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Stock Market Outlook for July 22, 2016

 

The seasonal peak in existing home sales is upon us.

 

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:

Vodafone Group Plc (ADR) (NASDAQ:VOD) Seasonal Chart

The Clorox Company (NYSE:CLX) Seasonal Chart

 

 

The Markets

Stocks ended lower on Thursday with the Dow snapping its 9-day win streak, the longest stretch of daily gains since March of 2013.  Most benchmarks saw losses in the range of one third to one half of a percent as investors start booking profits from the recent rally.  Momentum indicators across the charts are slowly rolling over a buying pressures become exhausted.

Continuing with the string of recent housing reports, on Thursday it was the release of existing home sales that had investors encouraged of the strength in the housing market.  The headline print indicated that sales of existing homes increased by 1.1% in June to a seasonally adjusted annual rate of 5.570 million.  Analyst expectations called for a decline of 1.0% to 5.475 million.  Stripping out the seasonal adjustments, existing home sales were higher by 11.0% last month, much better than the average gain for June of 7.7%.  The year-to-date change for sales has now converged with its average trend following a weaker than average start to the year.  Sales in the midwest led the charge in June with the year-to-date trend moving firmly above the seasonal pace through the first half of the year.  June typically marks the peak in sales across most regions as the spring selling season concludes and the summer slowdown becomes apparent.  As for the median sales price, it gained 3.7% in June, which is actually shy of the average increase for the month of 4.1%.  Still, the year-to-date change in price is running firmly above the seasonal average, higher this year by 11.0% and indicting an insufficient level of supply to meet demand.  The months of supply presently sits at 4.6, still well below 6.0, which is characteristic of a balanced market.

Meanwhile, an important gauge of manufacturing activity was released during Thursday’s session.  The Philadelphia Fed General Business Conditions Index posted an unexpected contraction for July, falling to –2.9, from +4.7 previous, and missing estimates calling for a print of +5.0.  Stripping out seasonal adjustments, the read was actually –11.3, well below the average level for July of –6.9.  This comes as the summer factory shutdown period becomes apparent, forcing a slowdown in activity.  Activity typically rebounds into August and September.  Manufacturing activity continues to hold below the average trend as factories seek to reign in inventory levels that had been expanding for many months amidst weak export demand.

And wrapping up the economic data released on Thursday is the weekly report on jobless claims, which is already suggesting that the factory slowdown period is moving behind us.  The headline print indicated that initial claims fell by 1,000 to 253,000, below the consensus estimate of 265,000.  Looking at the unadjusted dataset, the year-to-date trend has now fallen below the seasonal average following a number of months of levels that were above the norm.  Initial claims typically decline between mid-July and early September, hints of which are already becoming apparent.

Sentiment on Thursday, as gauged by the put-call ratio, ended bullish at 0.95.

 

 

 

 

Seasonal charts of companies reporting earnings today:

 

S&P 500 Index

 

 

TSE Composite