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Stock Market Outlook for May 25, 2018

Investors still finding areas to take on risk, despite a sea of headline risks.

 

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:

Consolidated Communications (NASD:CNSL) Seasonal Chart

Consolidated Communications (NASD:CNSL) Seasonal Chart

SP Plus Corp. (NASD:SP) Seasonal Chart

SP Plus Corp. (NASD:SP) Seasonal Chart

Camden National Corp. (NASD:CAC) Seasonal Chart

Camden National Corp. (NASD:CAC) Seasonal Chart

The Bank of Nova Scotia (NYSE:BNS) Seasonal Chart

The Bank of Nova Scotia (NYSE:BNS) Seasonal Chart

Celgene Corporation  (NASDAQ:CELG) Seasonal Chart

Celgene Corporation (NASDAQ:CELG) Seasonal Chart

Great Canadian Gaming Corporation (TSE:GC) Seasonal Chart

Great Canadian Gaming Corporation (TSE:GC) Seasonal Chart

Citizens, Inc. (NYSE:CIA) Seasonal Chart

Citizens, Inc. (NYSE:CIA) Seasonal Chart

Limoneira Co. (NASD:LMNR) Seasonal Chart

Limoneira Co. (NASD:LMNR) Seasonal Chart

 

 

The Markets

Stocks closed well off of their lows on Thursday following news that President Trump had cancelled the North Korea summit.  The S&P 500 Index closed lower by two-tenths of one percent, holding above the 2720 pivot point highlighted in recent days.  It is becoming clear that investors require more clarity on some of the nagging geopolitical concerns prior to choosing which side of this pivot point the market will fall.

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Investors continue to find refuge in some of the more risk-on areas of the market that provide less exposure to international turmoil.  The Russell 2000 Small Cap Index closed positive on Thursday, as did the Dow Jones Transportation Average.  The transportation benchmark broke above a short-term trading range that spanned between 10,000 and 10,800.  The breakout move suggests an upside target of 11,600, which, if realized, would represent a new all-time high.  The benchmark, as with other indices, has held long-term support at the rising 200-day moving average and now the 20 and 50-day moving averages are re-joining the upward ascent.  Seasonally, the Dow Jones Transportation Average tends to weaken between May and September, therefore the strength realized in recent weeks is certainly encouraging for risk sentiment amidst the sea of headline risks.

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Dow Jones Transportation Average Seasonality

$TRAN Relative to the S&P 500

Monthly Seasonal Dow Jones Transportation Average

On the economic front, a report on existing home sales suggested weakness for the month of April.  The headline print indicated that sales of existing homes fell by 2.5% to a seasonally adjusted annual rate of 5.46 million.  Analysts had forecasted an unchanged result at 5.6 million.  Stripping out the seasonal adjustments, existing home sales actually increased by 6.0%, which is well short of the 10.9% gain that is average in this typically strong spring month.  Rising interest rates and less than favourable weather conditions are suggested to have weighed on activity.  The result puts the year-to-date change 5.5% below the average trend with two months left to report in the important spring selling season.  Across the regions, only the mid-west is showing a result that is on par with seasonal norms, while the north-east, west, and south fall firmly below average on the year.  While some reports suggested supply weighed on the result, the 10.4% increase in inventory of existing single family homes suggests otherwise, a result that is a full two percent above average for the fourth month of the year.  Year-to-date, inventories are higher by 23.3%, or 7.5% above average, representing the largest increase since 2010.  This puts the months of supply at 4.0, which is well off of the low recorded in December at 3.2.  Typically, six months of supply is considered to be a balanced market.  Surprisingly, the increase in supply has yet to take a toll on prices, the median of which is higher by 4.6% through the end of April.  The average increase by this point in the year is 1.3%.  The price of houses remains an ongoing burden on activity, which if constrained further could have wider ranging impacts.  Overall, while a disappointing result, the report warrants a pass until further datapoints are obtained.  Housing tends to act as a leading indicator to the broader economy, therefore struggle in the real estate market warrants monitoring.

Existing Home Sales Seasonal Chart

Monthly Existing Home Sales Data

Existing Home Sales Seasonal Chart

Existing Home Sales - Northeast Seasonal Chart Existing Home Sales - Midwest Seasonal Chart Existing Home Sales - West Seasonal Chart Existing Home Sales - South Seasonal Chart

Inventory of Existing Homes for Sale Seasonal Chart

Inventory of Existing Homes for Sale Seasonal Chart

Median Sales Price of Existing Homes Seasonal Chart

Sentiment on Thursday, as gauged by the put-call ratio, ended bullish at 0.87.

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Seasonal charts of companies reporting earnings today:

Buckle, Inc. (The) (BKE) Seasonal Chart CAE Inc (CAE) Seasonal Chart Foot Locker, Inc. (FL) Seasonal Chart Hibbett Sports, Inc. (HIBB) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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