Equity Clock

Stock Market Outlook for August 21, 2020

The gap between the year-to-date change and the seasonal norm for natural gas storage continues to narrow, providing a tailwind to our seasonal trade in the commodity.

 

 

 

*** 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.

Entree Gold Inc. (TSE:ETG.TO) Seasonal Chart

Hon Industries, Inc. (NYSE:HNI) Seasonal Chart

Dr. Reddy’s Laboratories Ltd (NYSE:RDY) Seasonal Chart

Sociedad Quimica Y Minera (NYSE:SQM) Seasonal Chart

 

 

The Markets

Stocks fluttered following the opening bell on Thursday as investors continued to digest the cautious comments from the Fed, as well as the revelation that initial jobless claims ticked back above one million in the past week, leading to questions pertaining to the health of the labor market.  The S&P 500 Index closed higher by around a third of one percent, remaining around all-time highs.  Strength in technology was once again a dominant force picking the benchmark off the lows of the day.

On the hourly chart, the benchmark is retracing higher to test rising trendline support that was broken during Wednesday’s session.  That level now hovers around the previous all-time high of 3393, which could capture the attention of investors.  Momentum indicators continue to negatively diverge from price, hinting of waning upside pressures.  The benchmark at an all-time peak has given investors something to mull over and they will be watching which side of the line price action drifts.  Pushing the ball over the end-zone, further into all-time high territory, would inevitably draw further investors off the sidelines, perhaps good for another 3% to 5% lift in prices from present levels, while a drift below this pivot-point would get the double-top machine generated, forcing investors to become cautious of the level of resistance.  Progress on additional economic stimulus could have the final say.  While optimism remains high that another stimulus bill will be passed, the timing of this is highly uncertain.  Presently, a scaled-back stimulus bill is being floated through congress to further support the economic momentum, a vote on which could be this weekend.  Of course, the consumer has been the bright spot in this economic rebound, allowing the market to recoup all to the pandemic decline.  Any risk to the consumer’s ability to spend would threaten the strength of the broader equity market.

On schedule for the Thursday session, the Energy Information Administration (EIA) released its tally of natural gas in storage for the week just past.  The administration reports that natural gas stockpiles increased by 43 billion cubic feet (bcf) last week, which is down from the 58 bcf injection reported in the week prior.  Year-to-date, the change in natural gas inventories is hovering 11.1% above the seasonal average trend, a gap that has been narrowing for over a month.  This has created a tailwind behind the commodity, which had been pressured for a prolonged period of time with above average increases to stockpiles.  The price of the commodity is higher by over 30% since the start of August, when the window to the period of seasonal strength began.  The optimal holding period is between the start of September and the start of December.  We continue to hold exposure to natural gas in the Seasonal Advantage Portfolio that we manage in partnership with Castlemoore.

Sentiment on Thursday, as gauged by the put-call ratio, ended bullish at 0.75.

 

 

 

Seasonal charts of companies reporting earnings today:

 

 

S&P 500 Index

 

 

TSE Composite

Sponsored By...