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Stock Market Outlook for July 5, 2018

Investors showing signs of risk-aversion in a traditionally risk-on period for stocks.

 

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:

Cubic Corp. (NYSE:CUB) Seasonal Chart

Cubic Corp. (NYSE:CUB) Seasonal Chart

Hollysys Automation Technologies (NASD:HOLI) Seasonal Chart

Hollysys Automation Technologies (NASD:HOLI) Seasonal Chart

Armour Residential REIT Inc. (NYSE:ARR) Seasonal Chart

Armour Residential REIT Inc. (NYSE:ARR) Seasonal Chart

 

 

The Markets

Stocks closed lower on Tuesday as fears of a growing trade war kept investor cautious of equity allocations.  The S&P 500 Index shed around half of one percent, closing back below its 50-day moving average.  The benchmark continues to show short-term resistance at 2743 representing the gap that was opened last week.  Horizontal support around 2700 continues to keep the market elevated, for now, amidst the heightened headline risks.  Technology was the biggest laggard on the day, acting contrary to seasonal norms that calls for strength in cyclical sectors through the first couple of weeks of the new quarter as fund inflows and general earnings optimism prop up the market in this mid-summer rally period.  Markets are taking a noticeably defensive tone with staples and utilities topping the leaderboard during Tuesday’s session.  Bond prices are also on the rise.  With investors becoming risk-averse during this traditionally risk-on period for stocks, warning flags are raised.

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On the economic front, a report on factory orders in the US topped analyst estimates.  The headline print indicated that orders increased by 0.4% in May, surpassing analyst estimates calling for no change (0.0%).  Stripping out the seasonal adjustments, the Value of Manufacturers’ New Orders for All Manufacturing Industries actually increased by 4.6%, firmly above the 3.0% increase that is average for the fifth month of the year.  The result puts the year-to-date gain at 6.5%, or 4.8% above the average change through the first five months of the year.  The performance in 2018 remains the best in seven years.  The strength behind the aggregate tally is very broad with a wide array of durable and non-durable goods showing above average performance.  Technology orders remains a standout.  The year-to-date change for computers and electronics products is 11.1% above average through the end of May, representing the best performance for this category in over two decades.  The results are indicative of a strong economy as companies make investments in the US following the recently enacted tax cuts.  Seasonally, June typically marks the peak in factory orders for the year, hitting a high just before the average factory shutdown period.  For a complete breakdown of the results, the seasonal charts can be accessed via the chart database at https://charts.equityclock.com/u-s-factory-orders.

Value of Manufacturers' New Orders for All Manufacturing Industries Seasonal Chart

Monthly Value of Manufacturers' New Orders for All Manufacturing Industries Data

Value of Manufacturers' New Orders for All Manufacturing Industries Excluding Transportation Seasonal Chart Value of Manufacturers' New Orders for All Manufacturing Industries Excluding Defense Seasonal Chart

Sentiment on Tuesday, as gauged by the put-call ratio, ended bearish at 1.07.

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Seasonal charts of companies reporting earnings today:

International Speedway Corporation (ISCA) Seasonal Chart PriceSmart, Inc. (PSMT) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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