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Stock Market Outlook for July 19, 2019


Citigroup Economic Surprise Index starting to curl higher as economic data starts to beat again.

 

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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FNB Bancorp Inc. (NASD:FNBG) Seasonal Chart

FNB Bancorp Inc. (NASD:FNBG) Seasonal Chart

Diageo PLC (NYSE:DEO) Seasonal Chart

Diageo PLC (NYSE:DEO) Seasonal Chart

Allied Properties Real Estate Investment Trust (TSE:AP/UN.TO) Seasonal Chart

Allied Properties Real Estate Investment Trust (TSE:AP/UN.TO) Seasonal Chart

Centerra Gold Inc. (TSE:CG.TO) Seasonal Chart

Centerra Gold Inc. (TSE:CG.TO) Seasonal Chart

W. R. Berkley Corp. (NYSE:WRB) Seasonal Chart

W. R. Berkley Corp. (NYSE:WRB) Seasonal Chart

Eldorado Gold Corp. (NYSE:EGO) Seasonal Chart

Eldorado Gold Corp. (NYSE:EGO) Seasonal Chart

 

 

The Markets

Stocks gained on Thursday following comments from New York Federal Reserve President John Williams that indicated that the Fed would be willing to act aggressively to prevent an economic downturn.  The S&P 500 Index added almost four-tenths of one percent, bouncing from its rising 20-day moving average that was tested at the lows of the session.  A clash in leadership between financials and utilities played out during the session as yields moved lower; investors are battling with maintaining a defensive posture or becoming more cyclically oriented given the value of defensive assets is less enticing than it was at the start of the year.

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Helping stocks to move higher was a decline in the US Dollar Index, which traded lower from its declining 50-day moving average.  The currency benchmark has been battling within a range between the 50 and 200-day averages for the past few weeks as investors debate how the Fed will act when it meets at the end of this month.  A break of the 200-day could lead to a quick move lower back to support around 95, at which point a head-and-shoulders topping pattern would be apparent.  The topping pattern presents downside potential towards 92, or around 4.5% below present levels.  In a report released by the International Monetary Fund (IMF) on Wednesday, the dollar was suggested to be overvalued to the tune of 6% to 12%, so the bets for a downside move are increasing.  This should otherwise be conducive to further gains in stocks and commodities.  Seasonally, the US Dollar tends to decline through the third quarter.

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US Dollar Index Futures (DX) Seasonal Chart

On the economic front, a report on manufacturer sentiment in the Philadelphia region surprised analysts with the highest level in a year.  The headline print of the Philadelphia Fed Business Outlook Survey showed a level of +21.8, far surpassing the consensus analyst estimated that called for a more muted +4.5.  Positive levels indicate expanding manufacturing conditions.  The result is a significant improvement from the +0.3 reported in June when activity across a number of regions slowed significantly amidst the overhang of the ongoing tariff war.  Stripping out the seasonal adjustments, the actual level of the manufacturing gauge was +8.8, which is much stronger than the –6.6 that is average for this time of year.  Typically, factory shutdowns cause a slowdown in broad manufacturing activity in the month, but, in recent years, it has been apparent that factories have continued to produce through the summer in an effort to keep up with demand.  This is causing a distortion of the aggregate tendencies of economic activity during the summer, which are typically weaker than the spring months that preceded this period.  This can be conducive to creating stronger than expected results when economic data is released.  We often cite the weakness in economic activity as factor for the weaker period for stocks during the summer months, however, should factory data continue to deviate from historical norms at this time of year, equity market tendencies may evolve as well.  Seasonally, the Philly Fed Index tends to rise in August and September as manufacturers produce goods for the upcoming holiday period.

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A number of better than expected economic reports released in recent weeks has allowed the Citigroup Economic Surprise Index to find support around the lows of the past seven years.  Employment, retail sales, and, now, the previously mentioned report on manufacturer sentiment have beat expectations, creating an uptick in this gauge that measures the actual performance of the economy relative to expectations.  The indicator has been in decline essentially since the end of 2017 as the euphoric expectations following the passage of the Trump tax cuts were proven to be too optimistic in the 18 months that followed; stocks have stagnated since.  But as estimates come down and pessimism grows, lows in the indicator are often realized, leading to the next upswing as data starts to beat once again.  Better than expected data may be sufficient to quell the pessimistic sentiment that is prevailing amongst investors, keeping them on the sidelines despite the significant rally from the December low and the recent breakout to new all-time highs.

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

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Seasonal charts of companies reporting earnings today:

Acme United Corporation. (ACU) Seasonal Chart American Express Company (AXP) Seasonal Chart Autoliv, Inc. (ALV) Seasonal Chart Banco Latinoamericano de Comercio Exterior, S.A. (BLX) Seasonal Chart BlackRock, Inc. (BLK) Seasonal Chart Citizens Financial Group, Inc. (CFG) Seasonal Chart Cleveland-Cliffs Inc. (CLF) Seasonal Chart Gentex Corporation (GNTX) Seasonal Chart IBERIABANK Corporation (IBKC) Seasonal Chart Kansas City Southern (KSU) Seasonal Chart ManpowerGroup (MAN) Seasonal Chart Regions Financial Corporation (RF) Seasonal Chart Schlumberger N.V. (SLB) Seasonal Chart Sensient Technologies Corporation (SXT) Seasonal Chart State Street Corporation (STT) Seasonal Chart Synchrony Financial (SYF) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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