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Stock Market Outlook for June 18, 2018

Quad witching wreaks havoc on the commodity market, but downside potential may be limited.

 

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:

Iron Mountain Incorporated  (NYSE:IRM) Seasonal Chart

Iron Mountain Incorporated (NYSE:IRM) Seasonal Chart

Southern First Bancshares, Inc. (NASD:SFST) Seasonal Chart

Southern First Bancshares, Inc. (NASD:SFST) Seasonal Chart

ArcBest Corp. (NASD:ARCB) Seasonal Chart

ArcBest Corp. (NASD:ARCB) Seasonal Chart

VeriFone Systems Inc. (NYSE:PAY) Seasonal Chart

VeriFone Systems Inc. (NYSE:PAY) Seasonal Chart

Alphabet Inc. (NASD:GOOGL) Seasonal Chart

Alphabet Inc. (NASD:GOOGL) Seasonal Chart

MTY Food Group (TSE:MTY) Seasonal Chart

MTY Food Group (TSE:MTY) Seasonal Chart

Jabil Circuit, Inc.  (NYSE:JBL) Seasonal Chart

Jabil Circuit, Inc. (NYSE:JBL) Seasonal Chart

Arch Capt. Grp. Ltd. (NASD:ACGL) Seasonal Chart

Arch Capt. Grp. Ltd. (NASD:ACGL) Seasonal Chart

Banco Macro SA (NYSE:BMA) Seasonal Chart

Banco Macro SA (NYSE:BMA) Seasonal Chart

 

 

The Markets

Stocks weakened on Friday as investors reacted to the threat of a trade war as the Trump administration sought to impose tariffs on $50 billion of Chinese goods.  The S&P 500 Index fell by around three-quarters of one percent at the lows of the session.  The benchmark turned around in the afternoon trade as investors continue adopt the perception that the actions are part of a strategy to fuel negotiations.  The large-cap benchmark closed lower by a mere tenth of a percent, weighed down by energy and material stocks.  Consumer staples, health care, and utilities, the so-called defensive segments of the market, closed higher on the day.

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A sharp selloff in the commodity market had investors leaning on the sell button for stocks exposed to the production of these raw inputs.  Metal and energy commodities saw losses in excess of 2% as trading surrounding quadruple witching caught the market off-guard.  The price of gold plunged by 2.28%, falling from resistance around the 200-day moving average.  Oil fell by 2.74%, declining from resistance around the 50-day moving average.  The negative price action surrounding the quarterly futures and options expiration is fairly typical, leading to appealing buying opportunities into the end of June and beginning of July.  Strong demand fundamentals for commodities given the robust manufacturing conditions suggest that downside potential for the commodity market is limited, assuming the US Dollar doesn’t interfere.  July tends to be strong month for a number of commodities, including silver, copper, and oil.

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Crude Oil Futures (CL) Seasonal Chart

FUTURE_CL1 Monthly Averages

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Gold Futures (GC) Seasonal Chart

FUTURE_GC1 Monthly Averages

On the subject of strong manufacturing demand, a report on industrial production for May was released before Friday’s opening bell.  The headline print indicated that industrial production declined by 0.1% last month, diverging from the gain of 0.1% forecasted by analysts.  Manufacturing was lower by 0.7%, also a miss compared to expectations of a 0.1% gain.  Stripping out the seasonal adjustments, total industrial production was actually higher by 0.3%, which is well short of the 0.8% gain that is average for the month of May.  The result puts the year-to-date change around half of a percent above the seasonal norm, maintaining an above average pace that originated in April.  Manufacturing is showing a similar margin above this annual average trend.  Durable goods manufacturing continues to factor prominently behind the results, while non-durable manufacturing lags its average trend.  For a full breakdown of the results, the seasonal charts have been uploaded to the database at https://charts.equityclock.com/u-s-industrial-production.

Industrial Production: Total Seasonal Chart

Monthly Industrial Production: Total Data

http://charts.equityclock.com/seasonal_charts/economic_data/IPMANSICN_seasonal_chart.PNG

And as the hard data for May continues to be disseminated, some of the soft data for June is beginning to flow.  First up, the empire manufacturing survey, producing insight as to the health of business activity in the New York region.  The headline print indicated that the general business conditions index advanced to +25.0 in June from +20.1 previous.  The consensus was for a print of +19.1.  Stripping out the seasonal adjustments, the actual level showed +29.5, well above the average level of +10.1 for the last month of the first half of the year.  This is the highest level for the month of June since data began back in 2001.  The results continues to reiterate that manufacturing activity is flourishing in America, which bodes well for future reports on industrial production.  Manufacturing activity typically contracts in the month of July, but the strength in activity suggests that there is a good chance that a rare expansionary result is realized as businesses keep factory floors humming amidst the robust demand.

http://charts.equityclock.com/seasonal_charts/economic_data/Empire_State_Mfg_seasonal_chart.PNG

Sentiment on Friday, as gauged by the put-call ratio, ended bullish at 0.93.

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Seasonal charts of companies reporting earnings today:

  • No significant reports scheduled

 

S&P 500 Index

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TSE Composite

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