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Stock Market Outlook for June 25, 2018

Canadian equity benchmark moves to all-time high, despite lacklustre data on the economy.

 

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:

Metro, Inc. (TSE:MRU) Seasonal Chart

Metro, Inc. (TSE:MRU) Seasonal Chart

Southern Missouri Bancorp, Inc. (NASD:SMBC) Seasonal Chart

Southern Missouri Bancorp, Inc. (NASD:SMBC) Seasonal Chart

Boston Private Financial Holdings (NASD:BPFH) Seasonal Chart

Boston Private Financial Holdings (NASD:BPFH) Seasonal Chart

East West Bancorp, Inc. (NASD:EWBC) Seasonal Chart

East West Bancorp, Inc. (NASD:EWBC) Seasonal Chart

AGF Management Limited (TSE:AGF.B) Seasonal Chart

AGF Management Limited (TSE:AGF.B) Seasonal Chart

Neustar Inc. (NYSE:NSR) Seasonal Chart

Neustar Inc. (NYSE:NSR) Seasonal Chart

Heritage Commerce Corp. (NASD:HTBK) Seasonal Chart

Heritage Commerce Corp. (NASD:HTBK) Seasonal Chart

Greif Bros. Corp. (NYSE:GEF) Seasonal Chart

Greif Bros. Corp. (NYSE:GEF) Seasonal Chart

 

The Markets

Stocks rebounded on Friday, but the rotation that is typical for the quarter-end continues.  The Dow Jones Industrial Average, which had been lagging in recent days, achieved a gain of around five-tenths of one percent, while the Russell 2000 and Nasdaq Composite closed flat to negative on the day.  The S&P 500 Index gained two-tenths of one percent, continuing to hold support around the rising 20-day moving average.

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For the week, the large-cap benchmark shed around nine-tenths of one percent, pulling back slightly from the rising intermediate-term trend that originated with the early April low.  While weekly momentum indicators remain in bullish territory, the lack of expansion in the past week risks a stalling of the positive momentum.  Long-term support remains firm at the rising 50-week moving average, while the 20-week average around 2700 remains an important pivot point to watch.  Intermediate resistance around 2800 could present the upper limit to a trading range, a break of which would result in a significant corresponding move.

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The benchmark that is not being constrained by overhead resistance is the TSX Composite, which is trading at new all-time highs.  The Canadian index is higher by over 8.5% since the lows of April, outperforming benchmarks around the globe over this timeframe.  Strength in a number of sectors have fuelled the overall result, including technology, staples, financials, energy, and materials, which have each outperformed their counterparts south of the border.  The depreciation of the Canadian dollar has certainly been a positive.  Seasonally, the TSX Composite typically peaks in June, trading lower into the month of October.  Clearly, the benchmark has been diverging from this seasonal norm.

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S&P/TSX Composite index Seasonal Chart

$TSX Relative to the S&P 500
$TSX Relative to the S&P 500

$TSX Monthly Averages

On the economic front, Statscan provided reports on CPI and Retail Trade.  First up, the consumer price index.  The headline print, which is one of the few to be reported non-seasonally adjusted, showed that the prices that consumers paid increased by 0.1% last month, well short of the 0.4% increase that is average for May.  The result puts the year-to-date change three-tenths of one percent above the seasonal norm for this time of year.  Fuel, which advanced to a gain of 9.6% year-to-date, can be pegged as an obvious culprit behind the strength in the prevailing trend of the aggregate result.  The average change in fuel prices through the end of May is 2.1%.  Elsewhere, mortgage interest continues to stand out, up 2.8% through the first five months of the year, well above the average increase by this point of a mere 0.04%.  Mortgage interest costs have increased for the past nine consecutive months, the longest uninterrupted stretch of increases since 2008.  These costs have generally trended flat to negative for many years, therefore this increase in the price of borrowing is certainly taking a toll on the budgets of consumers.  The communications category saw a reprieve in May, falling by 2.9%, diverging from the average increase of 0.1% for the month.  However, the 3.7% increase year-to-date is still the largest increase through the first five months of the years since 1998 as the price for internet access remain elevated.  While few categories exist where consumers are paying less for goods than they were last year, generally the trends suggest that prices are taking a larger share of consumer budgets, which has the potential to constrain consumer spending going forward.  For insight as to how other categories of the report are performing, the charts can be accessed at https://charts.equityclock.com/canada-consumer-price-index-cpi

Canada CPI - All-items Seasonal Chart

Monthly Canada CPI - All-items Data

Canada CPI - Fuel oil and other fuels Seasonal ChartCanada CPI - Mortgage interest cost Seasonal ChartCanada CPI - Communications Seasonal Chart

April’s report on retail trade in Canada is suggestive of a slowdown in spending.  The headline print indicated that sales fell by 1.2% month-over-month, below the analyst consensus estimate that called for no change.  Stripping out the seasonal adjustments, retail sales in  Canada were actually higher by 1.1%, which is much lower than the 6.1% average increase for the fourth month of the year.  The year-to-date change remains above the seasonal norm, now by 2.9%, but the gap has narrowed with this latest result.  A below average change in sales at auto dealers and food/beverage stores were a drag on the aggregate result.  For a complete breakdown of the report, the charts can be accessed via the chart database at https://charts.equityclock.com/canada-retail-trade-sales.

Retail trade Seasonal Chart

Monthly Retail trade Data

Sentiment on Friday, as gauged by the put-call ratio, ended bullish at 0.85.

 

 

 

 

Sectors and Industries entering their period of seasonal strength:

Household Products Industry Seasonal Chart
S5HOPR Index Relative to the S&P 500S5HOPR Index Relative to the Sector

S5HOPR Index Monthly Averages

 

 

Seasonal charts of companies reporting earnings today:

Carnival Corporation (CCL)  Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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