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Stock Market Outlook for September 27, 2018

Peculiar action as both utilities and financials trade sharply lower following the latest  rate hike announcement.

 

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:

Parker-Hannifin Corporation  (NYSE:PH) Seasonal Chart

Parker-Hannifin Corporation (NYSE:PH) Seasonal Chart

Accenture Ltd. (NYSE:ACN) Seasonal Chart

Accenture Ltd. (NYSE:ACN) Seasonal Chart

Parametric Technology Corp. (NASD:PTC) Seasonal Chart

Parametric Technology Corp. (NASD:PTC) Seasonal Chart

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

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

Federated National Holding Co. (NASD:FNHC) Seasonal Chart

Federated National Holding Co. (NASD:FNHC) Seasonal Chart

 

 

The Markets

Stocks dipped on Wednesday as investors hit the sell button following latest FOMC announcement.  The Fed announced that it is increasing its benchmark rate by a quarter of a percent to a range of 2% to 2.25% and that another rate increase should be expected before the end of the year.  The S&P 500 Index shed a third of a percent, weighed down, in part, by utilities, REITs, and financials.  The moves were counterintuitive as yields on treasury notes moved lower, which should have otherwise been a benefit to bond proxies in the utilities and REIT sectors. US Banks, which typically benefit in a rising rate environment, were the largest drag within the financial sector on the day.  The ETF in the US that tracks the banks (KBE) is quickly closing in on support around $46.50, which is also the lower limit of a descending triangle pattern.  The bank ETF is now trading firmly below its 200-day moving average, which raises some flags pertaining to the longer-term trend.  Investors are certainly expressing their pessimism on the ability of banks to see significant benefits in an environment with loan growth moderating and yield spreads narrowing.  Seasonally, US bank stocks enter their period of seasonal strength closer to the end of November.

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Banks Industry Seasonal Chart

S5BANKX Index Relative to the S&P 500S5BANKX Index Relative to the Sector

S5BANKX Index Monthly Averages

On schedule for the Wednesday session was the release of the petroleum status report for the week ending September 21.  The EIA indicated that oil stockpiles increased by 1.9 million barrels last week, while gasoline stockpiles increased by 1.5 million barrels.  The result elevated the days of supply of oil by four-tenths of a day to 22.8, while gasoline saw its days of supply rise by eight-tenths to 24.9.  This is the highest days of supply of gasoline for the third week of September since 1994, suggesting ample supply as refiners transition production from summer to winter blend.  This transition period appears to be underway given the sharp drop in production in the latest week, coinciding with an abrupt decline in the level of gasoline supplied.  Lower production of gasoline implies that oil stockpile gains are likely in the weeks ahead, coinciding with the seasonal norm that calls for a rise in inventories into the middle of November.  The headwind of rising oil inventories may cap gains in the energy commodity, also coinciding with seasonal norms for this time of year.

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 fell by nearly one percent following the report.  A trading range between $62 and $75 continues to be implied.

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Crude Oil Futures (CL) Seasonal Chart

On the economic front, a report on new home sales in the US continues a trend of weak reports on the housing market.  The headline print indicated that new home sales increased by 3.5% in August, rising to a seasonally adjusted annual rate of 629,000.  The result was slightly short of the consensus analyst estimate that called for a rate of 630,000.  Stripping out the seasonal adjustments, new home sales actually fell by 3.8%, which is weaker than the 3.4% decline that is average for the summer month.  Revisions to past data-points have also depressed the year-to-date trend, which now sits 10% below the seasonal average change.  Homes under construction, which were showing an above average change year-to-date just last month has now fallen below its seasonal trend.  Sales of homes completed, meanwhile, remains in negative territory year-to-date.  The sales that are occurring are happening at lower price points with the median price of homes down 6.7% through the month of August.  This was a weak report and the below average trend this year raises serious concerns pertaining to the strength of the housing market.  Builders continue to pump out product at an above average pace, optimistic of their ability to sell, but home sales data suggest that the optimism may be unwarranted.  Housing is typically a leading indicator of economic activity.

New Home Sales Seasonal Chart

Monthly New Home Sales Data

New Home Sales Seasonal Chart

New Home Sales - Not Started Seasonal Chart New Home Sales - Under Construction  Seasonal Chart New Home Sales - Completed Seasonal Chart Median Sales Price for New Houses Sold Seasonal Chart

Sentiment on Wednesday, as gauged by the put-call ratio, ended bullish at 0.87

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Seasonal charts of companies reporting earnings today:

Accenture plc (ACN) Seasonal Chart AngioDynamics, Inc. (ANGO) Seasonal Chart CalAmp Corp. (CAMP) Seasonal Chart Cantel Medical Corp. (CMD) Seasonal Chart Carnival Corporation (CCL) Seasonal Chart Carnival Corporation (CUK) Seasonal Chart ConAgra Brands, Inc. (CAG) Seasonal Chart Ferrellgas Partners, L.P. (FGP) Seasonal Chart McCormick & Company, Incorporated (MKC) Seasonal Chart Progress Software Corporation (PRGS) Seasonal Chart Rite Aid Corporation (RAD) Seasonal Chart Scholastic Corporation (SCHL) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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