The YTD change in NYSE Margin Debt suggests that we have yet to reach euphoric levels. 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 edged higher on Monday as strength in the utilities and financial sectors offset losses in technology. The S&P 500 Index added a mere three basis points, remaining supported at the 20-day moving average. But as stocks move higher, so too are bond prices with the iShares 20+ year bond ETF (TLT) charting another year-to-date high. The long-term bond ETF is now the most overbought, according to the 14-day relative strength index (RSI), since July of last year, just before the fund fell from its all-time high. This rally in bond prices, particularly amongst those with long maturities, has resulted in a flattening of the yield curve over the past few months as yields on the short end have moved higher alongside the federal funds rate. The move has some investors concerned that the curve may eventually invert, an event that has preceded past recessions. The spread of the 20-year treasury yield versus the 2-year yield is closing in on the recovery lows set last summer at 1.07%; a trend of lower-highs and lower-lows remains intact. According to the Fed’s dot plot, the median projection of the Fed Funds rate by the end of 2018 is 2.125%, just 30 bps away from the current 20-year yield. Should the Fed remain on the path that they have suggested, spreads are likely to tighten unless something can entice investors away from the long-end of the curve. On the economic front, a report on durable goods orders dimmed what was previously a bright spot in the economy. The headline print indicated that orders fell by 1.1% last month, a significant miss versus expectations of a 0.4% decline. Excluding the more volatile transportation component, orders were higher by a very marginal 0.1%, again short of estimates which called for a 0.5% rise. Stripping out the seasonal adjustments, the value of manufacturers’ new orders for capital goods industries actually fell by 1.2%, well short of the 2.7% increase that is average for the month of May. Following an above average year-to-date change through March and April, the trend has fallen back to the seasonal norm as orders in defense and transportation industries weigh; defense capital goods and transportation equipment are showing a below average pace with just one month left in the quarter. While these intra-quarter updates are interesting to look at, the more meaningful results are typically released for quarter-ends when activity spikes for the quarterly reporting periods. Orders rise by an average of 17.5% in June, fuelled by orders in a number of categories, including aircraft, which tend to act as one of the choppiest constituents in the report. Taking the report at face value, the results continue a trend of moderate economic data that provides little to be excited off. Investors continue to pin their hopes that that the Trump administration’s agenda will reinvigorate economic activity, thereby justifying the high valuations that equity prices are presently realizing. Perhaps activity will improve when June’s data is released next month, but the “hope” trade can only last so long. In other news, the NYSE released its latest margin stats for the month of May. You may be familiar with the phrase that “bull markets are born on pessimism, grow on scepticism, mature on optimism, and die on euphoria.” The release of margin data provides an interesting gauge of how euphoric investors are at this point in the cycle. During periods of tremendous market euphoria, investors will tend to take on significant levels of margin in an effort to leverage the returns generated by the positive market trend. But while investors may “leak” into leveraged positions on the way up, it turns into a flood on the way down as traders seek to cover the debt in order to avoid significant losses. Currently, the year-to-date change in this indicator has been running above average through May, climbing alongside the equity market, but it has yet to reach the “euphoric” gains of 30%+ that has typically preceded major equity market peaks, such as in 2000 and 2007. Margin debt is higher by 10.3% through the first five months of the year, pulling back slightly in this May report. During the summer months, particularly July and August, investors are less likely to take on margin in their investment portfolios, typically resulting in more declines than gains in margin levels, at least over the past 20 years. So to answer the question of which stage we are presently in, while there is still no shortage of sceptics out there, the present market environment resembles that of optimism, still short of the euphoria that is indicative of excessive risk-taking. Sentiment on Monday, as gauged by the put-call ratio, ended bullish at 0.81. Seasonal charts of companies reporting earnings today: S&P 500 Index TSE Composite