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Stock Market Outlook for July 16, 2018

Historically, the most volatile period for stocks is between the middle of July and the beginning of October.

 

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:

Sarepta Therapeutics, Inc. (NASD:SRPT) Seasonal Chart

Sarepta Therapeutics, Inc. (NASD:SRPT) Seasonal Chart

Cobiz Financial Inc. (NASD:COBZ) Seasonal Chart

Cobiz Financial Inc. (NASD:COBZ) Seasonal Chart

Genworth MI Canada (TSE:MIC) Seasonal Chart

Genworth MI Canada (TSE:MIC) Seasonal Chart

Fortis Incorporated  (TSE:FTS) Seasonal Chart

Fortis Incorporated (TSE:FTS) Seasonal Chart

Duke Energy Corporation  (NYSE:DUK) Seasonal Chart

Duke Energy Corporation (NYSE:DUK) Seasonal Chart

Berkshire Hathaway, Inc. (NYSE:BRK-B) Seasonal Chart

Berkshire Hathaway, Inc. (NYSE:BRK-B) Seasonal Chart

Sandy Spring Bancorp, Inc. (NASD:SASR) Seasonal Chart

Sandy Spring Bancorp, Inc. (NASD:SASR) Seasonal Chart

WD-40 Company  (NASDAQ:WDFC) Seasonal Chart

WD-40 Company (NASDAQ:WDFC) Seasonal Chart

 

 

The Markets

Stocks closed marginally higher on Friday, despite a lacklustre start to the earnings season for the banks. Shares of Citigroup, Well Fargo, and JP Morgan all traded lower following results, once again dragging on the KBW Bank Index, which continues to sit around the lows of the year.  A descending triangle pattern continues to constrain the price action.  The negative setup, if fulfilled, presents downside potential towards the 52-week lows charted last September.  Seasonally, the Bank Index remains in a period of weakness through to the start of October.

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KBW Bank Index Seasonal Chart

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

$BKX Monthly Averages

For the week, the S&P 500 Index gained 1.50%, closing marginally above psychological resistance at 2800.  Support at the 20-week moving average remains apparent.  An inverse head-and-shoulders pattern can be implied by the price action over the six months.  Momentum indicators are attempting to hold in bullish territory.  For now, looking on the surface, the market looks to be in good shape, but seasonal tendencies beyond the week ahead give reason for caution.  Historically, the period between mid-July and the beginning of October has been the most volatile time of year for stocks, resulting in weak equity market performance through the remainder of the third quarter.  Cyclical sectors tend to weigh as economic activity wanes and upside catalysts are typically few and far between.  Opportunities remain in various segments of the market through this volatile period, but their scope tends to be narrow, often pertaining to areas that are hedged against cyclical fluctuations in the economy.

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Volatility Index (VIX) Seasonality

Monthly Seasonal Volatility Index (VIX)

North of the border, the Canadian equity benchmark is showing an upward swing of its own, closing at a new weekly high.  Trendline resistance remains a hurdle overhead.  The benchmark has shown a consistent trend of underperformance versus US counterparts for the past decade as energy and material stocks weigh.  However, over the next month and a half, the Canadian benchmark may be in a position to outperform as a result of the same sector weights.  The TSX Composite has outperformed the S&P 500 Index 64% of the time over the past 25 years between the middle of July and the beginning of September as energy and gold mining stocks enter seasonally strong periods.  Average return for the Canadian and US benchmarks is 0.06% and -0.77%, respectively.  The Canadian Energy and Gold Mining sectors have been attempting to carve out long-term bottoms for the the past couple of years and upside breakouts could further entice buyers to these market segments that have been unloved for many years.

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S&P/TSX Composite index Seasonal Chart

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

$TSX Monthly Averages

Sentiment on Friday, as gauged by the put-call ratio, ended close to neutral at 0.98.

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Sectors and Industries entering their period of seasonal strength:

S&P/ASX 200 Seasonal Chart

^AXJO Relative to the S&P 500
^AXJO Relative to the S&P 500

^AXJO Monthly Averages

 

 

Seasonal charts of companies reporting earnings today:

Avid Bioservices, Inc. (CDMO) Seasonal Chart Bank of America Corporation (BAC) Seasonal Chart BlackRock, Inc. (BLK) Seasonal Chart First Defiance Financial Corp. (FDEF) Seasonal Chart J.B. Hunt Transport Services, Inc. (JBHT) Seasonal Chart Netflix, Inc. (NFLX) Seasonal Chart SuperCom, Ltd. (SPCB) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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