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Stock Market Outlook for May 21, 2019


Presenting a seasonal trading strategy for the holiday shortened week.

 

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:

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IAMGold Corp. (TSE:IMG.TO) Seasonal Chart

IAMGold Corp. (TSE:IMG.TO) Seasonal Chart

United States Cellular Corp. (NYSE:USM) Seasonal Chart

United States Cellular Corp. (NYSE:USM) Seasonal Chart

Kimco Realty Corp. (NYSE:KIM) Seasonal Chart

Kimco Realty Corp. (NYSE:KIM) Seasonal Chart

Citizens, Inc. (NYSE:CIA) Seasonal Chart

Citizens, Inc. (NYSE:CIA) Seasonal Chart

Aramark (NYSE:ARMK) Seasonal Chart

Aramark (NYSE:ARMK) Seasonal Chart

Royal Gold, Inc. (NASD:RGLD) Seasonal Chart

Royal Gold, Inc. (NASD:RGLD) Seasonal Chart

MSCI, Inc. (NYSE:MSCI) Seasonal Chart

MSCI, Inc. (NYSE:MSCI) Seasonal Chart

Cascades, Inc. (TSE:CAS.TO) Seasonal Chart

Cascades, Inc. (TSE:CAS.TO) Seasonal Chart

 

 

The Markets

Stocks closed lower on Friday as trade war fears lingered going into the weekend.  The S&P 500 Index closed down by just less than six-tenths of one percent, weighed down by core cyclical sectors, including industrials and energy.  Defensive sectors (staples, utilities, health care, and REITs) outperformed by comparison, suggesting ongoing risk aversion.  The large-cap benchmark remains above the now broken short-term trend channel and the benchmark is attempting to consolidate above short-term levels of support.  The 50-hour moving average, now around 2853, had presented resistance in the first half of the month and will be looked towards as a near-term level of support.  Below that, the upper limit to the previous declining trend channel at 2810 presents a simple downside limit that would allow this short-term bullish move, or rather attempt at a short-term low, to become confirmed.  The large-cap index bounced in the past week from a range of support that tops out around 2815 as investors maintain the “buy the dip” mentality; whether they are right or wrong has yet to be seen.  The defensive tilt is typically indication that investors are positioning for more pain ahead, which does not bode well for the broad market, however, the self-imposed headwind pertaining to trade remains fluid and the defensive shift could act as ammunition for a risk-on move into the end of the month if investor sentiment improves.

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For the week, the large-cap benchmark closed down by three-quarters of one percent, ending well off of the lows set earlier in the period.  At the lows of the period, support around the 20-week moving average was tested.  This variable hurdle acted as resistance through the fourth quarter decline.  Until some of these major moving averages on the weekly chart are definitively broken, it would be difficult to count out this market on an intermediate-term basis.  Momentum indicators are rolling over and if bearish crossovers are confirmed with respect to RSI and MACD around present levels, the negative divergence versus price would be continued, an indication of waning buying demand.  MACD and RSI have been negatively diverging from price since January of last year, failing to provide confidence in the new highs in September and again in April.  For now, the benchmark is acting very typical of a standard 5% correction, but, as with the headlines, the situation remains fluid.

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While we enter holiday shortened weeks in both Canada and the US (Canada this coming week with Victoria Day and the US the week following with Memorial Day), Canadian investors have the advantage of being able to trade while US markets are closed in about one week time.  The Canadian equity benchmark has shown a benefit from this holiday disconnect.  The TSX Composite has gained an average of one quarter of one percent during the Memorial Day session, while the week leading into the session has returned an average of 0.71%.  Both the day and the week have realized positive results in 69% of periods since 1990.  Investors can take advantage by buying TSX listed ETFs that track the Canadian benchmark, such as the iShares S&P/TSX 60 Index ETF– XIU, on the Tuesday following the Victoria Day long weekend and selling it by the close of the Memorial Day Monday, when the Canadian market is open and the US market is closed.  The TSX tends to outperform US benchmarks, in general, between the middle of May and the beginning of June, buoyed by the release of earnings from some notable Canadian corporations, such as the Canadian banks.

TSX Composite Return around the
US Memorial Day Holiday
Memorial Day Day of Return Week prior to and including the US holiday
2018 -0.37% -0.90%
2017 0.03% -0.24%
2016 -0.13% 1.20%
2015 -0.09% 0.52%
2014 0.05% 1.38%
2013 0.23% 0.66%
2012 -0.09% 2.53%
2011 0.23% 1.30%
2010 0.78% 2.10%
2009 0.76% 3.14%
2008 0.24% -1.51%
2007 0.35% -0.22%
2006 0.70% 2.60%
2005 0.56% 2.34%
2004 0.84% 2.52%
2003 0.03% 0.64%
2002 -0.01% -0.78%
2001 -0.02% 0.25%
2000 0.43% -2.51%
1999 0.57% -1.78%
1998 0.56% 1.09%
1997 1.08% 3.90%
1996 0.11% 0.29%
1995 0.14% 1.49%
1994 -0.19% 0.52%
1993 0.42% 1.22%
1992 -0.05% -0.62%
1991 -0.01% 0.20%
1990 0.11% -0.64%
Average: 0.25% 0.71%
Gain Frequency: 68.97% 68.97%

 

S&P/TSX Composite index Seasonal Chart

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

$TSX Monthly Averages

Sentiment on Friday, as gauged by the put-call ratio, ended bearish at 1.09.

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Seasonal charts of companies reporting earnings today:

Atento S.A. (ATTO) Seasonal Chart AZZ Inc. (AZZ) Seasonal Chart Compugen Ltd. (CGEN) Seasonal Chart International Game Technology (IGT) Seasonal Chart Nordson Corporation (NDSN) Seasonal Chart SpartanNash Company (SPTN) Seasonal Chart Tata Motors Ltd (TTM) Seasonal Chart America's Car-Mart, Inc. (CRMT) Seasonal Chart  AutoZone, Inc. (AZO) Seasonal Chart DAQO New Energy Corp. (DQ) Seasonal Chart Dycom Industries, Inc. (DY) Seasonal Chart Eaton Vance Corporation (EV) Seasonal Chart  Golar LNG Partners LP (GMLP) Seasonal Chart Home Depot, Inc. (The) (HD) Seasonal Chart Ituran Location and Control Ltd. (ITRN) Seasonal Chart J.C. Penney Company, Inc. Holding Company (JCP) Seasonal Chart Kohl's Corporation (KSS) Seasonal Chart MediWound Ltd. (MDWD) Seasonal Chart Monro, Inc. (MNRO) Seasonal Chart Nordstrom, Inc. (JWN) Seasonal Chart  Ship Finance International Limited (SFL) Seasonal Chart Skyline Champion Corporation (SKY) Seasonal Chart TJX Companies, Inc. (The) (TJX) Seasonal Chart Toll Brothers, Inc. (TOL) Seasonal Chart Transcat, Inc. (TRNS) Seasonal Chart Urban Outfitters, Inc. (URBN) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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