Contact | RSS Feed

Stock Market Outlook for May 29, 2018

Second best performance for consumer durable goods orders in the past two decades.

 

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:

Natus Medical, Inc. (NASD:BABY) Seasonal Chart

Natus Medical, Inc. (NASD:BABY) Seasonal Chart

Tree Island Steel Ltd. (TSE:TSL) Seasonal Chart

Tree Island Steel Ltd. (TSE:TSL) Seasonal Chart

Deltic Timber Corp. (NYSE:DEL) Seasonal Chart

Deltic Timber Corp. (NYSE:DEL) Seasonal Chart

Baxter International Inc. (NYSE:BAX) Seasonal Chart

Baxter International Inc. (NYSE:BAX) Seasonal Chart

Argonaut Gold (TSE:AR) Seasonal Chart

Argonaut Gold (TSE:AR) Seasonal Chart

Catalyst Pharmaceuticals Partners (NASD:CPRX) Seasonal Chart

Catalyst Pharmaceuticals Partners (NASD:CPRX) Seasonal Chart

Westar Energy, Inc. (NYSE:WR) Seasonal Chart

Westar Energy, Inc. (NYSE:WR) Seasonal Chart

Taro Pharmaceutical Industries Ltd. (NYSE:TARO) Seasonal Chart

Taro Pharmaceutical Industries Ltd. (NYSE:TARO) Seasonal Chart

 

 

The Markets

Stocks finished fractionally lower on Friday as geopolitical concerns continue to constrain upward momentum for stocks.  The S&P 500 Index shed just less than a quarter of one-percent, ending just above the 2720 pivot point we’ve highlighted exhaustively in recent days.  Equity markets continue to look for clarity on some of the overhanging concerns to take a position on either side of this short-term divide.  The 100-day moving average at 2710 is likely a level that market participants are focussed on given its support characteristics provided in February and March, followed by resistance characteristics evident through the month of April.  For the time being, the intermediate to long-term moving average has returned to a position of support, but it still has a lot to prove as stocks attempt to move past the triangle consolidation range that spanned the first four months of the year.

image

On the economic front, weakness in April’s report on durable goods orders gives little reason for concern.  The headline print indicated that new orders of durable goods fell by 1.7% last month, missing the consensus estimate that called for a 1.2% decline.  Excluding autos, the change for the month was actually positive at 0.9%, better than the 0.6% gain expected by analysts.  Stripping out the seasonal adjustments, the Value of Manufacturers’ New Orders for Capital Goods Industries actually fell by 23.0% in April, worse than the 18.9% decline that is average for this spring month.  Despite the one-month slip, the year-to-date change remains 4.6% above average for this time of year, reiterating the strength in the manufacturing economy that remains intact.  With performance that is 6.5% above average through April, consumer goods factored prominently in the report with new orders of durable consumer goods excluding transportation showing the second best performance through the first four months of the year in two decades.  Transportation, such as auto sales, was a problem in a number of reports in April as the spring month continues to show signs that it is losing strength as a prime buying period following the winter months; sales are increasingly shifting into the last two months of the year as inventory liquidation sales entice buyers surrounding the Christmas holiday.  While orders continue to show an above average pace on the year, so too are gains to inventories, which are now running 0.3% above average year-to-date.  In March the spread versus the average trend was 0.8%, so signs of improvement are becoming evident, indicating that supply and demand may be aligning.  The quarter-end reports, however, typically provide a better gauge of overall order and inventory levels.  Bottom line is that while some isolated weakness can be observed, more likely to do with evolving trends in purchasing patterns, the report suggests ongoing strength in the manufacturing economy, which bodes well for cyclically sensitive areas of the equity market as their average periods of weakness get underway.

Value of Manufacturers' New Orders for Capital Goods Industries  Seasonal Chart

Monthly Value of Manufacturers' New Orders for Capital Goods Industries  Data

Value of Manufacturers’ New Orders for Capital Goods Industries Seasonal Chart

Value of Manufacturers' New Orders for Capital Goods - Nondefense  Seasonal Chart Value of Manufacturers' New Orders for Capital Goods - Nondefense excluding Aircraft  Seasonal Chart Value of Manufacturers' Total Inventories for Capital Goods Industries  Seasonal Chart Value of Manufacturers' New Orders for Consumer Goods: Durable Goods Excluding Transportation Industries Seasonal Chart Value of Manufacturers' New Orders for Consumer Goods: Durable Goods Excluding Defense Industries Seasonal Chart Value of Manufacturers' New Orders for Capital Goods: Defense Capital Goods Industries Seasonal Chart Value of Manufacturers' New Orders for Durable Goods Industries: Transportation Equipment Seasonal Chart

On the topic of healthy economic activity, CASS Information Systems released their shipping gauge for the month of April in recent days.  Shipment volumes are indicated to have gained 2.1% in April, while expenditures climbed by 0.6%.  The gain in volumes is a divergence from the 0.8% average decline for the month, although the frequency of April declines over the past 17 years has not been that typical at only 41%.  Shipment volumes are now running 2.6% above average through the first four months of the year, suggesting strength in activity as businesses and consumers ship goods across the economy.  Expenditures, meanwhile, are trending 1.2% above average, perhaps more of a factor of rising costs to ship goods, but still representative of underlying demand to ship goods.  Seasonally, shipping activity typically charts an important high for the year in June as businesses seek to get their goods to customers ahead of the factory shutdown period in July. 

Cass Freight Index: Shipments  Seasonal Chart

Monthly Cass Freight Index: Shipments  Data

Cass Freight Index: Shipments Seasonal Chart

Cass Freight Index: Expenditures Seasonal Chart

The strength in shipping activity is being picked up by a number of stocks, particularly railroads, which are currently sitting at all-time highs.  Other shipping related industry groups have also shown positive relative performance in recent months  Unfortunately, average seasonal tendencies for this time of year are not on the side of investors taking position in these cyclical industries.  Transportation stocks, whether it be railroads or other shipping related industries, tend to decline, on average, between May and September, resetting from the positive trends averaged in the fall and spring.  The Dow Jones Transportation average continues to show signs of breaking out of an approximately 800-point trading range that projects upside towards a fresh all-time high of 11,600.  Obviously, if achieved, this would bode well for risk assets during a predominantly risk-off period for equity markets.

image

Railroads Industry Seasonal Chart
S5RAIL Index Relative to the S&P 500S5RAIL Index Relative to the Sector

S5RAIL Index Monthly Averages

image

Dow Jones Transportation Average Seasonality

$TRAN Relative to the S&P 500

Monthly Seasonal Dow Jones Transportation Average

Sentiment on Friday, as gauged by the put-call ratio, ended bullish at 0.92.

image

 

 

 

Seasonal charts of companies reporting earnings today:

Leju Holdings Limited (LEJU) Seasonal Chart Advanced Drainage Systems, Inc. (WMS) Seasonal Chart American Woodmark Corporation (AMWD) Seasonal Chart Bank of Nova Scotia (The) (BNS) Seasonal Chart Booz Allen Hamilton Holding Corporation (BAH) Seasonal Chart Elbit Systems Ltd. (ESLT) Seasonal Chart Evogene Ltd. (EVGN) Seasonal Chart Gazit-Globe Ltd. (GZT) Seasonal Chart Heico Corporation (HEI) Seasonal Chart HP Inc. (HPQ) Seasonal Chart  Momo Inc. (MOMO) Seasonal Chart Noah Holdings Ltd. (NOAH) Seasonal Chart Quotient Limited (QTNT) Seasonal Chart Salesforce.com Inc (CRM) Seasonal Chart SpartanNash Company (SPTN) Seasonal Chart

 

 

S&P 500 Index

image

image

 

 

TSE Composite

image

image

 

Sponsored By...
Seasonal Advantage Portfolio by CastleMoore

Comments are closed.