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Stock Market Outlook for August 23, 2016

 

New concerns emerge in the seasonal gold trade as miners start to underperform the commodity.

 

Real Time Economic Calendar provided by Investing.com.

 

**NEW** As part of the ongoing process to offer new and up-to-date information regarding seasonal and technical investing, we are adding a section to the daily reports that details the stocks that are entering their period of seasonal strength, based on average historical start dates.   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:

  • No stocks identified for today

 

 

The Markets

Stocks gyrated around the flatline on Monday as investors continue to speculate on what Janet Yellen will have to say at this week’s Jackson Hole meeting.  The S&P 500 Index shed a mere 6 basis points, dragged lower by weakness in the energy sector.  Once again, commodities are in focus as the price of oil dipped by over 3%, retracing some of the gains achieved over the past week.  First level of support for WTI Crude is around $46, close to its 50-day moving average that is attempting to curl higher.  The S&P 500 Energy Sector Index dropped just shy of nine-tenths of one percent, trading lower from overhead resistance around 525.  This level continues to form the neckline of a potential head-and-shoulders bottoming pattern, a bullish setup that could project a move higher to around 650, assuming resistance is exceeded.  The price of oil remains key and weekly inventory reports to be released in the coming weeks will be influential as the summer driving season comes to an end, thereby eliminating a significant portion of demand for the refined product.  A severe hurricane season, which is the forecast, could offset a demand decline by limiting production through September and October, but, as of yet, this remains just speculation.

Continuing with the commodity theme, gold continues to show strain within its period of strength.  The price of gold has traded within a tight range over the past two months with the Gold ETF (GLD) unable to overcome gap resistance just below $130.  Negatively diverging momentum indicators suggest waning buying pressures.  But it is the performance of the stocks that is raising new concerns.  Along with similar negative momentum divergences, the Gold Miners ETF (GDX) has rolled over in recent days, now testing possible support around its 50-day moving average.  The ratio of GDX versus GLD has maintained a defined rising trend for much of the year as miners outperform the commodity, a vote of confidence amongst investors that the price of the metal would move higher.  A crack emerged in the rising relative trend during Monday’s session as the ratio gapped lower, slightly below trendline support.  The stocks typically lead the commodity, therefore underperformance of the miners is indicative of a shift in investor perception of the near-term direction of the yellow metal.  Seasonally, both the stocks and the commodity remain in a period of seasonal strength through to the end of September, benefitting from, among other things, the rise in volatility in equity markets over the timeframe.  With volatility remaining exceptionally low and uncertainty quite high over the Fed’s path to normalize rates, the price of gold is showing evidence of stalling, waiting for the next catalyst to fuel a breakout or breakdown.

Sentiment on Monday, as gauged by the put-call ratio, ended bullish at 0.90.

 

 

 

 

Seasonal charts of companies reporting earnings today:

 

S&P 500 Index

 

 

TSE Composite