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Stock Market Outlook for September 14, 2018

Weaker than expected inflation in the US taking some strength away from the US Dollar Index.

 

 

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:

Telefonica S.A. (ADR) (NYSE:TEF) Seasonal Chart

Telefonica S.A. (ADR) (NYSE:TEF) Seasonal Chart

Marcus Corp. (NYSE:MCS) Seasonal Chart

Marcus Corp. (NYSE:MCS) Seasonal Chart

First Citizens BancShares, Inc. (NASD:FCNCA) Seasonal Chart

First Citizens BancShares, Inc. (NASD:FCNCA) Seasonal Chart

Internet Gold-Golden Lines Ltd. (NASD:IGLD) Seasonal Chart

Internet Gold-Golden Lines Ltd. (NASD:IGLD) Seasonal Chart

IRSA Propiedades Comerciales SA (NASD:IRCP) Seasonal Chart

IRSA Propiedades Comerciales SA (NASD:IRCP) Seasonal Chart

Chemical Financial Corp. (NASD:CHFC) Seasonal Chart

Chemical Financial Corp. (NASD:CHFC) Seasonal Chart

Maximus, Inc. (NYSE:MMS) Seasonal Chart

Maximus, Inc. (NYSE:MMS) Seasonal Chart

General Mills, Inc.  (NYSE:GIS) Seasonal Chart

General Mills, Inc. (NYSE:GIS) Seasonal Chart

Champion Iron (TSE:CIA) Seasonal Chart

Champion Iron (TSE:CIA) Seasonal Chart

 

Toronto Money Show

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The Markets

Stocks in the US punched out gains on Thursday as trade fears alleviated and investors took comfort in a weaker than expected report on inflation in the US.  The S&P 500 closed higher by half of one percent, pushing back towards the highs of the year after a check-back of horizontal resistance at the January high in recent sessions.  Investors were seen rotating back into this summer’s winners in the health care and technology sectors, perhaps a bit of window dressing ahead of the end of the quarter.  But caution is warranted before chasing these high flyers.  In the last half of September, investment managers will often rebalance portfolios to take allocations back to investment policy statement guidelines.  This suggests that technology and health care sector allocations that have grown in size compared to other sectors that may have moved little in the quarter are vulnerable to selling pressures.  The laggards could be the beneficiaries, at least on a relative basis.  The net result on the broader market is negative performance across major equity benchmarks.  The rebalance event loosely surrounds September Quadruple Witching, which sees the expiration of equity and index options and futures, forcing a rebalance process in portfolios anyways.   An opportunity in some of the lagging sectors over the short-term may become apparent if the average tendency plays out.  Quadruple witching take place on September 21st.

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On the economic front, a report on consumer prices suggested that inflationary pressures abated in August, allowing the Fed more room in enacting its normalization policy.  The headline print indicated that the Consumer Price Index (CPI) increased by 0.2% last month, which was short of forecasts calling for a 0.3% rise.  Less food and energy, the increase was an more modest 0.1%, also short of estimates calling for a 0.2% increase.  Stripping out the seasonal adjustments, the consumer price index for all urban consumers actually increased by 0.06%, which is short of the 0.1% increase that is average for the summer month.  The year-to-date change in the gauge is now higher by 2.3%, a tenth of a percent below the seasonal average trend.  Conversely, core CPI (excluding food and energy), is running 0.1% above average, supported by the rapid increase in fuel prices year-to-date.  The increase in food prices has lagged seasonal norms through the month of August.  Among the standouts, prices of household operations are up by 4.5% through August, double the average increase of 2.2% by this point in the year.  This is the strongest rate since 2008.  Transportation is also running hot through the first two-thirds of the year, up by 5.2%, a full percentage point above the seasonal norm.  This is the strongest rate since 2011.  Strength in vehicle prices are a significant factor.  New and used motor vehicle pricing is running 1.7% above normal.  The prices of new cars have come down slightly this summer, but not nearly to the magnitude that they typically decline as dealers seek to liquidate current model year inventory.  As a result, August and September have typically been the best months to buy a new car; prices typically rise through the fourth quarter as new models fill showroom floors.  But while consumers may have not seen the normal benefits from lower auto prices, they have realized a benefit from a sharper than average decline in airfares, which are back to the flat-line on the year.  The decline, however, is not as large as last year’s decline from a high charted in May.  Airfares seasonally decline in the back half of the year.  And the last standout continues to pertain to technology, the hardware and services category specifically, which is showing a trend that is essentially flat on the year.  This category has been in perpetual decline for decades as the price of technology becomes increasingly cheaper, but, with elevated demand for products this year, prices have shown little change.  Overall, inflation is still embedded in the economy, but the pressures have alleviated versus what was seen in the first half of the year.  This may give the Fed some breathing room at future policy meetings.  Seasonally, prices tend to hit their highs of the year in September, then fall through the fourth quarter.  For an analysis of all of the categories in this report and to find out when may be the best time of year to buy some of those big-ticket items, the charts are available in the database at https://charts.equityclock.com/u-s-consumer-price-index-cpi-producer-price-index-ppi.

Consumer Price Index for All Urban Consumers: All Items Seasonal Chart

Monthly Consumer Price Index for All Urban Consumers: All Items Data

Consumer Price Index for All Urban Consumers: All Items Less Food and Energy Seasonal ChartCPI - Food and beverages Seasonal ChartCPI - Household operations Seasonal ChartCPI - Transportation Seasonal ChartCPI - New and used motor vehicles Seasonal ChartCPI - Airline fare Seasonal ChartCPI - Information technology, hardware and services Seasonal Chart

The weaker than expected CPI stripped some strength away from the US dollar, the index of which fell by around a quarter of a percent to move below support around the 50-day moving average.  The index attempted to maintain its trend of higher-highs and higher-lows by bouncing from around this level at the end of last month, but resistance around the 20-day moving average proved to be a hurdle that it was unable to overcome.  Momentum indicators are negatively diverging from price, which has been suggesting waning buying pressures.  A short-term head-and-shoulders pattern has downside implications towards horizontal support around 92.  Dollar strength has been enough to restrict some of the classic seasonal trades for the summer, such as gold, but a fulfilment of the downside target that the topping pattern suggests could allow these trades to end on a strong note going into the back half of September.  Seasonally, the US Dollar Index tends to decline into the month of October, on average, then rise sharply into the middle of November.

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US Dollar Index Futures (DX) Seasonal Chart

DX.FUT Monthly Averages

Sentiment on Thursday, as gauged by the put-call ratio, ended bullish at 0.84.

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Seasonal charts of companies reporting earnings today:

Dave & Buster's Entertainment, Inc. (PLAY) Seasonal Chart MAM Software Group, Inc. (MAMS) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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