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Stock Market Outlook for May 31, 2018

Stocks snap-back, but gaps across a number of cyclical sectors remain.

 

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:

Bank of Marin (NASD:BMRC) Seasonal Chart

Bank of Marin (NASD:BMRC) Seasonal Chart

SJW Group Inc. (NYSE:SJW) Seasonal Chart

SJW Group Inc. (NYSE:SJW) Seasonal Chart

Monmouth Real Estate Investment (NYSE:MNR) Seasonal Chart

Monmouth Real Estate Investment (NYSE:MNR) Seasonal Chart

Alterra Power (TSE:AXY) Seasonal Chart

Alterra Power (TSE:AXY) Seasonal Chart

Continental Gold (TSE:CNL) Seasonal Chart

Continental Gold (TSE:CNL) Seasonal Chart

Johnson & Johnson  (NYSE:JNJ) Seasonal Chart

Johnson & Johnson (NYSE:JNJ) Seasonal Chart

Consolidated Communications (NASD:CNSL) Seasonal Chart

Consolidated Communications (NASD:CNSL) Seasonal Chart

Renasant Corp. (NASD:RNST) Seasonal Chart

Renasant Corp. (NASD:RNST) Seasonal Chart

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

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

 

 

The Markets

Stocks rebounded on Wednesday as concerns alleviated pertaining to the situation in Italy.  A strong auction for Italian debt sent bond yields lower, easing concerns of contagion in the Eurozone.  The S&P 500 Index jumped by 1.27%, retracing the loss recorded in the previous session.  The large-cap benchmark is now back within a tight range spanning between 2700 and 2740 as investors wait for further clarity on some of the ongoing geopolitical concerns.

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While the S&P 500 Index has shaken off recent weakness, significant gaps across a number of cyclical sectors remain.  Referring to the SPDR Sector ETFs, financials, energy, materials, and industrials are all showing gaps overhead presenting a significant hurdle in the way of near-term upside momentum.  For the energy ETF (XLE), that level is $77, representing last week’s breakdown point.  The other gaps are a little more recent with the industrial ETF (XLI) showing a hurdle at $75.60, the materials ETF (XLB) at $58.85 (an another at $59.64), and the financial ETF (XLF) showing the largest gap of them all between $27.50 and $27.70.  So four important cyclical sectors with defined levels of short-term resistance overhead suggests that the broader market is not out of the woods just yet.  Risk sentiment was put to the test during Tuesday’s broad market selloff, fuelling gains in defensive bets, such as treasury bonds, REITs and staples; it may take a catalyst to put investors back into risk-on mode, although a new all-time high in the small-cap Russell 2000 Index on Wednesday bodes well for the market’s ability to overcome this brief down-shift in stocks.

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On the economic front, Statscan released their look at Industrial Product Prices for the month of April.  The headline print indicated that prices increased by 0.5% in April, which is less than the 0.7% increase forecasted by analysts.  The average change for the month is a mere 0.2% increase.  The result puts the year-to-date change at +2.3%, which is five-tenths of one percent above average for this point in the year.  Energy and petroleum products were behind the strength in the April result, but excluding this volatile category still shows an above average increase through the first four months of the year of two-tenths of one percent.  Food products, clothing, lumber, paper products, metals, construction materials, furniture, and packaging materials are all showing gains that are well above average year-to-date, emphasizing the breadth of inflationary pressures embedded in the economy.  It is just now that petroleum is joining the above average pace seen in other categories.  Seasonally, the aggregate industrial product price index tends to flat-line through the remainder of spring as commodity prices moderate going into the average factory shutdown period in July.  For a complete breakdown of the results, the charts are available in the database at https://charts.equityclock.com/canada-industrial-product-price-index-ippi-by-north-american-product-classification-system-napcs.

Canada Total, Industrial product price index (IPPI) Seasonal Chart

Monthly Canada Total, Industrial product price index (IPPI) Data

Canada Total Industrial product price index (IPPI), excluding energy and petroleum products Seasonal Chart

North of the border, the US Census department released advanced figures pertaining to international trade in the US.  The headline print indicated that the trade deficit shrank very slightly from $68.6 Billion to $68.2 Billion in April.  A 0.5% decline in imports and exports contributed to the aggregate result.  Analysts had forecasted a deficit of $71.0 Billion.  Stripping out the seasonal adjustments, exports actually declined by 8.3% while imports were lower by 1.5%; the average change for each in the month of April is –6.9% and –2.0%, respectively.  On the export side, only the foods, feeds, and beverages category is trending above average on the year, while capital goods, vehicles, and consumer goods are trending below average year-to-date.  Industrial supplies exports are merely inline with seasonal norms.  A stronger US dollar would have acted as a headwind on export activity, an impact that will likely carry forward for the present month, which ends on Thursday.  The US Dollar Index is up by around 6% in just the past month and a half, weighing on international trade at a time when activity is typically robust through the first half of the year.  The dollar index is back to a significant zone of resistance around 95, which could cap the upward momentum over the near-term, however, ongoing strength could have negative impacts on economic activity and the US equity market overall.  The 200-day moving average of the currency benchmark is no longer pointing lower and is now poised to curl higher, suggesting longer-term positive momentum as the period of seasonal weakness gets underway.  Seasonally, the US Dollar Index tends to decline between mid-May and mid-October, helping commodities, such as gold, but the recent appreciation threatens to constrain the seasonal trade for the metal ahead.

US International Trade - Imports Seasonal Chart

Monthly US International Trade - Imports Data

US International Trade – Imports Seasonal Chart

US International Trade - Exports Seasonal Chart

Monthly US International Trade - Exports Data

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US Dollar Index Futures (DX) Seasonal Chart

DX.FUT Monthly Averages

Sentiment on Wednesday, as gauged by the put-call ratio, ended close to neutral at 0.98.

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Seasonal charts of companies reporting earnings today:

American Eagle Outfitters, Inc. (AEO) Seasonal Chart Build-A-Bear Workshop, Inc. (BBW) Seasonal Chart Burlington Stores, Inc. (BURL) Seasonal Chart Cantel Medical Corp. (CMD) Seasonal Chart Christopher & Banks Corporation (CBK) Seasonal Chart Ciena Corporation (CIEN) Seasonal Chart Costco Wholesale Corporation (COST) Seasonal Chart CSS Industries, Inc. (CSS) Seasonal Chart Dollar General Corporation (DG) Seasonal Chart Dollar Tree, Inc. (DLTR) Seasonal Chart Donaldson Company, Inc. (DCI) Seasonal Chart Express, Inc. (EXPR) Seasonal Chart Frontline Ltd. (FRO) Seasonal Chart Gamestop Corporation (GME) Seasonal Chart Golar LNG Limited (GLNG) Seasonal Chart InnerWorkings, Inc. (INWK) Seasonal Chart  Kirkland's, Inc. (KIRK) Seasonal Chart lululemon athletica inc. (LULU) Seasonal Chart Marvell Technology Group Ltd. (MRVL) Seasonal Chart Perry Ellis International Inc. (PERY) Seasonal Chart Ship Finance International Limited (SFL) Seasonal Chart Tech Data Corporation (TECD) Seasonal Chart Titan Machinery Inc. (TITN) Seasonal Chart Ulta Beauty, Inc. (ULTA) Seasonal Chart Vmware, Inc. (VMW) Seasonal Chart Workday, Inc. (WDAY) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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