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Stock Market Outlook for June 25, 2019


Relative performance of the Dow Jones Transportation Average versus the S&P 500 Index at the lowest level since 2012.

 

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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Brady Corp. (NYSE:BRC) Seasonal Chart

Brady Corp. (NYSE:BRC) Seasonal Chart

 

 

The Markets

Stocks closed mildly lower on Monday as investors took a breather ahead of the next catalyst for stocks, the G20 summit this weekend.  The S&P 500 Index shed just less than two –tenths of one percent, still remaining within arms length of the all-time high charted on Thursday.  Momentum indicators on the hourly chart remain in bullish territory, however, a negative divergence with respect to MACD and RSI suggest waning buying pressures around these record highs.  Previous resistance around 2900 is in a position of support.

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In a report posted earlier last week, we highlighted the potential of the benchmark to take a shot at the all-time high, however, evidence of risk aversion gave reason for caution.  We cited the underperformance in the Small-Cap Russell 2000 index and the Dow Jones Transportation Average as reason for scepticism in the risk sentiment of investors.  That underperformance continues to expand.  The Russell fell by 1.26% on Monday and the Dow Jones Transportation Average fell 1.50%.  The transportation benchmark rolled over from resistance around its 50-day moving average, starting to hint of a lower short-term high that could lead to the completion of a head-and-shoulders topping pattern.  The relative performance of the transports versus the S&P 500 Index is at the lowest level since 2012.  Transportation expenditures have been struggling this year under the weight of tariff uncertainty, negatively impacting the fundamental outlook for the industry.  Weakness in both the Russell and the Transports typically is a leading indication of weakness in the broader economy, typically a precursor to a broad market decline.  Seasonally, transportation stocks remain in a period of weakness through September.  We provide more insight on shipping activity in our monthly outlook for July, due to be released to subscribers on Tuesday.  Subscribe now.

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Dow Jones Transportation Average Seasonality

We’ve highlighted the bullish potential for the price of Gold should price break above long-term resistance, but it is worth repeating given that it is now on everyone’s radar as traders attempt to join the bandwagon.  The price of the precious metal broke definitively above resistance at $1360 last week, quickly fuelling a round of buying pressure in the days that followed.  A number of bullish patterns can be derived from the price action that preceded this move.  A cup and handle, a head-and-shoulders bottom, or a rounded base, each has positive implications that suggest more room to run.  The upside target of the cup-and-handle pattern points to $1525, or another $100 above Monday’s close.  Consolidation and digestion from the surge in recent days would be helpful.  Previous resistance around $1360 is now a level of support.  In the Seasonal Advantage Portfolio that we manage in partnership with Castlemoore, we have had exposure to gold stocks since April, a trade that is now paying off very nicely.  Seasonally, a number of stocks benefit from positive tendencies in the spring, running through the third quarter when the commodity and the stocks advance together.

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Gold Futures (GC) Seasonal Chart

Sentiment on Monday, as gauged by the put-call ratio, ended bullish at 0.76.

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Seasonal charts of companies reporting earnings today:

AeroVironment, Inc. (AVAV) Seasonal Chart  FactSet Research Systems Inc. (FDS) Seasonal Chart FedEx Corporation (FDX) Seasonal Chart Lennar Corporation (LEN) Seasonal Chart Micron Technology, Inc. (MU) Seasonal Chart Synnex Corporation (SNX) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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