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Stock Market Outlook for May 23, 2018

Energy sector providing warning as period of seasonal strength for Oil concludes.

 

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:

Citizens, Inc. (NYSE:CIA) Seasonal Chart

Citizens, Inc. (NYSE:CIA) Seasonal Chart

Quidel Corp. (NASD:QDEL) Seasonal Chart

Quidel Corp. (NASD:QDEL) Seasonal Chart

Orocobre Ltd. (OTCMKT:OROCF) Seasonal Chart

Orocobre Ltd. (OTCMKT:OROCF) Seasonal Chart

Westshore Terminals Investment Corp (TSE:WTE) Seasonal Chart

Westshore Terminals Investment Corp (TSE:WTE) Seasonal Chart

Chesapeake Utilities Corp. (NYSE:CPK) Seasonal Chart

Chesapeake Utilities Corp. (NYSE:CPK) Seasonal Chart

Kaman Corp. (NYSE:KAMN) Seasonal Chart

Kaman Corp. (NYSE:KAMN) Seasonal Chart

 

 

The Markets

Stocks turned lower on Tuesday as geopolitical concerns lingered.  The S&P 500 Index shed just over three-tenths of one percent, closing a gap that was opened in the previous session.  On the hourly chart of the large-cap benchmark, 2720 is becoming a level to watch.  The benchmark gapped below this level just over one week ago, only to see a subsequent gap higher above the same level on Monday.  The benchmark ended just above this pivot point at Tuesday’s close, having turned lower from resistance at 2742.  A move below 2710 would suggest a double-top pattern, which projects short-term downside potential to around 2660.  Headlines are once again dominating the trading action now that earnings season is predominantly complete, leaving investors to the whims of comments released out of the White House.  Over the coming days, traders will start to leave their desks for the first long weekend of summer in the US and the sessions surrounding this event typically have a positive bias.  Traders will typically complete their month-end transactions and cover tactical short bets that pose a higher risk while market participants attempt to enjoy some rest and relaxation.

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One of the seasonal trades that typically concludes around the Memorial Day holiday is oil, which gains, on average between February 12 and May 21.  The trade took off right on cue this year, gaining a stellar 22.2% over the approximately three-month span.  Geopolitical risks obviously helped.  Risks aside, it is around this time of year when the level of production of gasoline typically peaks as the growth in demand for product hits cruising altitude ahead of the summer driving season.  The result leads to a flattening of the average price slope for oil, causing the stocks of producers to flat-line as well.  The S&P 500 Energy Sector Index gave a solid signal to book profits during Tuesday’s session.  The benchmark charted a reversal candlestick around resistance of 580, signalling investor reluctance to initiate new positions around this overbought level.  The Relative Strength Index (RSI) has just moved below 70, triggering a sell signal.  Downside follow-through in Wednesday’s session would confirm a top, at least in the short-term.  A period of consolidation may be in order, perhaps allowing investors to pick up new positions when the next period of strength for the sector rolls around in the July/August timeframe.  We’ll receive insight as to the state of petroleum inventories during Wednesday’s session, the reaction to which will be heavily scrutinized.

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Crude Oil Futures (CL) Seasonal Chart

FUTURE_CL1 Monthly Averages

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Energy Sector Seasonal Chart

ENERGY Relative to the S&P 500
ENERGY Relative to the S&P 500

ENERGY Monthly Averages

The downturn in the energy sector on Tuesday also took a toll on the TSX Composite, which in recent months had been outperforming US counterparts due to its energy commodity exposure.  A similar reversal candlestick provides warning that the overbought rally has hit a peak, at least in the short-term.  Momentum indicators are showing early signs of rolling over, including the relative strength index (RSI), which topped out close to 80 in the past couple of sessions.  Previous resistance close to 15,800 would be expected to now act as support.  Seasonally, the Canadian benchmark tends to peak around the start of June, on average.

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S&P/TSX Composite index Seasonal Chart

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

$TSX Monthly Averages

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

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Seasonal charts of companies reporting earnings today:

Anthera Pharmac... Seasonal Chart Copart, Inc. Seasonal Chart Ralph Lauren Co... Seasonal Chart Netapp, Inc. Seasonal Chart Williams-sonoma... Seasonal Chart Synopsys, Inc. Seasonal Chart Lowe's Companie... Seasonal Chart L Brands, Inc. Seasonal Chart Bristow Group I... Seasonal Chart Canadian Imperi... Seasonal Chart Eni Spa Seasonal Chart Enbridge Energy... Seasonal Chart Ja Solar Holdin... Seasonal Chart Modine Manufact... Seasonal Chart Qiwi Plc Seasonal Chart Star Bulk Carri... Seasonal Chart Galena Biopharm... Seasonal Chart Telecom Argenti... Seasonal Chart Transportadora... Seasonal Chart Target Corporat... Seasonal Chart Tiffany & Co. Seasonal Chart Ultrapar Partic... Seasonal Chart Westell Technol... Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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