Contact | RSS Feed

Stock Market Outlook for September 17, 2018

Economic data suggests ongoing business and consumer strength.

 

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:

FNB Bancorp Inc. (NASD:FNBG) Seasonal Chart

FNB Bancorp Inc. (NASD:FNBG) Seasonal Chart

China Automotive Systems Inc. (NASD:CAAS) Seasonal Chart

China Automotive Systems Inc. (NASD:CAAS) Seasonal Chart

NLIndustries, Inc. (NYSE:NL) Seasonal Chart

NLIndustries, Inc. (NYSE:NL) Seasonal Chart

American Water Works Co. Inc. (NYSE:AWK) Seasonal Chart

American Water Works Co. Inc. (NYSE:AWK) Seasonal Chart

Time Warner Inc.  (NYSE:TWX) Seasonal Chart

Time Warner Inc. (NYSE:TWX) Seasonal Chart

China Distance Education Holdings (NYSE:DL) Seasonal Chart

China Distance Education Holdings (NYSE:DL) Seasonal Chart

Kandi Technologies Corp. (NASD:KNDI) Seasonal Chart

Kandi Technologies Corp. (NASD:KNDI) Seasonal Chart

AutoZone, Inc. (NYSE:AZO) Seasonal Chart

AutoZone, Inc. (NYSE:AZO) Seasonal Chart

Interactive Brokers Group (NASD:IBKR) Seasonal Chart

Interactive Brokers Group (NASD:IBKR) Seasonal Chart

 

 

The Markets

Stocks closed the week flat on Friday as investors, yet again, reacted to trade headlines.  The S&P 500 Index added three basis points, managing to maintain levels above the psychologically important 2900 level.  Horizontal support at the January high around 2873 was tested in the past week.

image

On the weekly look , the fourth weekly close above the January high has given justification to August’s breakout above this level.  The benchmark has effectively moved sideways since, consolidating the breakout move.  MACD and RSI continue to point higher with the Relative Strength Index (RSI) positioned just below overbought levels.  Stochastics are showing early signs of rolling over, but this move has yet to be shared by the other two momentum indicators.  Seasonally, the last two weeks of the month are the ones to watch as monthly rebalancing and profit taking lead to the weakest period for the equity benchmarks out of the whole year.

image

On the economic front, a report on retail sales indicated a weaker than expected print for the month of August.  The headline print showed that retail sales increased by 0.1% last month, well short of estimates calling for a 0.4% rise.  Excluding the more volatile components of gas and autos, sales were higher by 0.2%, also short of estimates calling for a 0.4% gain.  Stripping out the seasonal adjustments, sales actually increased by 3.5%, which is better than the 2.5% increase that is average for the summer month.  The year-to-date change is now trending 1.6% above average, the best performance since 2014.  Excluding autos, the 3.9% above average performance in retail sales is the best pace on record (data ranging back to 1993), a testament to the tax cuts enacted at the end of last year.  Auto sales is the biggest drag on the aggregate tally, running 10.2% below the seasonal average trend through the month of August.  Strength is seen in furniture, electronics, health, general merchandise, clothing, and gasoline sales.  The strength in consumer spending remains fairly broad, a sign of a healthy economy.  Seasonally, retail sales dip into the month of September then rise through the fourth quarter as the notorious consumer spending season takes hold.  For a breakdown of all of the categories in the report, the charts are available via the database at https://charts.equityclock.com/u-s-retail-trade-sales.

Retail Trade: Total Seasonal Chart

Monthly Retail Trade: Total Data

Retail Trade and Food Services, excluding Auto Seasonal ChartRetail Trade: Auto and Other Motor Vehicles Seasonal Chart

Further on the economy, industrial production figures for the month of August were as expected.  The headline print indicated that industrial production increased by 0.4% in August, inline with the consensus forecast.  The manufacturing component was higher by 0.2%, short for estimates that called for a 0.3% rise.  Stripping out the seasonal adjustments, total industrial production was actually higher by 2.4%, short of the 3.2% increase that is average for the summer month.  But the result certainly gives little reason for disappointment given the well above average print achieved in July.  Net result is that industrial production is trending 1.2% above average through the end of August, which is the third best performance in the past decade.  Manufacturing is running 1.1% above the seasonal average trend, which is the second best performance in the past decade, lagging only behind 2010 when the economy emerged from the recession.  Diving into some of the other broad categories, the production of consumer goods is lagging its seasonal average trend, weighed down by weakness in automotive, home electronics, chemicals, and energy.  But business is picking up the slack with production of business equipment running 2.5% above the seasonal average trend.  Transit and industrial are driving this result.  The standout categories in the report pertain to defense/space equipment and materials, both of which are showing the best performance in years; materials is showing the third best performance in the past two decades, running 3.0% above the seasonal norm.  Overall, these are strong results.  Industrial production and manufacturing have muscled through the  summer slump, which typically sees a sharp drop in activity in July amidst the factory shutdown period.  Production is now at the highs of the year and in a much higher than average position.  Seasonally, production tends to decline through the last four months of the year as activity wanes ahead of the important business and consumer spending season.  For a complete breakdown of the results, the charts are available in the database at https://charts.equityclock.com/u-s-industrial-production

Industrial Production: Total Seasonal Chart

Monthly Industrial Production: Total Data

Industrial Production: Consumer goods Seasonal ChartIndustrial Production: Business equipment Seasonal ChartIndustrial Production: Defense and space equipment Seasonal ChartIndustrial Production: Materials Seasonal ChartIndustrial Production: Manufacturing Seasonal Chart

And just briefly on business sales and inventories, while the sales side remains strong, inventories are starting to show signs of growing above average.  Sales are running 2.0% above the seasonal average trend, year-to-date, and inventories are running 0.4% above the seasonal norm.  The strength in inventories is coming exclusively from manufacturing, which is running a full percentage point above average.  So while manufacturing activity is strong, a disconnect may be forming where supply is not equating to demand.  This can pose issues in future periods should manufacturers be forced to conduct inventory control measures.  Discounting of product may be required.  This is still an emerging trend and it is premature to conclude anything definitively as of yet.

Total Business Sales Seasonal Chart

Monthly Total Business Sales Data

Total Business Sales Seasonal Chart

Manufacturers Sales Seasonal Chart Retailers Sales Seasonal Chart Merchant Wholesalers Sales Seasonal Chart

Total Business Inventories Seasonal Chart

Total Business Inventories Seasonal Chart

Manufacturers Inventories Seasonal Chart Retailers Inventories Seasonal Chart Merchant Wholesalers Inventories Seasonal Chart

Sentiment on Friday, as gauged by the put-call ratio, ended bullish at 0.83.

image

 

 

 

 

Seasonal charts of companies reporting earnings today:

FedEx Corporation (FDX) Seasonal Chart Oracle Corporation (ORCL) Seasonal Chart

 

 

S&P 500 Index

image

image

 

 

TSE Composite

image

image

 

Sponsored By...
Seasonal Advantage Portfolio by CastleMoore

Comments are closed.