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Stock Market Outlook for August 30, 2018

Equity benchmarks trade to significantly overbought levels as the sustainability of the rally becomes questionable.

 

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:

Oracle Corporation  (NASDAQ:ORCL) Seasonal Chart

Oracle Corporation (NASDAQ:ORCL) Seasonal Chart

Global Sources Ltd. (NASD:GSOL) Seasonal Chart

Global Sources Ltd. (NASD:GSOL) Seasonal Chart

Descartes Systems Group Inc. (NASD:DSGX) Seasonal Chart

Descartes Systems Group Inc. (NASD:DSGX) Seasonal Chart

Tata Motors Ltd. (NYSE:TTM) Seasonal Chart

Tata Motors Ltd. (NYSE:TTM) Seasonal Chart

The Toro Company  (NYSE:TTC) Seasonal Chart

The Toro Company (NYSE:TTC) Seasonal Chart

Ryanair Holdings PLC (NASD:RYAAY) Seasonal Chart

Ryanair Holdings PLC (NASD:RYAAY) Seasonal Chart

Banco Frances Del Rio SA (NYSE:BFR) Seasonal Chart

Banco Frances Del Rio SA (NYSE:BFR) Seasonal Chart

 

Upcoming BNN Appearance:

I will be on BNN’s Market Call Tonight at 6:00pm ET this Friday, August 31st taking your calls on Technical Analysis and Seasonal Investing.  CALL TOLL-FREE 1-855-326-6266,  EMAIL marketcall@bnnbloomberg.ca,  or TWEET @MarketCall.

Just Released…

The monthly outlook for September has just been released to Equity Clock subscribers.  Highlights include:

  • Equity market tendencies in September
  • Potential breadcrumbs that could lead to the next recession
  • Comments on the seasonal trade in natural gas
  • Comments on the conclusion to the period of strength in the energy sector
  • Notable stocks entering their period of strength in September
  • And more…

 

The Markets

Stocks hit fresh all-time highs on Wednesday as strength in big tech names led the advance.  The tech heavy Nasdaq Composite gained nearly one percent, starting to put the psychologically important 8000 level in the rear-view mirror.  The trend in the benchmark has become slightly parabolic in recent days, starting to raise questions as to the sustainability of this move.  The 14-day relative strength index (RSI) is now above 70, a significantly overbought level that often precedes buying exhaustion.

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NASDAQ Composite Seasonal Chart

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

$COMPQ Monthly Averages

The same can be said of the S&P 500 Index, which is similarly showing a slightly parabolic trend and overbought RSI level.  The benchmark has even pushed above its defined rising trend channel, which created an orderly rise from the lows charted around the start of May.  Analysts using Bollinger bands or Keltner channels will also note that the level has surpassed the upper band using a 20-day timescale, which is not exactly a bearish attribute given that price can still advance higher, but short-term buying exhaustion is not that uncommon.

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The market momentum going forward may depend on whether some sector benchmarks can exceed resistance overhead.  The S&P 500 Financial Sector index struggled at resistance on Wednesday around 475, trading flat despite a positive market tape.  The Energy Sector Index has started to show resistance around its declining 50-day moving average, although support at the 200-day not far below suggests that the negative short-term hurdle may be short-lived.  Industrials and materials are showing hurdles of their own.  These sectors can say a lot about investor risk sentiment and continued strain at levels of resistance overhead would present a signal to become concerned of the willingness of buyers to take on risk in the month(s) ahead.

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On schedule for the Wednesday session, the weekly petroleum status report was released.  The EIA is reporting that oil inventories decreased by 2.6 million barrels last week, while gasoline decreased by 1.6 million barrels.  The result did little to change the days of supply of each, both down by a mere tenth of a day.  The level of oil and gas inventories is essentially unchanged since the middle of July, an abnormal path at a time when drawdowns are the average during the high demand summer driving season.  Domestic production of oil has returned to its all-time high level initially charted just over a month ago.  Meanwhile, on the product side, the level of product supplied of gasoline has returned to its high of the year in what might be the last push to retailers ahead of the last long weekend of summer.  Product supplied, a gauge of demand, tends to fall off sharply following the labour day long weekend in both Canada and the US.  The sharp jump in the level of product supplied was not met by an equivalent jump in production, perhaps a sign that inventories of summer blend are plentiful.  These inventories may have to be drawn down before stockpiles of winter blend can be increased.  The risk is that oil stockpiles are pressured higher well ahead of the average seasonal low late in September as production of gasoline wanes.

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 reacted positively to the inventory draw with WTI crude rising around 1.5%.  The energy commodity still looks poised to continue a trading range between a low of $62 and a high of $75, a level that has significance on a longer-term scale given its support characteristics that were evident when prices were around $100 early in the decade.  Seasonally, the price of oil tends to decline through the fourth quarter as demand fades following summer driving season.  Price has declined in 55% of Septembers over the past 20 years and 60% of Octobers.

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http://charts.equityclock.com/seasonal_charts/futures/FUTURE_CL1.PNG

FUTURE_CL1 Monthly Averages

Sentiment on Wednesday, as gauged by the put-call ratio, ended bullish at 0.85.

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Seasonal charts of companies reporting earnings today:

Abercrombie & Fitch Company (ANF) Seasonal Chart Ambarella, Inc. (AMBA) Seasonal Chart American Outdoor Brands Corporation (AOBC) Seasonal Chart Build-A-Bear Workshop, Inc. (BBW) Seasonal Chart Burlington Stores, Inc. (BURL) Seasonal Chart Campbell Soup Company (CPB) Seasonal Chart  Ciena Corporation (CIEN) Seasonal Chart Destination XL Group, Inc. (DXLG) Seasonal Chart Dollar General Corporation (DG) Seasonal Chart Dollar Tree, Inc. (DLTR) Seasonal Chart EDAP TMS S.A. (EDAP) Seasonal Chart  Ituran Location and Control Ltd. (ITRN) Seasonal Chart Kirkland's, Inc. (KIRK) Seasonal Chart lululemon athletica inc. (LULU) Seasonal Chart MEI Pharma, Inc. (MEIP) Seasonal Chart Methode Electronics, Inc. (MEI) Seasonal Chart   Patterson Companies, Inc. (PDCO) Seasonal Chart Perry Ellis International Inc. (PERY) Seasonal Chart Redhill Biopharma Ltd. (RDHL) Seasonal Chart Signet Jewelers Limited (SIG) Seasonal Chart Spark Networks, Inc. (LOV) Seasonal Chart Tech Data Corporation (TECD) Seasonal Chart The Cooper Companies, Inc. (COO) Seasonal Chart The Michaels Companies, Inc. (MIK) Seasonal Chart Titan Machinery Inc. (TITN) Seasonal Chart Toronto Dominion Bank (The) (TD) Seasonal Chart Ulta Beauty, Inc. (ULTA) Seasonal Chart  

 

 

S&P 500 Index

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TSE Composite

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