2850, investors are likely to take profits, thereby capping the advance, at least on the first swing.  This is the same range of resistance that we cautioned investors to shoot against in February and March.  Momentum indicators on the large-cap benchmark are pointing higher, suggesting that the path of least resistance over the near-tem is higher.

image

On the economic front, a report on the consumer price index had investors encouraged that inflation was relatively tame in the month of April.  The headline print indicated that CPI was higher by 0.2% last month, below the consensus forecast calling for a 0.3% rise.  The year-over-year rate presently sits at 2.5%, while the rate excluding food and energy sits at 2.1%.  Stripping out the seasonal adjustments, CPI was actually higher by 0.4% in the month, inline with the average change for this time of year.  The year-to-date trend is inline with the historical average, up 1.6% through the end of April.  Less the more volatile components of food and energy, inflation is running a tenth of a percent above the seasonal norm.  While the gap versus the average trend on this look may seem insignificant, this is actually the strongest result since 2009.  Parsing the details, food CPI was generally mixed, although a large spike was apparent in the Other Food Away From Home segment, which jumped to a gain of 2.9% on the year.  The average change is 1.2%.  But what is really impacting the consumer is the substantial increases in the household operations and personal care categories, which are higher by 3.3% and 1.7%, respectively since the year began.  The average gain by this point in the year is 1.1% and 1.0%, respectively.  Another standout in the report is the personal computers and peripheral equipment category, not so much for the gain that is showing, but rather the simple fact that it is higher on the year.  The prices of technology, such as computers, have been in perpetual decline with prices falling by 14.3%, on average, over the course of the calendar year.  Four months into 2018, the price index for this category is higher by two-tenths of a percent, well above the 4.0% decline that is average by the end of April.  This is only the second time in history that a gain through the first four months has been recorded, emphasizing the strong demand for technology as computers increasingly encompass every aspect of our lives and as businesses seek to expand.  We have highlighted a number of datapoints in recent weeks where technology employment, production, and sales are exceptionally strong, equivalent to the late 1990’s.  A new technology wave may be upon us. 

Consumer Price Index for All Urban Consumers: All Items Seasonal Chart

Monthly Consumer Price Index for All Urban Consumers: All Items Data

Consumer Price Index for All Urban Consumers: All Items Seasonal Chart

Consumer Price Index for All Urban Consumers: All Items Less Food and Energy Seasonal Chart CPI - Household operations Seasonal ChartCPI - Personal care Seasonal ChartCPI - Personal computers and peripheral equipment Seasonal Chart

With inflation on the headline print showing a rather subdued result, bond prices pushed higher, along with interest rate sensitive securities.  The utilities sector led Thursday’s gains with the S&P 500 Utilities Sector Index gaining 1.34% by the closing bell.  The utilities benchmark broke below rising trend channel support in recent sessions and Thursday’s rebound puts the benchmark flush against that previous trendline.  The sector tends to hit an important peak on an absolute basis at the beginning of May, capping off a brief seasonal uptick that originated early in March.  The sector was up around 6% from low to high over this period, while the S&P 500 Index was essentially unchanged.  The next period of strength for the sector runs from the end of July through to the beginning of October, representing a strong period relative to the broad market.

image

Utilities Sector Seasonal Chart

UTILITIES Relative to the S&P 500
UTILITIES Relative to the S&P 500

UTILITIES Monthly Averages

Briefly on Natural Gas, the EIA released their look at inventories for the week just past.  The commodity recorded a build of 89 bcf, representing the second increase to inventories this year.  Storage levels are now down by 54.2% year-to-date, well below the 45.0% decline that is average into the first week of May.  The average low to the withdrawal season came about three weeks later than average, presenting somewhat of a bullish backdrop for prices into the period of seasonal strength for the commodity.  The Natural Gas ETF (UNG) closed higher by 2.6% on Thursday, remaining in this consolidation range that spans between $21.56 and $23.37.  Seasonally, the price of natural gas typically rises through the middle of June.

image

image

Natural Gas Futures (NG) Seasonal Chart
FUTURE_NG1 Relative to the S&P 500FUTURE_NG1 Relative to Gold

FUTURE_NG1 Monthly Averages

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

image

 

 

 

Sectors and Industries entering their period of seasonal strength:

10 Year U.S. Treasury Notes Futures (TY) Seasonality
CME_TY1 Relative to the S&P 500CME_TY1 Relative to the Sector

Monthly Seasonal 10 Year U.S. Treasury Notes Futures (TY)

 

 

Seasonal charts of companies reporting earnings today:

Alexco Resource Corp (AXU) Seasonal Chart ArcelorMittal (MT) Seasonal Chart Cambium Learning Group, Inc. (ABCD) Seasonal Chart Celsion Corporation (CLSN) Seasonal Chart  GWG Holdings, Inc (GWGH) Seasonal Chart Thomson Reuters Corp (TRI) Seasonal Chart VEON Ltd. (VEON) Seasonal Chart VolitionRX Limited (VNRX) Seasonal Chart Westport Fuel Systems Inc (WPRT) Seasonal Chart 

 

 

S&P 500 Index

image

image

 

 

TSE Composite

image

image

 

Sponsored By...
Seasonal Advantage Portfolio by CastleMoore

Comments are closed.