Equity Clock

Stock Market Outlook for August 6, 2020

West Texas Intermediate Crude tests its 200-day moving average for the first time since the start of the year following a larger than expected drawdown in inventories.

 

 

 

*** 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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Autodesk, Inc. (NASD:ADSK) Seasonal Chart

Tyler Technologies, Inc. (NYSE:TYL) Seasonal Chart

Columbia Banking System, Inc. (NASD:COLB) Seasonal Chart

Nelnet Inc. (NYSE:NNI) Seasonal Chart

McGrath RentCorp (NASD:MGRC) Seasonal Chart

Inseego Corp. (NASD:INSG) Seasonal Chart

Stantec Inc (NYSE:STN) Seasonal Chart

Actuant Corp. (NYSE:EPAC) Seasonal Chart

iShares Russell 1000 Growth ETF (NYSE:IWF) Seasonal Chart

VanEck Vectors ChinaAMC A-Share ETF (NYSE:PEK) Seasonal Chart

 

 

The Markets

Stocks gained on Wednesday as investors anticipated the Democrats and Republicans coming to an agreement on another stimulus bill.  The S&P 500 Index gained almost two-thirds of one percent, closing around the upper limit of February’s gap resistance.  The downside gap charted between the February 21st low of 3328 and the February 24th open at 3257 (~ 3250 to 3325) has threatened to cap the advance, but, while some reaction has been apparent, the benchmark has been extraordinarily resilient amidst economic threats that are ongoing.  A definitive break above this February gap would open the door to the all-time high at 3393, beyond which the sky is the limit.  Massive stimulus from central banks around the globe and improving credit condition have been supportive of risk assets.  Short-term support for the large-cap benchmark remains firm at the 20-day moving average and momentum indicators have turned back higher, violating a previously triggered sell signal with respect to MACD.  It would take a break of the rising 20-day moving average below to warrant a shift in bias from positive to negative.

On schedule for the Wednesday session, the Energy Information Administration released the status of petroleum inventories for the week just past.  The Energy Information Administration reported on Wednesday that oil inventories declined by 7.4 million barrels last week, which is a much larger drawdown than the consensus analyst estimate of a drop of 3.0 million. Gasoline stockpiles, meanwhile, increased by 419,000 barrels, and distillates increased by 1.6 million barrels. The result saw the days of supply of oil fall by seven-tenths to 35.9, while gasoline days of supply ticked higher by a tenth to 28.6. The average days of supply for each at the end of July is 21.9 and 23.8, respectively.  We sent out further insight to subscribers intraday, including whether or not you should pursue stocks in the energy sector for the seasonal trade that begins at this time of year.  Subscribe now.

Further on the economic front, north of the border, Statscan released merchandise trade data for the month of June.  The headline print indicated that the trade deficit in the country expanded at the end of the second quarter to $3.2 billion, the result of a 17.1% increase in exports and a 21.8% increase in imports.  Stripping out the seasonal adjustments, exports in Canada actually increased by 20.2% in June, while imports were higher by 25.8%.  The average change for each at this time of year is +0.3% and –0.1%, respectively.  The year-to-date trends for both exports and imports remain firmly below seasonal norms as cross border activity struggles amidst the pandemic overhang.  Food products and computers have been the bright spots on the export side, showing trends that are inline to above seasonal norms, while energy products have been a significant drag.  Subscribers can login to the database to view the seasonal charts for this report at https://charts.equityclock.com/canadian-international-merchandise-trade-exports-imports/

 

Sentiment on Wednesday, as gauged by the put-call ratio, ended overly bullish at 0.67.  It is becoming a frequent occurrence now to see the ratio hit levels below 0.7, implying complacency.  As has been emphasized in the past, complacency in itself isn’t necessarily a reason for stocks to sell off, however, it does make the market vulnerable to a shock event as portfolio hedges are no longer in place.

 

 

Seasonal charts of companies reporting earnings today:

 

 

S&P 500 Index

 

 

TSE Composite

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