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Stock Market Outlook for May 22, 2020


The Natural Gas Fund still cannot escape the fundamental headwind that is pushing against it, closing back around 52-week lows.

 

Real Time Economic Calendar provided by Investing.com.

 

 

*** 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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American Campus Communities Inc. (NYSE:ACC) Seasonal Chart

Clearwater Paper Corp. (NYSE:CLW) Seasonal Chart

Matthews International Corporation (NASD:MATW) Seasonal Chart

Spire Inc. (NYSE:SR) Seasonal Chart

Compass Diversified Holdings (NYSE:CODI) Seasonal Chart

BioCryst Pharmaceuticals, Inc. (NASD:BCRX) Seasonal Chart

 

 

The Markets

Stocks slipped on Thursday after the World Health Organization declared that yesterday saw the largest daily increase in coronavirus cases as the level of those that have been infected passes five million globally.  The S&P 500 Index fell by nearly eight-tenths of one percent, continuing to gyrate just below its 200-day moving average at 2999.36.  Previous short-term support around 2950 was tested by the closing bell.  The open gap between 2860 and 2915 presents a fairly significant level of support below. 

On the economic front, a report on existing home sales was released during Thursday’s session.  The headline print of April’s report indicated that sales declined by 17.8% to a seasonally adjusted annualized rate of 4.33 million. The result is approximately inline with the consensus analyst estimate that called for a rate of 4.325 million. (In our report to subscribers we incorrectly indicated a rate of 5.325 million) The year-over-year change has fallen again from +0.8% in March to -17.2% in April. Stripping out the seasonal adjustments, existing home sales actually fell by 10.3% in April, which is a negative divergence compared to the increase of 10.8% that is average for this time of year. This is only the second time in the past 20 years that existing home sales have fallen during this prime month in the spring home buying season; the only other April decline was in 2017 when sales fell by 1.8% for the month. The year-to-date change is now 26.4% below the seasonal average trend. This is the weakest year-to-date performance in over 20 years.  We sent out further insight to subscribers intraday.  Signup now to receive our intraday reports directly in your inbox.

Also released on Thursday was the latest tally of natural gas storage in the US.  The Energy Information Administration reports that 81 billion cubic feet (bcf) of the commodity was added to storage last week, continuing the tide of injections coming out of the winter withdrawal season.  Stockpiles of the commodity are down 21.6%, year-to-date, which is higher than the 40.5% drawdown that is typical through the middle of May.  The fundamentals have proved to be a significant headwind for the price of the commodity for some time and, unfortunately, the positive time of the year for prices is nearing an end.  The optimal holding period for the United States Natural Gas Fund (UNG) runs from April 1st to June 20th, having shown outperformance versus the benchmark in 8 of the past 12 periods.  As of the close of Thursday, the fund is down by 8.05% since the optimal holding period began, unable to escape the negative fundamental backdrop, despite previous indications that the price of natural gas had been charting a bottoming pattern.

Sentiment on Thursday, as gauged by the put-call ratio, ended bullish at 0.84.

 

 

Seasonal charts of companies reporting earnings today:

 

 

S&P 500 Index

 

 

TSE Composite

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