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Stock Market Outlook for June 21, 2018

Global equity benchmark breaking below a multi-month trading range, threatening to weigh on stocks closer to home.

 

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:

QUALCOMM, Inc.  (NASDAQ:QCOM) Seasonal Chart

QUALCOMM, Inc. (NASDAQ:QCOM) Seasonal Chart

Timberland Bancorp, Inc. (NASD:TSBK) Seasonal Chart

Timberland Bancorp, Inc. (NASD:TSBK) Seasonal Chart

CNB Financial Corp. (NASD:CCNE) Seasonal Chart

CNB Financial Corp. (NASD:CCNE) Seasonal Chart

Nam Tai Property Inc. (NYSE:NTP) Seasonal Chart

Nam Tai Property Inc. (NYSE:NTP) Seasonal Chart

Bank of Marin (NASD:BMRC) Seasonal Chart

Bank of Marin (NASD:BMRC) Seasonal Chart

RLI Corp. (NYSE:RLI) Seasonal Chart

RLI Corp. (NYSE:RLI) Seasonal Chart

 

 

The Markets

Stocks gained on Wednesday as the lack of trade headlines allowed investors to focus on the positive fundamentals in the economy.  The S&P 500 Index gained around two-tenths of one percent, led, in part, by technology and consumer discretionary, the two segments of the market that investors have been using to play offense in risk assets during recent weeks.  The Russell 2000 and Nasdaq 100 charted new all-time closing highs as investors continue to accumulate risk assets with the least amount of exposure to an international dispute.

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While US equity markets are holding up very well in the midst of the trade threats, other equity markets around the globe have not been as fortunate.  The MSCI World ex-US Index broke below significant support around 1975 on Tuesday, resolving a trading range that spans all the way up to 2060.  The break of the 85 point range suggests downside potential of the same magnitude, implying a target of 1890.  The benchmark was recently rejected at its 200-day moving average, which for the time being continues to point higher.  The longer the level remains below this long-term hurdle, the more likely a shift in direction will be realized, changing the long-term momentum from positive to negative.  While markets can diverge from one another over short periods of time, the negative influence of a decline on a global scale could inevitably weigh on stocks closer to home.  The worldwide benchmark remains seasonally weak through  to the end of September.

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On schedule for the Wednesday session was the weekly petroleum status report.  The EIA is indicating that oil stockpiles fell last week by 5.9 million barrels, while gasoline inventories increased by 3.3 million barrels.  The result saw the days of supply of each move in opposite directions with oil falling to 24.5 from 25.2 previous and gasoline rising to 25.4 from 24.8 previous.  For only the third time this year, domestic oil production did not increase, instead remaining unchanged at the all-time high of 10.9 million barrels per day.  With exports rising back to the highs of the year and imports remaining subdued, the resulting drawdown in oil inventories was inevitable.  As for gasoline, inventories are up to the highest level since the middle of March as demand for the product remains in a volatile range.  Demand for gasoline, as gauged by the level of product supplied, typically peaks for the year in a couple weeks time with the Independence Day holiday in the US.  Seasonally, the spring uptick in gasoline inventories peaks on June 22nd, on average, leading to declines in inventories through the remainder of summer.

Weekly U.S. Days of Supply of Crude Oil excluding SPR  (Number of Days) Seasonal Chart

Weekly U.S. Days of Supply of Crude Oil excluding SPR (Number of Days) Seasonal Chart

Weekly U.S. Ending Stocks excluding SPR of Crude Oil Seasonal ChartWeekly U.S. Field Production of Crude Oil Seasonal ChartWeekly U.S. Commercial Crude Oil Imports Excluding SPR Seasonal Chart

Weekly U.S. Days of Supply of Total Gasoline  (Number of Days) Seasonal Chart

Weekly U.S. Days of Supply of Total Gasoline (Number of Days) Seasonal Chart

Weekly U.S. Ending Stocks of Total Gasoline Seasonal Chart Weekly U.S. Refiner and Blender Adjusted Net Production of Finished Motor Gasoline Seasonal Chart Weekly U.S. Product Supplied of Finished Motor Gasoline Seasonal Chart

Oil traded higher on the day with the price of West Texas Intermediate testing short-term resistance at the declining 20-day moving average.  Seasonally, June 21st has been the average low ahead of a period of strength running through the first few weeks of summer.  The average return for the month of July is a mere 0.1%, but positive results have been recorded 70% of the time in the past 20 years.

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Crude Oil Futures (CL) Seasonal Chart

FUTURE_CL1 Monthly Averages

On the economic front, a report on existing home sales confirmed the rebound in big ticket purchases in the month of May.  The headline print indicated that sales of existing homes fell by 0.4% in May to a seasonally adjusted annual rate of 5.43 million.  The consensus estimate was for a 0.9% gain to a rate of 5.5 million.  Stripping out the seasonal adjustments, sales actually surged by 16.5%, which is well above the 10.3% average increase for the month.  The result puts the year-to-date change just a touch above the seasonal average trend following a weak April in which big ticket purchases took a hit due to unfavourable weather conditions.  All indications suggest that the strength in purchases for homes and home projects, as well as automobiles, has returned to normal, placing the trends back on track to achieve healthy results in this new tax environment.  While all regions showed sharp rebounds in the month, only the north-east is showing a year-to-date change that is below average; the west, midwest, and south are trending above their seasonal norms.  As for prices paid, the median sales price of existing homes is up an additional 2.7% in May, placing the year-to-date change at +7.4%.  The average change by this point in the year is +4.5%.  The rise in home prices is a positive to current home owners, strengthening the balance sheets of American consumers, but it also acts as a headwind for activity as potential entrants have difficulty with the affordability of the market, particularly in a rising rate environment.  Seasonally, existing home sales and prices peak in the month of June, declining thereafter through the back half of the year.  For a breakdown of the results, the charts can be accessed via the seasonal chart database at https://charts.equityclock.com/u-s-existing-home-sales.

Existing Home Sales Seasonal Chart

Monthly Existing Home Sales Data

Median Sales Price of Existing Homes Seasonal Chart

Sentiment on Wednesday, as gauged by the put-call ratio, ended bullish at 0.89.

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Sectors and Industries entering their period of seasonal strength:

Crude Oil Futures (CL) Seasonal Chart
FUTURE_CL1 Relative to the S&P 500FUTURE_CL1 Relative to Gold

FUTURE_CL1 Monthly Averages

 

 

Seasonal charts of companies reporting earnings today:

American Software, Inc. (AMSWA) Seasonal Chart Barnes & Noble, Inc. (BKS) Seasonal Chart  Commercial Metals Company (CMC) Seasonal Chart Darden Restaurants, Inc. (DRI) Seasonal Chart Kroger Company (The) (KR) Seasonal Chart Methode Electronics, Inc. (MEI) Seasonal Chart Patterson Companies, Inc. (PDCO) Seasonal Chart Red Hat, Inc. (RHT) Seasonal Chart 

 

 

S&P 500 Index

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TSE Composite

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