Equity Clock

Stock Market Outlook for July 16, 2020

Manufacturers seem to be forgoing their average July shutdown, focussing instead on reopening plans following pandemic closures.

 

 

 

*** 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:

Subscribers – Click on the relevant link to view the full profile. Not a subscriber? Signup here.

Franklin Electric Co., Inc. (NASD:FELE) Seasonal Chart

Brookfield Property Partners LP (NASD:BPY) Seasonal Chart

Atrium Mortgage Investment Corp. (TSE:AI.TO) Seasonal Chart

IQ Hedge Multi-Strategy Tracker ETF (NYSE:QAI) Seasonal Chart

SPDR S&P Dividend ETF (NYSE:SDY) Seasonal Chart

 

 

The Markets

Stocks climbed on Wednesday following optimism pertaining to a coronavirus vaccine and blowout earnings from Goldman Sachs.  The S&P 500 Index rose by just over nine-tenths of one percent, making progress moving above the short-term consolidation range that hovered just above support at the 20-day moving average.  Horizontal support around 3130 comes in around the same level as this short-term hurdle.  Major moving averages, including the 20, 50, and 200-day, are all pointing higher as are momentum indicators following last week’s MACD buy signal.  The benchmark is on the doorstep of significant resistance presented by the downside gap opened in February between 3250 and 3325.  Some kind of struggle around this zone seems inevitable.  The open and close were virtually identical on Wednesday, resulting in a doji (indecision) candlestick.  Investors are expressing their uncertainty around present levels, but for our seasonal summer rally trade, which we have been 100% invested in stocks, we have the money and are ready to run.  The summer rally peaks, on average, on the 17th of July and it has been one for the record books.

On the economic front, industrial production figures for the month of June were released before Wednesday’s opening bell.  The headline print of June’s report indicates that industrial production increased by 5.4% last month, which was stronger than the consensus analyst estimate that called for an increase of 4.4%. The manufacturing component reported an increase of 7.2%, which was also firmly above the consensus analyst estimate that called for an increase of 5.5%. Stripping out the seasonal adjustments, industrial production in the US actually increased by 8.1% in June, which is almost three times stronger than the 3.0% increase that is average for the month. The year-to-date change is now down by 9.6%, which is the weakest performance through the first half of the year since the Great Depression in 1932. The average change through this time of year is an increase of 3.1%.  We sent out further insight to subscribers intraday.  Subscribe now.

North of the border, Statscan released manufacturing activity of its own for the month of May.  The headline print indicated that manufacturing sales in Canada increased by 10.7% in May, which surpassed the consensus analyst estimate that called for a rise of 10.0%.  The year-over-year change is now lower by 31.6%, up from –37.1% previous. Stripping out the seasonal adjustments, sales of goods manufactured actually increased by 15.8% in May, which is more than double the 6.8% increase that is average for the spring month.  The year-to-date change is lower by 21.7% through the first five months of the year, thoroughly disconnected from the seasonal norm that calls for a rise of 13.2% by the end of May.  The disconnect versus seasonal norms remains apparent across the categories with the exception of sales of beer, wine, and pharmaceuticals, apparently staples for Canadian consumers in this pandemic.  Subscribers can login to the chart database to view the seasonal charts for this report at https://charts.equityclock.com/canada-manufacturing-sales

Further on the manufacturing front, regional sentiment surveys for July are starting to be released.  First up, New York.  The Empire State Manufacturing survey showed that its general business conditions index rebounded to +17.2 in July from –0.2 previous.  Analysts were expecting a print of +8.9.  Stripping out the seasonal adjustments, the actual level of the general business conditions index rose to +5.2, up marginally from the +5.0 recorded for June.  The average level for this time of year is –3.5.  Positive values indicate expanding conditions, while negative values indicate a contraction.  July typically sees widespread factory shutdowns, limiting manufacturing activity during this summer month.  The fact that the survey is showing a positive value when a negative value is a norm suggests that factories are forgoing their typical shutdowns as they focus on reopening following the pandemic closures.  This bodes well for further above average industrial production data when the results are released in one month’s time.

Sentiment on Wednesday, as gauged by the put-call ratio, ended bullish at 0.63. 

 

 

 

 

 

Seasonal charts of companies reporting earnings today:

 

 

S&P 500 Index

 

 

TSE Composite

Sponsored By...