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Stock Market Outlook for May 14, 2018

Year-to-date change in employment in Canada the weakest since the last recession.

 

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:

Community Trust Bancorp, Inc. (NASD:CTBI) Seasonal Chart

Community Trust Bancorp, Inc. (NASD:CTBI) Seasonal Chart

Lions Gate Entertainment Corp. (NYSE:LGF-A) Seasonal Chart

Lions Gate Entertainment Corp. (NYSE:LGF-A) Seasonal Chart

Under Armour, Inc. (NYSE:UAA) Seasonal Chart

Under Armour, Inc. (NYSE:UAA) Seasonal Chart

Bank of Montreal  (TSE:BMO) Seasonal Chart

Bank of Montreal (TSE:BMO) Seasonal Chart

Canadian Western Bank  (TSE:CWB) Seasonal Chart

Canadian Western Bank (TSE:CWB) Seasonal Chart

California Water Service Group (NYSE:CWT) Seasonal Chart

California Water Service Group (NYSE:CWT) Seasonal Chart

Teck Resources Ltd. (NYSE:TECK) Seasonal Chart

Teck Resources Ltd. (NYSE:TECK) Seasonal Chart

Humana Inc.  (NYSE:HUM) Seasonal Chart

Humana Inc. (NYSE:HUM) Seasonal Chart

Fossil, Inc.  (NASDAQ:FOSL) Seasonal Chart

Fossil, Inc. (NASDAQ:FOSL) Seasonal Chart

Cisco Systems, Inc.  (NASDAQ:CSCO) Seasonal Chart

Cisco Systems, Inc. (NASDAQ:CSCO) Seasonal Chart

 

 

The Markets

Stocks closed the week on a bit of a mixed note as investors digested the strength that had been achieved in recent sessions.  The S&P 500 Index closed higher by just less than two-tenths of one percent, continuing to hold above previous short-term resistance around 2717. The 20-day moving average of the benchmark is quickly converging back with its 50-day in what looks to becoming an imminent crossover event.  The short-term moving average has been trading below its longer-term counterpart since mid-February as the benchmark held within this massive consolidation range that was broken in the last few days.  While we don’t believe that the crossover itself has any significance as a trigger, the simple fact that the shorter-term moving average has been below the longer-term norm just reiterates the negative momentum impacting the market, which was one of the things that suggested to us that the February decline was not a one and done event.  While it may take a while to achieve new highs, the benchmark is providing some good indications that the consolidation phase has concluded and that the path of least resistance, barring any catalysts to the contrary, is higher.

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For the week, the large-cap benchmark was higher by 2.41%, pushing the index above its 20-week moving average.  Much like the bounds presented by the 50 and 200-day moving averages on the daily chart, the 20 and 50-week moving averages showed the significant hurdles on the weekly.  Within a certain allowance, the benchmark had been holding the 20-week moving average as support until the middle of March when the benchmark took another leg lower during one of the strongest months of the year for stocks.  The boundary that was previous support earlier in the year, then resistance  over the past month, is flipping back to a potential support position.  Weekly momentum indicators remain in bullish territory and are showing signs of curling higher again.  The benchmark has worked off the significant overbought conditions that were apparent in the middle of January, following the passing of the tax reform legislation in the US.

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Investors were risk-seeking in the week just past with key cyclical sectors charting gains exceeding 2% for the week.  Energy once again topped the leaderboard, but also financial, technology, and industrial saw gains surpass 3% over the five-day span.  Utilities and staples, the defensive sectors of the market, closed in the red.  Risk sentiment had been soured for many months, but slowly signs are emerging that the tide is changing, conducive to moving aggregate benchmarks higher.  This is counter to average seasonal patterns that call for a shift towards risk aversion starting from around the beginning of May.  But after a period between February and April where investors adopted a pessimistic view of the state of the market and hedged portfolios accordingly, an unwind of this risk-off trade threatens to maintain this inverse correlation to average seasonal price tendencies, at least over the near-term. 

Weekly change in S&P Sectors
Ticker Name % Change
XLE Energy Sector Fund 3.9%
XLF Financial Sector Fund 3.63%
XLI Industrial Sector Fund 3.39%
XLK Technology Sector Fund 3.34%
XLV Health Care Sector Fund 2.51%
XLB Materials Sector Fund 1.89%
XLY Cyclicals Sector Fund 0.84%
XLP Consumer Staples Sector Fund -0.3%
XLU Utilities Sector Fund -2.19%

 

On the economic front, Statscan released their monthly look at the state of the labour market in Canada.  The headline print indicated that employment declined by 1,100 positions in April, a significant miss versus estimates calling for a gain of 16,000.  The unemployment rate held steady at 5.8%.  Stripping out the seasonal adjustments, 100,300 jobs were added in the month, or a gain of 0.5%, which is below the 0.7% increase that is average for the fourth month of the calendar year.  Full-time employment accounted for all of the gain, rising by 169,300, while part-time employment fell by 69,000.  Full-time employment is trending marginally above average on the year, while part-time employment is trending well below the seasonal norm.  Overall, employment is showing a year-to-date change that is half of one percent below the seasonal average trend, representing the worst performance since 2009.  The deviation of the strength between the US and Canada continues to grow as activity increasingly leans south of the border given its more competitive tax landscape.  One area where this is easily apparent is manufacturing.  In 2017, manufacturing activity realized synchronized global growth, rising above average in a number of countries, including Canada and the US.  Above average gains to manufacturing employment was the result.  But in this new tax era for the US, manufacturing employment in the US is showing one of the best growth performances on record, while Canadian manufacturing employment  is showing the third worst change through the first four months of the year in the past two decades.  Wholesale and retail trade employment in Canada is also reverting from its above average path charted in 2017, now trending 2.0% below average.  Retail often encompasses a large share of part-time employment.  Another area of weakness is the finance, insurance, and real estate category, which is trending 3.1% below the seasonal norm.  On the flip side, the bright spots are in the area of agriculture, utilities, transportation, health care, and food services, which offset some of the concerns pertaining to the consumer and business aspects of the economy.  Overall, while the report could be classified as being “mixed,” there remains underlying concerns that activity is being pulled away from Canada and into the US, potentially threatening the strength of the Canadian economy in the year(s) ahead.  For a complete breakdown of the report, the charts have been uploaded to the database at https://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 Employment: Manufacturing Seasonal ChartCanada Employment: Wholesale and retail trade Seasonal Chart

Sentiment on Friday, as gauged by the put-call ratio, ended close to neutral at 0.97.

 

 

 

 

Seasonal charts of companies reporting earnings today:

Agilent Technologies, Inc. (A) Seasonal Chart Altair Engineering Inc. (ALTR) Seasonal Chart Amyris, Inc. (AMRS) Seasonal Chart China Lodging Group, Limited (HTHT) Seasonal Chart Eastside Distilling, Inc. (EAST) Seasonal Chart Hollysys Automation Technologies, Ltd. (HOLI) Seasonal Chart LightPath Technologies, Inc. (LPTH) Seasonal Chart  Rexnord Corporation (RXN) Seasonal Chart  Tidewater Inc. (TDW) Seasonal Chart Vertex Energy, Inc (VTNR) Seasonal Chart Vipshop Holdings Limited (VIPS) Seasonal Chart VOXX International Corporation (VOXX) Seasonal Chart Westwater Resources, Inc. (WWR) Seasonal Chart WidePoint Corporation (WYY) Seasonal Chart 

 

 

S&P 500 Index

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TSE Composite

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