Sunday, August 20, 2017

Weekly Stock Market Outlook 8/21/2017

U.S. markets finished slightly lower on Friday with the Energy and Utilities sectors showing strength while Consumer Discretionary and Healthcare led the decliners.

Another shakeup in the White House caused some midday volatility after news Steve Bannon is out. Overall, is was another losing week for the Dow and S&P 500, their second-straight, with losses of less than 1%. The Nasdaq fell 0.6% to extend its losing streak to fourth-straight.

Global Economy –European markets fell following the terrorist attacks in Barcelona with Airline stocks suffering the steepest pullback. The FTSE 100 declined 0.9% while the Stoxx Europe 600 dropped 0.7%.  France’s CAC 40 index gave back 0.6% while the Belgium20 declined 0.5%. The DAX 30 slipped 0.3%.  Germany’s July PPI rose 0.2% month-over-month and was up 2.3% year-over-year, stronger than expectations of unchanged and 2.2%, respectively.

Asian markets traded mostly in the red with Japan’s Nikkei hitting a three-month low. The Nikkei Stock Average sank another 1.2% on Friday to close at its lowest level since May.  Hong Kong’s Hang Seng Index stumbled 1.1% and Australia’s S&P/ASX 200 declined 0.6%. South Korea’s Kospi index dipped 0.1% while China’s Shanghai index edged up 0.02%.  China July new home prices rose in 56 of 70 cities, down from 60 cities that rose in June.

U.S. Economy-Consumer sentiment sentiment surged 4.2 points to 97.6 in the August preliminary read from the University of Michigan survey, much better than expected.  The U.S. QSS figures that track activity for the service sector revealed a 6.2% Q2 year-over-year gain in the aggregate “selected services” measure that was similar to last quarter’s 6.3% gain.

Market Sentiment –The iShares 20+ Year Treasury Bond ETF (TLT) was basically flat after testing a high of $127.15 shortly after the open.  Lower resistance at $127-$127.50 was cleared but failed to hold with a move above $128 being a bullish development. Rising support is at $126.25-$126 with backup help at $125-$124.75 and the 50-day moving average easily holding.

Market Analysis  The Spider S&P 500 ETF (SPY) traded down to $242.20 to hold support at $242-$241 and the 100-day moving average. This area market the early July breakout above this level and has now been retraced.  A move below $240 would be a bearish development. Resistance is at $244-$244.50 and the 50-day moving average.

The Utilities Select Sector Spider (XLU) made a run to $54.76 and a fresh 52-week peak on Friday. A move above resistance at $54.75-$55 could lead to a triple-top breakout towards $56-$57.50. Support is at $54-$53.75.

The percentage of Nasdaq 100 stocks trading above the 50-day moving average is just below 40% and levels last seen in early July.  The late July low reached the 35%-33% area. Continued selling pressure could lower this number to 30%-25% and levels last seen in October and November 2016. Continued closes above the 40% level could lead to a short-term rebound.

Courtesy of Market Geeks

Sunday, August 13, 2017

Weekly Stock Market Outlook 8/14/2017

U.S. markets suffered their second worst week of the year despite Friday’s slight rebound that ended a three-session slide. The technical damage to the major indexes hit the small-caps the hardest with the Russell 2000 breaching its 200-day moving average before holding this level into the closing bell.
Meanwhile, the S&P 500 and Nasdaq failed to recover their 50-day moving averages following Thursday’s close below these levels. Sectors were mixed for the week with Energy, Basic Materials, Financials, and Industrial leading on the downside.  Consumer Staples and the Utilities were the stronger sectors.

Q2 earnings results from 448 of the S&P 500 companies are up 10.9% from the same period last year on 5.8% higher revenues. Nearly 74% of the companies have beat EPS estimates with roughly 68% clearing revenue estimates. The proportion of companies beating both EPS and revenue estimates is an above-average 54%.  Q2 results from 23 of the 42 retailers in the S&P 500 index are down 1.7% from the same period last year on 6.7% higher revenues. So far, 74% of the companies have topped EPS estimates with 78% beating revenue estimates.

Estimates for Q3 have come down, but they appear to be following the moderate revisions pace seen ahead of the start of the Q2 earnings season. For 2017, total earnings for the S&P index are expected to be up 7.5% on 4.2% higher revenues, which would follow 0.8% earnings growth on 2% higher revenues in 2016. Additionally, index earnings are expected to be up 10.9% in 2018 and 8.6% in 2019.

Global Economy –European markets posted their worst week in nine months following Friday’s drubbing. The FTSE 100 index fell 1.1% to a 3-month low while France’s CAC 40 index, the Stoxx Europe 600, and the Belgium20, all dropped 1%. The DAX 30 was basically flat after slipping a quarter-point.

Asian markets were also weak across the board on continued geopolitical tensions. Hong Kong’s Hang Seng Index sank 2% and South Korea’s Kospi index declined 1.7%.  Shanghai index gave back 1.6% while Australia’s S&P/ASX 200 tumbled 1.2%. Japan’s Nikkei Stock Average slipped 0.1%.
Hong Kong’s economy for the second quarter expanded by 3.8% and topped the 3.2% growth rate forecast. Private consumption rose 5.3% year-over-year, up from a 3.9% expansion in the first quarter. Total exports of goods reached 5.6% from year ago levels, compared with a 9.3% expansion in the previous quarter.  China’s fiscal spending slowed in July as the Chinese government spent 1.35 trillion yuan, or $202.7 billion, in its fiscal budget in July, up 5.4% from a year earlier. The rate was down from the 19.1% increase in June.  China’s car sales were up 4.3% from a year earlier, accelerating from June’s 2.3% clip, on 1.68 million cars sold. Sales for the first seven months of 2017 were up 2% from the year-earlier period.

U.S. Economy-The Consumer Price Index for the month of July rose 0.1% for both the headline and core rates. There were no revisions to June, where the headline price reading was unchanged while the core edged up 0.1%.

Philly Fed’s Livingston Survey noted a slightly slower pace of growth is projected for the U.S. economy over the next three years than it did three months ago. Growth of 2.6% is projected for the current quarter, up from 2.5% previously. A 2.3% pace for the next quarter is expected, down from 2.4% previously.

For the annual average, growth is seen unchanged at a 2.1% year-over-year clip, but it’s expected to accelerate to 2.4% year-over-year in 2018 that was revised from 2.5%. A dip back to 2.2% year-over-year is expected in 2019, revised from 2.1%. The unemployment rate is projected to fall to 4.2% in Q4, from 4.3% this quarter.  Meanwhile, CPI is seen steady at a 2.3% year-over-year pace in Q4, and slowing to 2.2% in Q1 versus the prior 2.4% estimate.

Market Sentiment –Minneapolis Fed Neel Kashkari cited weak CPI inflation data as yet another reason to hold off on rate hikes, after warning repeatedly that inflation was undershooting the Fed’s 2% target.  Dallas Fed President Robert Kaplan wants to see more evidence of inflation picking up to the 2% target before another rate hike. He said he was a strong advocate of the two rate hikes seen so far this year, but now he’s willing to be patient as he looks for progress toward the price goal.  He also cautioned that the FOMC is not as accommodating as people might think and it would be healthy for the FOMC to start winding down its balance sheet.  Fed speak for the upcoming week includes Dallas Fed Kaplan and Kashkari on Thursday. Kaplan is scheduled to make another appearance on Friday.

The iShares 20+ Year Treasury Bond ETF (TLT) tested a high of $126.46 with lower resistance at $126.50-$127 holding. A move above the latter could lead to a double-top breakout towards $128-$130. Support is at $126-$125.50 with backup help at $124.75 and the 50-day moving average.

Market Analysis-The Spiders Dow Jones Industrial Average ETF (DIA) is trying to hold the late July breakout above the $218 level and current support. There is risk to $216-$215 and the 50-day moving average on a close below $218-$217.75.  A move back above resistance at $219.50-$220 would be a bullish signal for a return to all-time highs towards $222-$224.

The Technology Select Spider (XLK) traded higher on Friday following a 3-day pullback off the recent 52-peak of $58.33. Upper support at $56.75-$56.50 and the 50-day moving average held with risk to $55.50-$55.25 and the 100-day moving average if $56 failed.  This would retrace the early July breakout above the 50-day moving average. Resistance is at $57.50-$58 with a move above the latter likely signaling a run towards $60.

The number of S&P 500 stocks trading above their 50-day moving average is just above 40% and levels last in mid-April and mid-May.  Both times, the recovery back above the 50% level came in three and two sessions, respectively. A move below 40% would signal further weakness in the index as this level has held since early November 2016.

Courtesy of Market Geeks

Sunday, August 6, 2017

Weekly Stock Market Outlook 8/7/2017

U.S. markets finished Friday on a high note but the week was mixed despite the Dow setting its 8th-straight record high and is riding a 9-session win streak.  The S&P 500 also edged higher for the week but has traded in a 20-point range since mid-July, or 13 trading sessions. The Nasdaq was slightly lower for the week while the 1% pullback in the Russell 2000 held near-term support.
Utilities were the strongest sector last week with the Financial and Industrial sectors posting moderate gains. Oil and Energy led the laggards, falling 3%, followed by Business Services and Technology. Medical, Basic Materials, and Consumer Discretionary were also weak.

Q2 results from 420 S&P 500 companies combined accounted for 86.7% of the index’s total market capitalization.  Total earnings for these companies are up +11.6% from the same period last year on +5.6% higher revenues, with 74.3% beating EPS estimates and 68.3% beating revenue estimates.
With another 35 index members reporting results this week, the Q2 earnings season will have come to an end for 91% of S&P 500 members by the end of the upcoming week.

Global Economy –European markets gained ground, led by consumer goods, industrial and telecom stocks. France’s CAC 40 index surged 1.4% while Germany’s DAX 30 jumped 1.2%. The FTSE 100 index climbed 0.5% and the Stoxx Europe 600 advanced 1%. The Belgium20 index added 0.5%.
The flash estimate of the consumer price index for the euro area remained steady at 1.3% growth in July. Core inflation, excluding food and energy prices, rose to 1.2% in July.

The overall Eurozone manufacturing PMI checked in at 56.6, a tad under the 56.8 consensus forecast.
The Eurozone Q2 GDP met the consensus with quarter-over-quarter growth of 0.6% a year-over-year increase of 2.1%.

Asian markets traded mixed on Friday as traders awaited the U.S. employment report.

Japan’s Nikkei Stock Average fell 0.3% to fall back below the 20,000 level while China’s Shanghai index gave back 0.4%. Australia’s S&P/ASX 200 slipped 0.3%. South Korea’s Kospi index gained 0.4% while Hong Kong’s Hang Seng Index added 0.1%. The Bank of Japan said it will keep its August bond purchase plans unchanged from July. Additionally, Japanese worker earnings unexpectedly fell in June at the fastest pace in 2 years and can be attributed to some of the weakness.

China’s official government reading of its manufacturing PMI came in at 51.4, which was down from 51.7 in June.  The China Caixin manufacturing PMI for July came in at 51.1, up from 50.4 in June, where it was expected to remain.

U.S. Economy-Non-farm payrolls rose 209,000 in July, topping the forecast for 180,000 job additions. Average hourly earnings grew 0.3% month-over-month and the unemployment rate fell from 4.4% to 4.3%, both as expected.

The trade deficit narrowed 5.9% to $43.6B billion in June from $46.4B in May.

The ISM manufacturing index slipped 1.5 points to 56.3 in July and slightly below the 56.4 forecast.
Markit’s manufacturing PMI for July came in at 53.3, and just ahead of the forecast of 53.2. Markit’s services PMI rose 0.5 points to 54.7 in the final July reading. The ISM non-manufacturing index dropped 3.5 points to 53.9 in July, hitting an 11-month low. Factory orders rebounded 3.0% in June.

Market Sentiment –Fedspeak returns with a number of events throughout the week. St. Louis Fed’s James Bullard will give a presentation on the U.S. economy and monetary policy from on Monday, while Minneapolis Fed’s dovish dissenter Kashkari will moderate a Rotary Club Q&A session.
New York Fed’s William Dudley will open and take part in a panel discussion on New York economic trends on Thursday. And finally, Dallas Fed’s Robert Kaplan will take part in a Q&A session on Friday and Neel Kashkari will being doing the same at a community bankers conference.

The iShares 20+ Year Treasury Bond ETF (TLT) traded in negative territory throughout the session with the low reaching $124.44.  Lower support at $125-$124.50 and the 50-day moving average held with additional risk to $124-$123.50 on a close below the latter. Resistance is at $125.50-$125.75.

Market Analysis-The Spiders Dow Jones Industrial Average ETF (DIA) stair-stepped its way past upper resistance at $219-$220 after setting another all-time high of $220.67. Continued closes above $220-$219.50 keeps blue-sky territory open up to $222-$222.50. Rising support is at $219.50-$218.50.  A move, or close, below $218 would be a slightly bearish development for a possible quick trip towards $216-$214 and the 50-day moving average.

The Utilities Selector Sector Spider (XLU) pulled back on Friday after lower resistance at $54-$54.50 held during the prior session. This level held twice in June and the recent attempt is forming a triple-top. These technical setups can be bullish, or bearish, with XLU needing to close above resistance to form a new base and possible breakout towards $55-$56. Near-term support is at $53.50-$53 and a rising 50-day moving average.

Ref:  Market Geeks