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Stock Market Outlook for June 19, 2018

Transportation stocks bucking seasonal norms as shipping activity remains strong.

 

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 The Ozarks Inc (NASDAQ:OZRK) Seasonal Chart

Bank Of The Ozarks Inc (NASDAQ:OZRK) Seasonal Chart

Shinhan Financial Group Co. Ltd. (NYSE:SHG) Seasonal Chart

Shinhan Financial Group Co. Ltd. (NYSE:SHG) Seasonal Chart

United States Cellular Corp. (NYSE:USM) Seasonal Chart

United States Cellular Corp. (NYSE:USM) Seasonal Chart

Lindsay Corp. (NYSE:LNN) Seasonal Chart

Lindsay Corp. (NYSE:LNN) Seasonal Chart

Armstrong World Industries Inc. (NYSE:AWI) Seasonal Chart

Armstrong World Industries Inc. (NYSE:AWI) Seasonal Chart

Novartis A G (NYSE:NVS) Seasonal Chart

Novartis A G (NYSE:NVS) Seasonal Chart

German American Bancorp (NASD:GABC) Seasonal Chart

German American Bancorp (NASD:GABC) Seasonal Chart

 

 

The Markets

Stocks dipped on Monday as investors focused on lingering trade tensions between the US and China.  The S&P 500 Index fell by four-tenths of one percent, coming close to testing the rising 20-day moving average at the lows of the session.  Consumer staples was the session laggard with the ETF that tracks the sector down by around 1.6%, clawing back the strong performance achieved on Friday.  The consumer staples ETF broke above declining trendline resistance in the past couple of weeks, as well as moving above the declining 50-day moving average.  This previous variable resistance at the 50-day would now be expected to act as support, assuming the breakout is real.  A band of resistance between $51 and $53 is presenting a range of supply that the sector ETF may struggle with for some time as investors debate allocations to the defensive market segment in an economy that is growing well above average.  Seasonally, consumer staples tend to trade flat to negative between the start of June through to the end of September.

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Consumer Staples Sector Seasonal Chart

STAPLES Relative to the S&P 500
STAPLES Relative to the S&P 500

STAPLES Monthly Averages

On the economic front, CASS Information Systems released their monthly freight indices for the month of May.  The leading provider of integrated information and payment management solutions reported that their shipments index increased by 5.9% in May, while expenditures rose by 4.9%.  The results are well above the average change for each of +1.9% and +1.8%, respectively.  The year-to-date change on the shipments index is now 6.9% above average, representing the second best performance since the turn of the century.  CASS notes that “the U.S. freight economy is extraordinarily strong” causing demand to exceed supply for most modes of transportation.  These types of results typically follow recessionary economic conditions as activity turns a corner and moves back into growth mode.  The pro-business policies of the Trump administration are fuelling activity and allowing companies to look past the risks presented by a all-out trade war.  A removal of the geopolitical overhang could unleash further strength in business investment as they look to execute on their post tax reform plans.  Seasonally, shipping activity, a leading indicator of economic activity, tends to chart an important peak for the year in June, then declines through the fourth quarter.  The robust conditions could buck this average trend, perhaps mitigating the negative tendencies.  In 2017, shipment activity merely flat-lined following the month of June, reaming elevated as seasonal norms turned lower.

Cass Freight Index: Shipments  Seasonal Chart

Monthly Cass Freight Index: Shipments  Data

Cass Freight Index: Shipments Seasonal Chart

Cass Freight Index: Expenditures Seasonal Chart

Despite the risks of a trade war, the Dow Jones Transportation Average has managed to maintain levels around multi-month highs.  Short-term support at the rising 20-day moving average has held firm over the past month.  Major momentum indicators and moving averages are trending higher, suggesting a positive bias across a number of timeframes. The benchmark broke above a trading range between 10,000 and 10,800 just in the past couple of weeks, suggesting an upside target of 11,600.  The strength is contrary to seasonal norms that calls for weaker prices between May and September.  June alone tends to be one of the weaker months of the year for the benchmark, falling by 0.8% on average with declines recorded in 65% of periods over the past 20 years.  The benchmark is presently higher by 2.8% for June, reacting to the positive economic fundamentals that are keeping investors embedded in cyclical assets.

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Dow Jones Transportation Average Seasonality

$TRAN Relative to the S&P 500

Monthly Seasonal Dow Jones Transportation Average

Sentiment on Monday, as gauged by the put-call ratio, ended bearish at 1.03.

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Seasonal charts of companies reporting earnings today:

FedEx Corporation (FDX) Seasonal Chart La-Z-Boy Incorporated (LZB) Seasonal Chart Oracle Corporation (ORCL) Seasonal Chart 

 

 

S&P 500 Index

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TSE Composite

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