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Stock Market Outlook for May 22, 2018

Stocks digest recent gains as trade tensions linger.

 

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:

Equity Lifestyle Properties, Inc. (NYSE:ELS) Seasonal Chart

Equity Lifestyle Properties, Inc. (NYSE:ELS) Seasonal Chart

Novavax, Inc. (NASD:NVAX) Seasonal Chart

Novavax, Inc. (NASD:NVAX) Seasonal Chart

Healthcare Services Group (NASD:HCSG) Seasonal Chart

Healthcare Services Group (NASD:HCSG) Seasonal Chart

Power Corporation of Canada  (TSE:POW) Seasonal Chart

Power Corporation of Canada (TSE:POW) Seasonal Chart

Guess?, Inc.  (NYSE:GES) Seasonal Chart

Guess?, Inc. (NYSE:GES) Seasonal Chart

Spire Inc. (NYSE:SR) Seasonal Chart

Spire Inc. (NYSE:SR) Seasonal Chart

Deckers Outdoor Corp. (NYSE:DECK) Seasonal Chart

Deckers Outdoor Corp. (NYSE:DECK) Seasonal Chart

Idacorp, Inc. (NYSE:IDA) Seasonal Chart

Idacorp, Inc. (NYSE:IDA) Seasonal Chart

Douglas Dynamics Inc. (NYSE:PLOW) Seasonal Chart

Douglas Dynamics Inc. (NYSE:PLOW) Seasonal Chart

The Boston Beer Company, Inc.  (NYSE:SAM) Seasonal Chart

The Boston Beer Company, Inc. (NYSE:SAM) Seasonal Chart

American States Water Co. (NYSE:AWR) Seasonal Chart

American States Water Co. (NYSE:AWR) Seasonal Chart

 

 

The Markets

Stocks ended the week on a bit of s soft note as trade tensions between China and the US linger.  The S&P 500 Index shed a quarter of one percent, continuing to consolidate above previous trendline resistance that had constrained upside momentum through the first four months of the year.  Gap resistance charted earlier in the week around 2725 is providing a bit of a cap to the short-term trend.

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On the weekly look of the large-cap benchmark, the benchmark had broken and closed above its 20-week moving average, approximately equivalent to the 100-day moving average, in the previous week, clearing a hurdle that had also acted as a constraint on upside momentum over the past month and a half.  The moving average is currently acting as support, something that investors will be watching closely in the weeks ahead to confirm that the breakout is legitimate.  Momentum indicators on the weekly look continue to hold in bullish territory, attempting to move higher following the slide in the first few months of the year.

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With data in the US light on Friday, we turn to reports released out of Canada with respect to CPI and retail trade.  Starting with April’s report on the Consumer Price Index, the gauge of inflation increased by 0.3% last month, inline with the consensus analyst estimate.  The result is slightly more than the average increase for the fourth month of the year of 0.2%.  Year-to-date, CPI is up 1.9%, six-tenths of a percent above the seasonal norm for this time of year.  Keep in mind that the average calendar year increase in CPI over the past 20 years has been 1.8%, so the gauge of inflation has already surpassed this annual norm only four months into the year.  Gasoline was highlighted by many as being a standout as the amount that consumer pays at the pump increases at a rate that is well above average.  With a gain of 12.6% year-to-date, this is firmly above the 9.1% increase that is average through this spring month.  Seasonally, prices at the pumps typically level off in May and June as the summer driving season gets underway.  Continuing to stand out in the report is mortgage interest costs, which are now higher by 2.2% on the year.  This is the second largest change through the month of April in the past two decades, imposing a toll on the balance sheets of consumers that they have not seen in a long time.  While gas prices receive most of the chatter given the wide publicity and prominence on roadside gas station signs, mortgage interest is one of those hidden expenses that are not readily accounted for, particularly if locked into a variable rate mortgage or if the mortgage is up for renewal.  The pressures on the consumer are building.  Consumers in Canada are paying above average increases for a wide range of categories, including communications, child care, clothing, transportation, health, and alcoholic beverages.   Consumers are going to have to find ways to adapt to this new normal as inflationary pressures are firmly embedded in the economy, both in Canada and the US.  For a complete breakdown of the results, you can view the charts in the database at https://charts.equityclock.com/canada-consumer-price-index-cpi.

Canada CPI - All-items Seasonal Chart

Monthly Canada CPI - All-items Data

Canada CPI - Mortgage interest cost Seasonal ChartCanada CPI - Gasoline Seasonal Chart

Next up was a report on retail trade for the month of March.  The headline print indicated that retail sales increase by 0.6% in the month, well above the consensus analyst estimate that called for a 0.2% rise.  Stripping out the seasonal adjustments, sales actually increased by 21.4%, well above the 18.4% average increase for the third month of the year.  The result puts the year-to-date change 6.8% above the seasonal norm, indicating the ongoing willingness of consumers to spend in this inflationary environment.  Through the first quarter, consumers were buying vehicles, furniture, electronics, personal care items, clothing, and jewellery at an above average rate, encompassing a wide range of discretionary items indicative of healthy consumer sentiment.  Grocery stores was one of the few categories to lag the seasonal norm through the first three months of the year.  Weather may take a toll on April’s result, however.  As we saw with results in the US for April, colder than average temperatures held back purchases of big ticket items, such as vehicles, building materials, and garden equipment.  The same should be expected in Canada when April results are released next month.  This is expected to be a short-term blip in activity and results should improve for May and June.  Sales activity typically wanes through the middle of the year, between June and and September, as the summer slumber takes a toll on auto and garden sales.  For a complete breakdown of results, the charts are available in the database at https://charts.equityclock.com/canada-retail-trade-sales.

Retail trade Seasonal Chart

Monthly Retail trade Data

Motor vehicle and parts dealers Seasonal ChartFurniture stores Seasonal ChartElectronics and appliance stores Seasonal ChartBeer, wine and liquor stores Seasonal ChartClothing and clothing accessories stores Seasonal ChartJewellery, luggage and leather goods stores Seasonal Chart

Sentiment on Friday, as gauged by the put-call ratio, ended bearish at 1.03.

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Sectors and Industries entering their period of seasonal strength:

Live Cattle Futures (LC) Seasonal Chart
FUTURE_LC1 Relative to the S&P 500FUTURE_LC1 Relative to Gold

FUTURE_LC1 Monthly Averages

 

 

Seasonal charts of companies reporting earnings today:

America's Car-Mart, Inc. (CRMT) Seasonal Chart Ferroglobe PLC (GSM) Seasonal Chart Monro, Inc. (MNRO) Seasonal Chart Nordson Corporation (NDSN) Seasonal Chart   Advance Auto Parts Inc (AAP) Seasonal Chart AutoZone, Inc. (AZO) Seasonal Chart Clear Channel Outdoor Holdings, Inc. (CCO) Seasonal Chart Container Store (The) (TCS) Seasonal Chart Cracker Barrel Old Country Store, Inc. (CBRL) Seasonal Chart Dr. Reddy's Laboratories Ltd (RDY) Seasonal Chart Dycom Industries, Inc. (DY) Seasonal Chart Eaton Vance Corporation (EV) Seasonal Chart  International Game Technology (IGT) Seasonal Chart Intuit Inc. (INTU) Seasonal Chart Kohl's Corporation (KSS) Seasonal Chart  Photronics, Inc. (PLAB) Seasonal Chart Radcom Ltd. (RDCM) Seasonal Chart Red Robin Gourmet Burgers, Inc. (RRGB) Seasonal Chart TJX Companies, Inc. (The) (TJX) Seasonal Chart Toll Brothers, Inc. (TOL) Seasonal Chart Transcat, Inc. (TRNS) Seasonal Chart Urban Outfitters, Inc. (URBN) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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