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Stock Market Outlook for January 18, 2019


Gauge of shipping activity shows that volumes are waning, while expenditures remain strong.

 

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:

Encore Wire Corp. (NASD:WIRE) Seasonal Chart

Encore Wire Corp. (NASD:WIRE) Seasonal Chart

FMC Technologies, Inc. (NYSE:FTI) Seasonal Chart

FMC Technologies, Inc. (NYSE:FTI) Seasonal Chart

Royal Bank of Canada  (TSE:RY) Seasonal Chart

Royal Bank of Canada (TSE:RY) Seasonal Chart

NextEra Energy Inc (NYSE:NEE) Seasonal Chart

NextEra Energy Inc (NYSE:NEE) Seasonal Chart

Canadian Tire Corp. Ltd. (TSE:CTC) Seasonal Chart

Canadian Tire Corp. Ltd. (TSE:CTC) Seasonal Chart

Melcor Developments Ltd. (TSE:MRD) Seasonal Chart

Melcor Developments Ltd. (TSE:MRD) Seasonal Chart

Vermilion Energy Trust  (TSE:VET) Seasonal Chart

Vermilion Energy Trust (TSE:VET) Seasonal Chart

Eastman Chemical Company  (NYSE:EMN) Seasonal Chart

Eastman Chemical Company (NYSE:EMN) Seasonal Chart

Avon Products, Inc.  (NYSE:AVP) Seasonal Chart

Avon Products, Inc. (NYSE:AVP) Seasonal Chart

Canadian National Rail Co. (NYSE:CNI) Seasonal Chart

Canadian National Rail Co. (NYSE:CNI) Seasonal Chart

Colgate-Palmolive Company  (NYSE:CL) Seasonal Chart

Colgate-Palmolive Company (NYSE:CL) Seasonal Chart

Bonavista Energy Corp (TSE:BNP) Seasonal Chart

Bonavista Energy Corp (TSE:BNP) Seasonal Chart

Advantage Oil Gas (TSE:AAV) Seasonal Chart

Advantage Oil Gas (TSE:AAV) Seasonal Chart

 

 

The Markets

Stocks surged on Thursday as investors reacted to headlines that the US might relax tariffs against China as the two countries negotiate a trade deal.  The S&P 500 Index added around three-quarters of one percent, advancing beyond the widely scrutinized level of resistance at 2630.  Of course, we have been reporting in recent days that the level of resistance would likely not play out according to the consensus given the expectations that prevailed for a rejection and rollover around this hurdle.  Investors that have been on the sidelines throughout the rebound attempt are likely to question their bearish stance.  It is at the point of vulnerability when the consensus is offside that the market moves contrary to expectations.  Important levels to watch are the 100 and 200-day moving averages at 2733 and 2740, respectively.  At some point, a retracement of the gain from the Christmas Eve low is inevitable, but whether or not the December lows are undercut is up for debate.  The benchmark continues to grind around the lower limit of a short-term rising wedge pattern, a break of which will likely trigger the retracement move.

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On the economic front, a gauge of manufacturer sentiment for the month of January contradicted are report that was released earlier in the week.   The Philadelphia Fed indicated that its Business Conditions Index jumped to +17.0 in January, up from the +9.1 reported previous.  Stripping out the seasonal adjustments, the actual level was +11.3, which is firmly above the +5.2 that is average for the first month of the year.  Earlier in the week, a similar gauge of manufacturer sentiment release out of New York suggesting below average conditions and hinting that the government shutdown and tariff war may be taking a toll.  While Philadelphia’s result is well below the levels seen at this point in the past two years of +19.4 and +21.2, the report remains encouraging, providing indication that the flame in the manufacturing economy still has a little longer to burn before conditions roll over.  Seasonally, the survey typically hits the high of the year in March as manufacturers ramp up activity into the spring.

Philadelphia Manufacturing Business Outlook Survey Seasonal Chart

Elsewhere on the economic front, CASS Information Systems released its gauge of shipping activity.  The report showed that shipping volumes declined by 1.7% in December, while expenditures increased by 1.9%.  The average change for each in the month is –4.3% and –3.2%, respectively.  Looking at the year overall, shipments actually declined by eight-tenths of one percent in 2018, below the average trend that calls for a half of a percent increase through the calendar year.  However, easing the concern of lower freight volumes is the fact that shippers are charging more to move goods with expenditures up 10.0% through year-end; the average calendar year gain is 3.3%.  Deteriorating economic fundamentals amidst the ongoing tariff war look to be weighing on activity, perhaps pointing to a more sustained economic downturn ahead, but the limited capacity in the industry is keeping prices supported, an indication that demand is still strong from those that are moving goods throughout the economy.  Seasonally, both volumes and expenditures tend to decline into the month of January, then rebound into the spring as the manufacturing economy wakes up following the winter slowdown.

Cass Freight Index: Shipments  Seasonal Chart

Monthly Cass Freight Index: Shipments  Data

Cass Freight Index: Shipments Seasonal Chart

Cass Freight Index: Expenditures Seasonal Chart

Sentiment on Thursday, as gauged by the put-call ratio, ended bullish at 0.80.

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Seasonal charts of companies reporting earnings today:

Citizens Financial Group, Inc. (CFG) Seasonal Chart First Horizon National Corporation (FHN) Seasonal Chart Kansas City Southern (KSU) Seasonal Chart Regions Financial Corporation (RF) Seasonal Chart Schlumberger N.V. (SLB) Seasonal Chart State Street Corporation (STT) Seasonal Chart SunTrust Banks, Inc. (STI) Seasonal Chart V.F. Corporation (VFC) Seasonal Chart Wipro Limited (WIT) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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