Stock Market Outlook for July 23, 2020
Precious metals continue to rip higher during their period of seasonal strength.
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*** 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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iShares Barclays Aggregate Bond Fund (NYSE:AGG) Seasonal Chart
The Travelers Cos., Inc. (NYSE:TRV) Seasonal Chart
Umpqua Holdings Corp. (NASD:UMPQ) Seasonal Chart
City Holding Co. (NASD:CHCO) Seasonal Chart
Northwest Bancshares, Inc. (NASD:NWBI) Seasonal Chart
First Bancorp (NASD:FBNC) Seasonal Chart
SPDR Barclays 1-3 Month T-Bill ETF (NYSE:BIL) Seasonal Chart
Vanguard Total Bond Market ETF (NASD:BND) Seasonal Chart
ProShares Short Dow30 (NYSE:DOG) Seasonal Chart
iShares 7-10 Year Treasury Bond ETF (NASD:IEF) Seasonal Chart
ProShares Short QQQ (NYSE:PSQ) Seasonal Chart
ProShares UltraShort S&P500 (NYSE:SDS) Seasonal Chart
iShares TIPS Bond ETF (NYSE:TIP) Seasonal Chart
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The Markets
Stocks closed higher on Wednesday as investors looked towards earnings slated to be released after the closing bell and during Thursday’s session. The S&P 500 Index gained just less than six tenths of one percent, charting a new closing recovery high. The benchmark continues to gyrate within the downside open gap that was charted in February, which led to the massive drawdown in stocks through the month thereafter. Some type of reaction to this zone is expected. Momentum indicators remain on an upswing and a buy signal remains intact, but the progression higher seems very tenuous. A catalyst may be required to continue the rebound unabated through the range of resistance that is currently upon us.
The hot trade in the market continues to be with respect to precious metals, which have surged in recent days amidst continuing weakness in the US dollar. The Gold Bullion ETF is moving towards the upper limit of its rising trend channel around $178, while the Silver Bullion ETF (SLV) has just blasted through resistance around $18 and has not looked back. The Silver ETF is higher by over 19% in just three sessions as investors attempt to gain exposure to the multi-year breakout in the commodity. Seasonally, both gold and silver (along with the producers) tend to gain at this time of year, rising amidst increasing equity market volatility, declining interest rates, and a weakening dollar. We have expressed out bullishness of the sector for the past few months and have placed our bets accordingly in the Seasonal Advantage Portfolio that we manage in partnership with CastleMoore. Holdings in silver and gold miners are up strongly, adding tremendous value to portfolio performance. Precious metals have now become the most overbought since February and the recent parabolic state creates a certain amount of vulnerability of a near-term pullback. In our weekly chart books, we have indicated an “Accumulate†rating for Gold and Palladium for many weeks now and will continue to maintain that rating so long as the technicals and the fundamentals are conducive for the ongoing rise in the metals.
Want to know which areas of the market to buy or sell? Our Weekly Chart Books have just been updated, providing a clear Accumulate, Avoid, or Neutral rating for currencies, cryptocurrencies, commodities, broad markets, and subsectors/industries of the market. Subscribers can login and click on the relevant links to access.
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On schedule for the Wednesday session, the Energy Information Administration released its tally of petroleum inventories for the week just past. The EIA reported that oil inventories increased by 4.9 million barrels last week, which is, once again, a significant disparity compared to the approximately 2.1 million barrel drawdown that was expected by analysts. Gasoline stockpiles, meanwhile, declined by 1.8 million barrels, while distillates increased by 1.1 million barrels. The result saw the days of supply of oil rise by a tenth of a day to 37.7, while gasoline days of supply dipped by a tenth to 28.6. The average days of supply for each at the start of July is 22.1 and 23.9, respectively. We sent out further insight to subscribers intraday, including whether or not we would be investors of the next period of seasonal strength for the energy sector that starts around this time of year. Subscribe now.
North of the border, Statscan released consumer price data for the month of June. The headline and non-seasonally adjusted print indicated that the consumer price index (CPI) increased by 0.8% last month, which is double the 0.4% increase that was expected by analysts. On average, CPI increases by 0.1% in the sixth month of the year. The year-to-date change now sits higher by a mere 0.6%, which is the weakest first half of the year performance since 1994. The average increase through this point in the year is 1.9%. The increase in food inflation in this country has started to wane with the year-to-date change converging with seasonal norms, but the impact of the pandemic can still be seen across the categories. The prices of rent, utilities, communications, clothing, transportation, and health/personal care products continue to trend firmly below the seasonal norms. The areas of strength are isolated, primarily with respect to big-ticket consumer items, such as appliances and passenger vehicles. Subscribers can login to the database to view the seasonal charts for this report at https://charts.equityclock.com/canada-consumer-price-index-cpi
Sentiment on Wednesday, as gauged by the put-call ratio, ended bullish at 0.75.
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Seasonal charts of companies reporting earnings today:
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S&P 500 Index
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TSE Composite
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