Equity Clock

Stock Market Outlook for July 22, 2020

NASDAQ reverses again from around 10,750 as hints emerge that the market is becoming top-heavy.

 

 

 

*** 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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Brookfield Infrastructure Partners L.P. (TSE:BIP/UN.TO) Seasonal Chart

Air Canada (TSE:AC.TO) Seasonal Chart

Gallagher Arthur J & Co. (NYSE:AJG) Seasonal Chart

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

Westamerica Bancorp (NASD:WABC) Seasonal Chart

First Interstate BancSystem Inc. (NASD:FIBK) Seasonal Chart

PIMCO Intermediate Municipal Bond Active ETF (NYSE:MUNI) Seasonal Chart

ProShares Short Real Estate (NYSE:REK) Seasonal Chart

 

 

The Markets

Stocks closed mixed on Tuesday as investors once again attempted to rotate away from technology centric names and towards areas of value.  The S&P 500 Index gained less than two-tenths of one percent, continuing to battle with the range of resistance between 3250 to 3325.  Momentum indicators remain on an upswing following the recent MACD buy signal, but the lack of expansion in the MACD histogram does raise concerns over the longevity of this recent upleg.  The benchmark remains supported by major moving averages below.

Technology was the largest drag during Tuesday’s session, a reversal from the prior day.  The S&P 500 Technology Sector Index dropped by 1.06% as holders of these previous and current market darlings show some hesitancy about holding sector constituents into earnings given the lofty valuations of many.  Earnings from Microsoft and Tesla will be heavily scrutinized on Wednesday.  The tech heavy NASDAQ composite reversed for a second time around 10,750, which highlights the significance of this hurdle.  The other reversal was observed a week ago, which resulted in a significant outside reveal candlestick.  While we didn’t see follow-though from last week’s reversal, the the benchmark continues to show evidence of being top-heavy.  Earnings ahead will have some heavy lifting to do if they intend to keep the positive trend for technology stocks elevated.  Seasonal tendencies show that following the summer rally period that peaks in the middle of July, the NASDAQ tends to pullback into the start of August.  In the model that we provide to subscribers at the end of our monthly report, the NASDAQ 100 ETF is no longer a holding as of July 17th; we will look for opportunities to accumulate technology positions following a period of consolidation.

On the economic front, Statscan released retail sales for the month of May.  The headline print indicated that retail sales in Canada increased by 18.7% in this spring month, just missing the consensus analyst estimate that called for a rise of 20.0%.  The year-over-year change now sits lower by 18.4%, an improvement from the 32.5% year-over-year decline recorded previous.  Stripping out the seasonal adjustments, retail sales in Canada actually increased by 32.4% in May, which is the largest one-month increase on record.  The average increase for this fifth month of the year is 10.4%.  Year-to-date, retail sales are down by 15.0%, which is still disconnected from the 2.6% decline that is average through the first five months of the year.  The negative performance over this timeframe is unmatched by any other period in history. Parsing the details, aside for staple items, the year-to-date trends across the categories remain below seasonal norms.  Auto parts, electronic/appliance, grocery, liquor store, and general merchandise store sales are realizing trends that are above seasonal norms as consumers create their bubble at home, while jewellery/luggage, clothing, furniture, and auto dealers still have a ways to go to return to levels that would be considered normal for this time of year.  Subscribers can login to the database and view the seasonal charts for this report at https://charts.equityclock.com/canada-retail-trade-sales

Sentiment on Tuesday, as gauged by the put-call ratio, ended bullish at 0.71.

 

 

 

 

Seasonal charts of companies reporting earnings today:

 

 

S&P 500 Index

 

 

TSE Composite

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