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Stock Market Outlook for May 18, 2018

Major treasury ETFs breaking neckline support to significant topping patterns.

 

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:

Seabridge Gold, Inc. (NYSE:SA) Seasonal Chart

Seabridge Gold, Inc. (NYSE:SA) Seasonal Chart

ZYNEX Inc. (OTCMKT:ZYXI) Seasonal Chart

ZYNEX Inc. (OTCMKT:ZYXI) Seasonal Chart

Spire Inc. (NYSE:SR) Seasonal Chart

Spire Inc. (NYSE:SR) Seasonal Chart

RLI Corp. (NYSE:RLI) Seasonal Chart

RLI Corp. (NYSE:RLI) Seasonal Chart

Medicines Co. (NASD:MDCO) Seasonal Chart

Medicines Co. (NASD:MDCO) Seasonal Chart

Technologies of Sterilization (TSE:TOS) Seasonal Chart

Technologies of Sterilization (TSE:TOS) Seasonal Chart

Premier Gold Mines (TSE:PG) Seasonal Chart

Premier Gold Mines (TSE:PG) Seasonal Chart

Klondex Mines (TSE:KDX) Seasonal Chart

Klondex Mines (TSE:KDX) Seasonal Chart

The Southern Company  (NYSE:SO) Seasonal Chart

The Southern Company (NYSE:SO) Seasonal Chart

Coca-Cola Bottling Co. Consolidated (NASD:COKE) Seasonal Chart

Coca-Cola Bottling Co. Consolidated (NASD:COKE) Seasonal Chart

Randgold Resources Ltd. (NASD:GOLD) Seasonal Chart

Randgold Resources Ltd. (NASD:GOLD) Seasonal Chart

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

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

PG&E Corporation  (NYSE:PCG) Seasonal Chart

PG&E Corporation (NYSE:PCG) Seasonal Chart

IAMGOLD Corporation  (TSE:IMG) Seasonal Chart

IAMGOLD Corporation (TSE:IMG) Seasonal Chart

Expedia, Inc (NASD:EXPE) Seasonal Chart

Expedia, Inc (NASD:EXPE) Seasonal Chart

 

Upcoming BNN Appearance:

I will be on BNN’s Market Call Tonight at 6:00pm ET today, May 18th taking your calls on Technical Analysis and Seasonal Investing.  CALL TOLL-FREE 1-855-326-6266,  EMAIL marketcall@bnnbloomberg.ca,  or TWEET @MarketCall  Be sure to send in your video questions for priority response on air.

 

The Markets

Stocks closed mixed on Thursday as headlines crossed that President Trump was pessimistic that trade talks with China would succeed.  The S&P 500 Index shed just less than a tenth of a percent, continuing to digest the breakout gains charted last week.  The 50-day moving average, which had been constraining upside momentum of the benchmark through the first four months of the year, is gradually flattening the longer the benchmark remains above the intermediate hurdle.  Positive intermediate momentum is re-emerging, setting the stage for the next leg higher for stocks.  Downside risks over the near-term as to 50-day moving average, while upside potential is towards the gap highlighted in previous reports around 2840.   Reaction amongst market participants to this upper target is probable as investors that were trapped in positions on the way down use the levels just below the all-time high as a place to trim allocations.

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Turning to the treasury market, major treasury ETFs have broken marginally below long-term levels of trendline support, setting the stage for further weakness.  The iShares 20+ Year Treasury Bond ETF (TLT) broke below support around $117, while the iShares 7 – 10 Year Treasury ETF (IEF) gapped below support around $101.  These levels of previous support also form the basis for necklines to head-and-shoulders topping patterns, the downside implications of which could be significant.  The calculated target on TLT is towards $89, or back to the 2013 lows, and the IEF has a calculated downside target towards $91.50, around the lows seen at the start of 2014.  These would be significant moves in what is generally considered to be a safe haven asset class.  While the downside threats remain clear, it is the pace at which bond prices continue their descent that warrants monitoring.  An swift move lower in prices coinciding with a spike in rates would send a shock throughout the equity market as investors re-price stocks amidst the higher cost of borrowing.  A more gradual decline in prices, alongside a gradual rise in rates, could actually be bullish for stocks given the strong fundamental underpinning in the economy, able to absorb a moderately higher cost of borrowing.  A number of inflation gauges will be monitored closely in the months ahead, but what we’ll be scrutinizing the most is average hourly wages.  The equity market saw a significant downdraft in February following indications that wages were starting to run a little hot around 2.9%, on a year-over-year basis.  It has since moderated around 2.6%, but the non-seasonally adjusted change suggests that the path this year is much higher than that.  Through the months of May and June, wages tend to moderate as lower paid seasonal hires for the summer dilute the average calculation.  Should employers be forced to pay more to attract the workers required given the tight labor market conditions, another hot wage print may be realized, sending investors back into panic mode.  We’ll be on the lookout for this when the next employment situation report is released in a couple week’s time.

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On the economic front, manufacturing reports continue to show extraordinary results, this time with the Philadelphia Fed Business Outlook Survey.  The headline print indicated that general business conditions index jumped to +34.4 from +23.2 previous.  The consensus was for a slight decline to +21.0.  Stripping out the seasonal adjustments, the actual result showed +39.3, which is more than double the +16.6 that is average for the month of May.  The result, while one point below the print recorded this time last year, is among the best May results on record, emphasizing the strength in the manufacturing economy that kicked into high gear last year.  Seasonally, the index of regional manufacturing conditions typically peaks in March, declining through to July amidst the summer factory shutdown period.  So far, signs of tapering growth have yet to be realized.

Philadelphia Manufacturing Business Outlook Survey Seasonal Chart

Sentiment on Thursday, as gauged by the put-call ratio, ended bullish at 0.83.

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Seasonal charts of companies reporting earnings today:

Apollo Investment Corporation (AINV) Seasonal Chart Astrazeneca PLC (AZN) Seasonal Chart Campbell Soup Company (CPB) Seasonal Chart Deere & Company (DE) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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