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Stock Market Outlook for July 9, 2019


Lack of confirmation of the breakout on the S&P 500 Index leaves reason for skepticism.

 

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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International Business Machines (NYSE:IBM) Seasonal Chart

International Business Machines (NYSE:IBM) Seasonal Chart

Alimentation Couche-Tard, Inc. (TSE:ATD/B.TO) Seasonal Chart

Alimentation Couche-Tard, Inc. (TSE:ATD/B.TO) Seasonal Chart

Palo Alto Networks Inc. (NYSE:PANW) Seasonal Chart

Palo Alto Networks Inc. (NYSE:PANW) Seasonal Chart

 

 

The Markets

Stocks traded slightly lower on Monday as investors continued to react to Friday’s stronger than expected employment report.  The S&P 500 Index shed half of one percent, continuing to consolidate above previous horizontal resistance around 2950.  Technology weighed on the broad market performance following a downgrade of shares of Apple.  The S&P 500 Technology sector Index, while around all-time highs, is battling with resistance at 1400, a hurdle recorded in the month of April.  Seasonally, the technology sector tends to rise between the middle of April and the middle of July as investors gravitate towards the growth characteristics presented by sector constituents, but, with uncertainties over the health of the global economy amidst a simmering trade war, gains for the sector this year have been muted, so far.  Major moving averages are pointing higher providing levels of support below.

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Technology Sector Seasonal Chart

It is the strain of the technology sector that has kept the NASDAQ Composite below significant resistance at 8150.  The Dow Jones Industrial Average is battling with long-term resistance of its own around 27,000.  The lack of confirmation of last week’s move in the S&P 500 Index leaves reason to be sceptical as to the legitimacy of the breakout.  Keep in mind that the grind higher is still underway, until shown otherwise, therefore the door is still open for similar breakouts to be seen in these other broad market gauges.  Seasonally, the NASDAQ Composite tends to gyrate mildly higher through the third quarter, while the Dow tends to gyrate mildly lower.

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NASDAQ Composite Seasonal Chart

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Dow Jones Industrial Average Seasonality

On the economic front, a stronger than expected employment report in the US for June dampened hopes of a Fed rate cut sometime in the back half of this year. The headline print indicated that non-farm payroll increased by 224,000 last month, far surpassing the consensus analyst estimate that called for an increase of 165,000. The unemployment rate ticked higher from 3.6% to 3.7% and average hourly earnings increased by 0.2%, a miss versus estimates of a 0.3% increase. Stripping out the seasonal adjustments, non-farm payrolls actually increased by 707,000, or 0.5%, which is stronger than the 0.3% increase that is average for this time of year. The year-to-date change is now a tenth of a percent above average. This is the weakest first half of the year increase since 2010 when the economy was still on the mend from the Great Recession.  We sent out further analysis and insight to subscribers on Monday.  To receive a copy of our report, subscribe now.

Total Nonfarm Seasonal Chart

North of the border, a weak Canadian employment report for June capped off the first half of the year on a bit of a sour note. Statscan reported that employment in Canada declined by 2,200 last month, which was weaker than the 5,000 increase that was forecasted by analysts. The unemployment rate ticked higher by a tenth of a percent to 5.5%. Stripping out the seasonal adjustments, employment in Canada actually increased by 155,000 in June, or 0.8%, which is weaker than the 1.3% increase that is average for this time of year. The year-to-date change has converged with its seasonal average trend, up by 3.3%.  Subscribers can login and view our analysis of the results that was sent out intraday.

Canada Employment Seasonal Chart

Sentiment on Monday, as gauged by the put-call ratio, ended close to neutral at 0.94.

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Seasonal charts of companies reporting earnings today:

Helen of Troy Limited (HELE) Seasonal Chart Lindsay Corporation (LNN) Seasonal Chart Northern Technologies International Corporation (NTIC) Seasonal Chart Pepsico, Inc. (PEP) Seasonal Chart WD-40 Company (WDFC) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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