Contact | RSS Feed

Stock Market Outlook for July 10, 2018

Financial sector index poised to test a convergence of potential levels of resistance.

 

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:

Motorola Solutions Inc. (NYSE:MSI) Seasonal Chart

Motorola Solutions Inc. (NYSE:MSI) Seasonal Chart

Phillips 66 (NYSE:PSX) Seasonal Chart

Phillips 66 (NYSE:PSX) Seasonal Chart

NetScout Systems, Inc. (NASD:NTCT) Seasonal Chart

NetScout Systems, Inc. (NASD:NTCT) Seasonal Chart

 

 

The Markets

Stocks continued with last week’s gains on Monday as financial shares strengthened heading into earnings.  The S&P 500 Index gained almost nine-tenths of one percent, pushing closer to the highs charted in the middle of June.  Horizontal resistance around 2800 presents a major hurdle overhead.

image

The gain follows an over 2% rise in the S&P 500 Financial Sector Index, which has a significant hurdle of its own to overcome.  The benchmark is closing in on the convergence of major moving averages presented by the 50 and 200-day at 456 and 458, respectively.  The benchmark previously showed signs of support at these moving averages and now a test of these levels as resistance is imminent.  Reaction to earnings will be key.  The sector is expected to show earnings growth of 18.6% for the second quarter with revenues showing a more muted 3.9% rise.  Results on either side of this bogey will likely fuel direction in the sector through the remainder of the quarter.  Lacklustre loan growth was cited as a factor behind the weakness in sector constituents following the last earnings season.  Consumer and business loan growth has come back in the quarter now past, which could reignite enthusiasm for sector constituents.  Treasury yields are slightly higher for the quarter, but the yield spread has narrowed, raising questions regarding net interest margins.  Seasonally, the financial sector tends to weaken between the middle of July and the beginning of October, weighed down declining yields over the same timeframe.

image

Financial Sector Seasonal Chart

FINANCIAL Relative to the S&P 500
FINANCIAL Relative to the S&P 500

FINANCIAL Monthly Averages

imageimage

On the economic front, the tally of automobile sales for the month of June was released in the past few days.  Non-seasonally adjusted, total vehicle sales actually fell by 2.4% in June, which is firmly better than the 3.4% decline that is average for the month.  The result puts the year-to-date change at –3.2%, which is 8.7% below the seasonal norm.  A shift towards purchases at the end of the year and away from the traditional spring buying season is culprit for the lag.  What is encouraging is that the performance so far in 2018 is showing a notable improvement versus the performance recorded in 2017 when sales of vehicles were down 12.5% through the middle of the year.  Trucks sales are showing strength.  The sales of light weight foreign trucks are trending 5.5% above the seasonal average trend through the first half of the year.  The sales of heavy weigh trucks are about inline with seasonal norms through the month of June, down 1.1% year-to-date.  Typically, strength in truck sales are associated with upbeat business activity, sometimes even acting as a leading indicator to broader economic activity.  The results confirm that business activity in the US is strong and strengthening as the year-to-date trends improve versus the lacklustre pace seen last year.  Through the back half of the year, it would be expected that the year-to-date trend for total vehicle sales and the seasonal norm will converge, perhaps even resulting in an above average gain for the year. 

Total Vehicle Sales Seasonal Chart

Monthly Total Vehicle Sales Data

Total Vehicle Sales Seasonal Chart

Motor Vehicle Retail Sales: Domestic Autos Seasonal Chart Motor Vehicle Retail Sales: Domestic Light Weight Trucks Seasonal Chart Motor Vehicle Retail Sales: Heavy Weight Trucks Seasonal Chart Motor Vehicle Retail Sales: Foreign Autos Seasonal Chart Motor Vehicle Retail Sales: Foreign Light Weight Trucks Seasonal Chart

Sentiment on Monday, as gauged by the put-call ratio, ended bullish at 0.92.

image

 

 

 

 

Seasonal charts of companies reporting earnings today:

AAR Corp. (AIR) Seasonal Chart EXFO Inc (EXFO) Seasonal Chart Pepsico, Inc. (PEP) Seasonal Chart  Simulations Plus, Inc. (SLP) Seasonal Chart VOXX International Corporation (VOXX) Seasonal Chart WD-40 Company (WDFC) Seasonal Chart

 

 

S&P 500 Index

image

image

 

 

TSE Composite

image

image

 

Sponsored By...
Seasonal Advantage Portfolio by CastleMoore

Comments are closed.