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Stock Market Outlook for August 23, 2018

Housing market continues to raise concerns as inventories grow at double the average rate YTD.

 

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:

W. R. Berkley Corp. (NYSE:WRB) Seasonal Chart

W. R. Berkley Corp. (NYSE:WRB) Seasonal Chart

ProAssurance Corp. (NYSE:PRA) Seasonal Chart

ProAssurance Corp. (NYSE:PRA) Seasonal Chart

Empresa Distribuidora Y Comercializadora (NYSE:EDN) Seasonal Chart

Empresa Distribuidora Y Comercializadora (NYSE:EDN) Seasonal Chart

Infinity Property and Casualty Corp. (NASD:IPCC) Seasonal Chart

Infinity Property and Casualty Corp. (NASD:IPCC) Seasonal Chart

American Eagle Outfitters  (NYSE:AEO) Seasonal Chart

American Eagle Outfitters (NYSE:AEO) Seasonal Chart

Turkcell Iletisim Hizmetleri AS (NYSE:TKC) Seasonal Chart

Turkcell Iletisim Hizmetleri AS (NYSE:TKC) Seasonal Chart

 

 

The Markets

Stocks closed essentially flat on Wednesday as strength in the energy sector helped to mitigate weakness in defensive sectors, mainly staples, utilities, and REITs.  The S&P 500 Index closed lower by 0.04%, remaining with striking distance of the all-time high charted intraday during Tuesday’s session.

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Supporting the energy sector on the day was strength in the price of oil following the latest EIA inventory report that indicated a larger than expected drawdown in oil inventories.  Stockpiles of the raw input declined by 5.8 million barrels, while gasoline increased by 1.2 million barrels.  The result took the days of supply of oil down by six-tenths of a day, while gasoline rose by three-tenths.  The change in inventories of oil over the past month and a half continues to diverge from the seasonal norm that calls for declines through to mid-September.  The production of oil is back up to all-time highs at 11 million barrels per day, which was offset in the latest week by a plunge in the level of imports.  As for gasoline, signs are emerging that production and demand, as gauged by the level of product supplied, are rolling over well ahead of the end to the summer driving season with the labour day long weekend.  Production of the refined commodity is down by 5.1% since its peak at the start of July; the level of product supplied is down 4.3% since its peak.  There are some hints that activity this driving season has been below average, therefore limiting demand for gasoline.  However, both production and the level of product supplied are showing gains that are above average year-to-date.  Seasonally, demand for gasoline falls off fairly sharply in the month of September.

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 traded firmly higher following the report.  The commodity is testing potential resistance at its declining 50-day moving average.  A trading range between $62 and $75 is looking increasingly probable.

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Crude Oil Futures (CL) Seasonal Chart

FUTURE_CL1 Monthly Averages

On the economic front, a report on existing home sales continued to raise concerns pertaining to the health of the housing market.  The headline print indicated that sales declined by 0.7% in July to a seasonally adjusted annual rate of 5.34 million.  Analysts had been forecasting a rise of the same margin to a rate of 5.42 million.  Stripping out the seasonal adjustments, sales actually fell by 8.4%, which is worse than the 6.7% decline that is average for the summer month.  The year-to-date change is now 3.4% below the seasonal average trend.  Weakness in the north-east, which was down by 6.7% in July, was the drag on the aggregate result.  But while home sales trend just slightly below the average trend, inventories are climbing well above it as elevated prices are keeping buyers to the sidelines.  The year-to-date gain in inventories is 32.6%, double the average increase through this point in the year of 16.1%.  Prices have been producing above average gains since 2010 and the 1.4% above average pace this year suggests that this trend is not set to immediately end.  Market participants are focussing on the solid demand fundamentals that are keeping prices supported, but above average growth in supplies can have the same impact, which is that prices may come down as the market adjusts to a new equilibrium.  Whether focussing on supply or demand, the health of the housing market depends on activity, which at this point is at risk of declining.  Seasonally, home sales activity typically falls through the remainder of the year as summer winds down.

Existing Home Sales Seasonal Chart

Monthly Existing Home Sales Data

Existing Home Sales Seasonal Chart

Existing Home Sales - Northeast Seasonal Chart Existing Home Sales - Midwest Seasonal Chart Existing Home Sales - West Seasonal Chart Existing Home Sales - South Seasonal Chart

Inventory of Existing Homes for Sale Seasonal Chart

Inventory of Existing Homes for Sale Seasonal Chart

Median Sales Price of Existing Homes Seasonal Chart

North of the border, Statscan released its monthly report on retail trade.  Canadian retail sales are indicated to have declined by 0.2% in the month of June, better than the consensus estimate that forecasted a decline of 0.4%.  Stripping out the seasonal adjustments, retail trade in Canada actually declined by 3.6%, which is more than double the 1.4% decline that is average for the sixth month of the year.  Looking at the first half of the year overall, sales are running 7.6% above average, which is the best performance in the over two decades of data that Statscan has on file.  Strength in the trend spans a broad set of categories, including autos, home furnishings, food and beverage, clothing, and jewellery.  Perhaps counterintuitive, the only category to show a below average pace on the year is gasoline stations.  The prices paid at the pump showed above average gains through the first half of the year and therefore would have been expected to lift the level of sales accordingly.  Sales at gasoline stations are running 5.9% below average through the first half of the year, representing the third weakest pace in the past decade.  Seasonally, sales at gasoline stations peak in the month of August, buoyed by summer driving demand.  Overall, the consumer in Canada continues to show healthy activity, overcoming the headwinds imposed by the rising cost of goods.  Seasonally, retail trade in this country typically declines through the remainder of summer, bottoming in September ahead of the important end of year shopping season.  For further charts from this report, they can be accessed via the chart database at the following link: https://charts.equityclock.com/canada-retail-trade-sales.

Retail trade Seasonal Chart

Monthly Retail trade Data

Gasoline stations Seasonal Chart

Sentiment on Wednesday, as gauged by the put-call ratio, ended close to neutral at 0.96.

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Seasonal charts of companies reporting earnings today:

1-800 FLOWERS.COM, Inc. (FLWS) Seasonal Chart Alibaba Group Holding Limited (BABA) Seasonal Chart Autodesk, Inc. (ADSK) Seasonal Chart Canadian Imperial Bank of Commerce (CM) Seasonal Chart Children's Place, Inc. (The) (PLCE) Seasonal Chart Citi Trends, Inc. (CTRN) Seasonal Chart Eros International PLC (EROS) Seasonal Chart Fly Leasing Limited (FLY) Seasonal Chart Gap, Inc. (The) (GPS) Seasonal Chart Globant S.A. (GLOB) Seasonal Chart  Hoegh LNG Partners LP (HMLP) Seasonal Chart Hormel Foods Corporation (HRL) Seasonal Chart HP Inc. (HPQ) Seasonal Chart  Immunomedics, Inc. (IMMU) Seasonal Chart Intuit Inc. (INTU) Seasonal Chart Leju Holdings Limited (LEJU) Seasonal Chart  Navios Maritime Holdings Inc. (NM) Seasonal Chart New York & Company, Inc. (NWY) Seasonal Chart OSI Systems, Inc. (OSIS) Seasonal Chart Ross Stores, Inc. (ROST) Seasonal Chart Sanderson Farms, Inc. (SAFM) Seasonal Chart Splunk Inc. (SPLK) Seasonal Chart Sportsman's Warehouse Holdings, Inc. (SPWH) Seasonal Chart Stage Stores, Inc. (SSI) Seasonal Chart StealthGas, Inc. (GASS) Seasonal Chart Toro Company (The) (TTC) Seasonal Chart Veeva Systems Inc. (VEEV) Seasonal Chart Vmware, Inc. (VMW) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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