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Stock Market Outlook for July 12, 2018

Crude Oil rolls over from trendline resistance; trendline support presently around $66.

 

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:

Valhi, Inc. (NYSE:VHI) Seasonal Chart

Valhi, Inc. (NYSE:VHI) Seasonal Chart

Shore Bancshares Inc. (NASD:SHBI) Seasonal Chart

Shore Bancshares Inc. (NASD:SHBI) Seasonal Chart

Watts Water Technologies, Inc. (NYSE:WTS) Seasonal Chart

Watts Water Technologies, Inc. (NYSE:WTS) Seasonal Chart

United Parcel Service, Inc.  (NYSE:UPS) Seasonal Chart

United Parcel Service, Inc. (NYSE:UPS) Seasonal Chart

Cintas Corporation  (NASDAQ:CTAS) Seasonal Chart

Cintas Corporation (NASDAQ:CTAS) Seasonal Chart

Timberland Bancorp, Inc. (NASD:TSBK) Seasonal Chart

Timberland Bancorp, Inc. (NASD:TSBK) Seasonal Chart

Horizon Bancorp (NASD:HBNC) Seasonal Chart

Horizon Bancorp (NASD:HBNC) Seasonal Chart

 

 

The Markets

Stocks dipped on Wednesday as investors reacted to the latest volley of tariffs announced by the Trump administration.  The S&P 500 Index slipped by around half of one percent, retracing a portion on the previous sessions gains when trade fears took a backseat to upbeat US fundamentals.  The usual culprits that are suspected to be impacted most by a trade skirmish saw the greatest losses on the day, including industrials and materials.  Utilities was the lone sector to finish in the green as investors sought areas of the market immune to international headwinds.  The S&P 500 Utilities Sector Index is trading back above its 200-day moving average, providing some encouragement that the longer-term path will return to positive.  Seasonally, the sector benefits from positive tendencies between July 23rd and October 3rd, on average.

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Utilities Sector Seasonal Chart

UTILITIES Relative to the S&P 500
UTILITIES Relative to the S&P 500

UTILITIES Monthly Averages

On schedule for the Wednesday session, the weekly status check of petroleum inventories was released.  The EIA is indicating that oil stockpiles declined by 12.6 million barrels last week, while gasoline inventories fell by 700,000 barrels.  The result saw the days of supply of oil fall by eight-tenths to 22.9, the first time that this gauge of supply has shown a 22-handle since January of 2015.  The average days of supply of the commodity at this time of year is 22.0.  While initial glimpse of the report suggests bullishness for the price of the commodity, anomalies in the results given the holiday week may be difficult to separate.  First off, imports of oil were sharply lower in the week as ports closed for the holiday period.  And also drawing on oil stockpiles was a sharp increase in the production of gasoline to the highest level of the year.  Typically, this increase in production coincides with an increase in product supplied of the refined commodity, but the two moved in opposite directions with the gauge of demand falling to around the lowest levels of the past few months.  Supply not being met by demand suggests an injection to inventories in the weeks ahead.  The increase in gasoline inventories through the past month and a half has been slightly above average and the trend could continue into July, beyond the average peak to gasoline inventories for the middle of the year.

Weekly U.S. Days of Supply of Crude Oil excluding SPR  (Number of Days) Seasonal Chart

Weekly U.S. Days of Supply of Crude Oil excluding SPR (Number of Days) Seasonal Chart

Weekly U.S. Ending Stocks excluding SPR of Crude Oil Seasonal ChartWeekly U.S. Field Production of Crude Oil Seasonal ChartWeekly U.S. Commercial Crude Oil Imports Excluding SPR Seasonal Chart

Weekly U.S. Days of Supply of Total Gasoline  (Number of Days) Seasonal Chart

Weekly U.S. Days of Supply of Total Gasoline (Number of Days) Seasonal Chart

Weekly U.S. Ending Stocks of Total Gasoline Seasonal Chart Weekly U.S. Refiner and Blender Adjusted Net Production of Finished Motor Gasoline Seasonal Chart Weekly U.S. Product Supplied of Finished Motor Gasoline Seasonal Chart

The price of oil plunged by around 5% during Wednesday’s session, perhaps not so much the direct result of the US petroleum report, but rather the threat of retaliation from China following the announced tariffs and news that oil exports out of Libya would return to normal. The price of WTI Crude rolled over from resistance presented by the upper limit of an intermediate rising trend channel, possibly set for a test of the lower limit, now around $66, in the coming days.  Support at the 20 and 50-day moving averages can be seen around $69.

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Crude Oil Futures (CL) Seasonal Chart
FUTURE_CL1 Relative to the S&P 500FUTURE_CL1 Relative to Gold

FUTURE_CL1 Monthly Averages

On the economic front, we start off with a report released on Tuesday, but due to the timing of the release of the non-seasonally adjusted data the analysis is delayed by a day.  Tuesday’s report on Job Openings and Labor Turnover indicated that openings declined by 3.0% to 6.638 million in May from 6.84 million previous.  The consensus estimate was for a decline to 6.70 million.  Stripping out the seasonal adjustments, openings actually fell by 9.3% in the month, which is slightly more than the 8.8% decline that is average for this time of year.  Still, it is very difficult to nit-pick over the half of one percent lag in the month when openings are running 9.1% above average year-to-date.  The greater than average decline in openings stems from the greater than average increase in hires.  Hires were up by 8.2% in the month, well above the 1.3% gain that is average for the month.  Hires are now running 3.4% above the seasonal average trend through the first five months of the year, driven by strength in mining, construction, trade transportation, retail, information, financial activities, health, and leisure.  Oddly enough, manufacturing hires, an area that factors prominently in the non-farm payroll report, is showing a lagging trend with respect to its seasonal norm.  As for the gauge of confidence in the labor market, the quit rate was up 10.9% in May, significantly above the average increase of 0.1% for this fifth month of the year.  Workers are leaving positions in the same industries that employers are hiring, suggesting that employees are moving up the ladder, taking advantage of the tight labor conditions to secure better opportunities.  Overall, the report continues to suggest a tight labor market, which has the potential to be inflationary in future months and quarters given the limited ability of employers to fill openings at current wages. 

Job Openings: Total Nonfarm Seasonal Chart

Monthly Job Openings: Total Nonfarm Data

Job Openings: Total Nonfarm Seasonal Chart

Quits: Total Nonfarm Seasonal Chart Hires: Total Nonfarm Seasonal Chart Layoffs and Discharges: Total Nonfarm Seasonal Chart

As for the gauge of inflation that is impacting business in the US, the Producer Price Index (PPI) for June was released before Wednesday’s opening bell.  The headline print indicate that PPI Final Demand increased by 0.3% last month, edging out the consensus analyst estimate that called for a 0.2% rise.  Stripping out the seasonal adjustments, PPI for All Commodities actually increased by 0.5% in the month, more than the 0.3% gain that is average for the period.  For the first half of the year overall, PPI is higher by 4.0%, well above the 2.7% gain that is average over the same period.  Striping out some of the more volatile items, PPI for Final Demand excluding food and energy is running seven-tenths of one percent above the seasonal norm through the first six months of the year, representing the fourth strongest performance in the past two decades.  Inflation is embedded in the economy and the threat of a trade war just adds to the risk of higher costs that businesses will have to absorb or pass on to consumer, potentially threatening the upbeat economic activity seen in recent years.

http://charts.equityclock.com/seasonal_charts/economic_data/PPIACO_seasonal_chart.PNG

  Producer Price Index by Commodity for Final Demand: Finished Goods Seasonal Chart  Producer Price Index by Commodity for Final Demand: Finished Goods Less Foods and Energy Seasonal Chart

As for activity, a report on wholesale trade provided indication of how business is faring at this stage of the retail chain.  The headlines indicated that sales increased by a seasonally adjusted 2.5% in May, while inventories increased by 0.6%.  Analysts were expecting a 0.5% rise in inventories.  Stripping out the seasonal adjustments, sales actually increased by 10.0% in the month, while inventories declined by 0.6%; the average change for each is +2.0% and –0.7%, respectively.  Wholesale sales are now running 6.1% above average year-to-date, joining the above average position that has been seen in inventories.  Previously, there was concern that inventories were increasing at a faster pace than what sales could accommodate, but this report puts to rest some of the fears.  On the sales side, strength in metals, computers/peripherals, paper, drugs, farm product raw materials, and petroleum are driving the larger than average aggregate result.  Electronic goods and furnishings are the lone categories showing below average trends through the first five months of the year.  Seasonally, wholesale sales peak for the year in October, just ahead of the important holiday retail period.  For a breakdown of the categories, the charts can be accessed through the chart database at https://charts.equityclock.com/u-s-wholesale-trade-sales-and-inventories.

Wholesale Sales  Seasonal Chart

Monthly Wholesale Sales  Data

Wholesale Sales Seasonal Chart

Wholesale Inventories Seasonal Chart

Sentiment on Wednesday, as gauged by the put-call ratio, ended bearish at 1.02.

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Seasonal charts of companies reporting earnings today:

Aspen Group Inc. (ASPU) Seasonal Chart Commerce Bancshares, Inc. (CBSH) Seasonal Chart Delta Air Lines, Inc. (DAL) Seasonal Chart National Beverage Corp. (FIZZ) Seasonal Chart Northern Technologies International Corporation (NTIC) Seasonal Chart Peak Resorts, Inc. (SKIS) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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