Contact | RSS Feed

Stock Market Outlook for July 3, 2018

Stronger than expected economic data fuels strength in the Canadian dollar to cap of a weak month for the currency.

 

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:

Barrett Business Services, Inc. (NASD:BBSI) Seasonal Chart

Barrett Business Services, Inc. (NASD:BBSI) Seasonal Chart

Towne Bank (NASD:TOWN) Seasonal Chart

Towne Bank (NASD:TOWN) Seasonal Chart

Las Vegas Sands Corp. (NYSE:LVS) Seasonal Chart

Las Vegas Sands Corp. (NYSE:LVS) Seasonal Chart

Royal Bank Of Canada (NYSE:RY) Seasonal Chart

Royal Bank Of Canada (NYSE:RY) Seasonal Chart

 

 

The Markets

Stocks closed higher on Friday, but well off of their highs as investors sold into the strength.  The KBW Bank index, which we have profiled in recent days as being in a precarious position at the lower limit of a descending triangle pattern, was higher by over 2% at the highs of the day, rallying following the CCAR results released the night before.  But by the closing bell, the bank index was firmly in the red, giving back the gains and then some.  Seasonally, cyclical areas of the market, such as bank stocks, typically rally from the last few days in June through the first couple of weeks of July, but with the overhang of a potential trade war, investors are showing that they are skittish.

image

KBW Bank Index Seasonal Chart

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

$BKX Monthly Averages

The S&P 500 Index traded right back to horizontal resistance around 2743 at the highs on Friday, once again confirming this previous level of support as resistance.

image

For the week, the large-cap benchmark is testing levels around its 20-week moving average, which is an important pivot point to the intermediate path of stocks.  Momentum indicators remain in bullish territory, but they are rolling over, hinting of imminent sell signals.  Economic fundamentals in the US remain stellar, which should otherwise give lift to stocks in the US, but the headline risks at present remain heavy, keeping investors cautious in equity positions.

image

On the economic front, a report on GDP in Canada showed a lacklustre result for economic activity in April.  The headline print indicated that monthly GDP increased by 0.1% in the spring month, which was marginally better than the unchanged result forecast by analysts.  Stripping out the seasonal adjustments, the increase was actually 0.4%, which is half of the 0.8% average increase for this time of year.  The result puts the year-to-date change nine-tenths of one percent below the seasonal average trend.  Mining activity was significantly lower in the month with the mining and quarrying (except oil and gas) category down by 7.5%.  The average change in the month is +1.3%.  Petroleum refineries also took a significant dip, down 26.9% in the month.  The average decline in April is 5.7%.  The report was broadly mixed with areas associated with commodity production offsetting the strength in pharmaceutical and semiconductor manufacturing, as well as pipeline transportation.  The report continues to suggest the struggle of industrial production in this country versus the US as activity is pulled south of the border given the more competitive tax landscape.  Seasonally, GDP in Canada continues to rise through to June before dipping sharply in July amidst the summer factory shutdown period.  For further insight as to the components behind the aggregate result, the seasonal charts are available in the chart database at https://charts.equityclock.com/canada-monthly-gross-domestic-product-gdp-by-industry.

Canada GDP - All industries Seasonal Chart

Monthly Canada GDP - All industries Data

Canada GDP - Mining and quarrying (except oil and gas) Seasonal ChartCanada GDP - Petroleum refineries Seasonal ChartCanada GDP - Pharmaceutical and medicine manufacturing Seasonal ChartCanada GDP - Semiconductor and other electronic component manufacturing Seasonal ChartCanada GDP - Pipeline transportation Seasonal Chart

Also in Canada, Statscan released its look at industrial product prices in the country.  The Industrial Product Price Index (IPPI) increased by 1.0% in May, a staggering jump for a one month period.  No change is the average performance in the month of May.  The result pushed the year-to-date gain to 3.2%, almost double the 1.7% average gain through this spring month.  Energy and petroleum products accounts for a significant share of the strength in this inflation gauge year-to-date, rising 11.8%.  The average change in the first five months of the year is +8.9%.  But even excluding this volatile category, industrial product prices are higher by 1.8%, firmly above the 1.0% change by this point in the year. Fruits/vegetables, tobacco, clothing, lumber, pulp/paper, metal products, and packaging materials are all seeing increases this year that are well above normal.  The threat of cross-border tariffs will not help in alleviating the strength in prices through the back half of the year.  Seasonally, industrial product prices tend to rise through August, then decline through the remaining months of the year as the price of oil fades following the conclusion of summer.  For further insight as to the influences behind the aggregate result, the seasonal charts can be accessed via the chart database at https://charts.equityclock.com/canada-industrial-product-price-index-ippi-by-north-american-product-classification-system-napcs.

Canada Total, Industrial product price index (IPPI) Seasonal Chart

Monthly Canada Total, Industrial product price index (IPPI) Data

Canada Total Industrial product price index (IPPI), excluding energy and petroleum products Seasonal ChartCanada IPPI - Energy and petroleum products Seasonal Chart

The stronger than expected economic data in Canada fuelled strength in the Canadian dollar as investors price in the potential for a rate hike at the next Bank of Canada policy meeting.  The domestic currency relative to its US counterpart jumped by just over one percent to test short-term resistance at its declining 20-day moving average.  The benchmark had become deeply oversold in recent days with RSI falling below 30 and MACD back to the lows of the year.  Seasonally, the Canadian Dollar relative to its US counterpart tends to rise between the end of June and the middle of July, then reverting to a negative trend through the remainder of July and August.

image

Canadian Dollar Forex (CAD) Seasonality

Monthly Seasonal Canadian Dollar Forex (CAD)

Sentiment on Friday, as gauged by the put-call ratio, ended bearish at 1.24.

image

 

Sectors and Industries entering their period of seasonal strength:

MSCI US REIT Index Seasonality

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

Monthly Seasonal MSCI US REIT Index

 

 

Seasonal charts of companies reporting earnings today:

Herman Miller, Inc. (MLHR)  Seasonal Chart Acuity Brands Inc (AYI)  Seasonal Chart

 

 

S&P 500 Index

image

image

 

 

TSE Composite

image

image

 

Sponsored By...
Seasonal Advantage Portfolio by CastleMoore

Comments are closed.