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Stock Market Outlook for June 28, 2018

It may be difficult to lower the trade deficit with the economy growing at an above average pace.

 

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:

The Procter & Gamble Company  (NYSE:PG) Seasonal Chart

The Procter & Gamble Company (NYSE:PG) Seasonal Chart

Goldman Sachs Group, Inc.  (NYSE:GS) Seasonal Chart

Goldman Sachs Group, Inc. (NYSE:GS) Seasonal Chart

 

 

The Markets

Stocks closed firmly lower on Wednesday as investors took advantage of early morning strength to close positions ahead of the end of the quarter.  The S&P 500 Index shed almost nine-tenths of one percent, closing below its rising 50-day moving average.  At the highs of the day, the large-cap benchmark traded back to gap resistance around 2743, at which point sellers emerged, confirming the horizontal level as a point of resistance. The benchmark closed right at psychological support of 2700, a break of which leaves downside risks towards the 200-day moving average, now at 2667.  The market has now entered the average summer rally period, spanning between June 27th and July 17th.  The strength of this short-term seasonal uptick will provide clues as to the strength of the longer-term trend.

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On the economic front, an advance report on international trade for the month of May suggested upbeat activity with respect to imports and exports.  The headline print indicated that the deficit shrank to $64.8 billion last month from $67.3 billion previous.  A 2.1% increase in exports combined with a 0.2% increase in imports was behind the aggregate result.  Stripping out the seasonal adjustments, exports actually increased by 4.5%, while imports increased by 5.3%. The average change for each is +2.3% and +2.1%, respectively.  The result put the year-to-date change for exports 1.5% above the seasonal norm, while imports is 1.9% above the average trend, certainly not the pace that the Trump administration desires.  With an economy growing at an above average pace, imports will inevitably follow suit.  As for exports, activity is showing the best year-to-date change since 2011 and it is 4.4% above last year’s pace.  The result is being driven by strength in food/beverage and consumer goods exports, both of which are trending well above average on the year.  Capital goods and automotive exports are showing a year-to-date change that is inline with the seasonal norm, while  industrial supplies exports has now fallen slightly below trend.  The Trump administration’s desire is to see the US trade deficit shrink, but, even if progress is made, it is unlikely to happen overnight.  Studies  confirm the positive correlation between the deficit and economic growth, therefore trying to impact one without affecting the other may be very difficult.  Seasonally, exports tend to show little change between now and September, while imports rise marginally order the period, causing the deficit to expand on a non-seasonally adjusted basis through the end of summer.

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

US International Trade – Exports Seasonal Chart

US Foods, Feeds, Beverages Exports Seasonal Chart US Industrial Supplies Exports Seasonal Chart US Capital Goods Exports Seasonal Chart US Automotive Vehicles, etc. Exports Seasonal Chart US Consumer Goods Exports Seasonal Chart

Also on the economic front, seasonal adjustments masked what was otherwise a solid report on Durable Goods Orders for the month of May.  The headline print indicated that new orders of durable goods declined by 0.6% in May, which was inline with the consensus analyst estimate.  Excluding transportation, the decline was a more muted 0.3%, but this was a divergence compared to the 0.5% increase that was expected.  Stripping out the seasonal adjustments, the Value of Manufacturers’ New Orders for Capital Goods Industries actually increased by 2.9%, which is above the average change for the fifth month of the year of 2.5%.  The year-to-date change now sits 6.1% above the seasonal norm, representing the best performance since 2011.  Defense capital goods was a big positive in the report, rising by 12.7% in the month, a significant divergence compared to the 10.8% average decline for the period.  New orders in this category are running a whopping 32.8% above average through the first five months of the year.  Durable goods orders have been the driver of manufacturing activity for the past couple of years and that momentum has yet to show signs of fading.  As always with this report, the more indicative reading of the strength of durable good activity is obtained with reports for March, June, September, and December as companies push through activity ahead of the end of the quarter.

Value of Manufacturers' New Orders for Capital Goods Industries  Seasonal Chart

Monthly Value of Manufacturers' New Orders for Capital Goods Industries  Data

Value of Manufacturers’ New Orders for Capital Goods Industries Seasonal Chart

Value of Manufacturers' New Orders for Capital Goods - Nondefense  Seasonal Chart Value of Manufacturers' New Orders for Capital Goods - Nondefense excluding Aircraft  Seasonal Chart Value of Manufacturers' Total Inventories for Capital Goods Industries  Seasonal Chart Value of Manufacturers' New Orders for Consumer Goods: Durable Goods Excluding Transportation Industries Seasonal Chart Value of Manufacturers' New Orders for Consumer Goods: Durable Goods Excluding Defense Industries Seasonal Chart Value of Manufacturers' New Orders for Capital Goods: Defense Capital Goods Industries Seasonal Chart Value of Manufacturers' New Orders for Durable Goods Industries: Transportation Equipment Seasonal Chart

Sentiment on Wednesday, as gauged by the put-call ratio, ended bearish at 1.08.

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Sectors and Industries entering their period of seasonal strength:

Silver Futures (SI) Seasonal Chart
FUTURE_SI1 Relative to the S&P 500FUTURE_SI1 Relative to Gold

FUTURE_SI1 Monthly Averages

 

 

Seasonal charts of companies reporting earnings today:

Accenture plc (ACN) Seasonal Chart Apogee Enterprises, Inc. (APOG) Seasonal Chart ConAgra Brands, Inc. (CAG) Seasonal Chart  KB Home (KBH) Seasonal Chart Lindsay Corporation (LNN) Seasonal Chart McCormick & Company, Incorporated (MKC) Seasonal Chart Nike, Inc. (NKE) Seasonal Chart OMNOVA Solutions Inc. (OMN) Seasonal Chart Shaw Communications Inc. (SJR) Seasonal Chart Synnex Corporation (SNX) Seasonal Chart Walgreens Boots Alliance, Inc. (WBA) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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