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Stock Market Outlook for January 5, 2017

Freeport-McMoRan bouncing from the neckline of a massive reverse head-and-shoulders pattern.


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**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 rallied for a second day on Wednesday, concluding the Santa Claus rally period with gains for all three major indices.  Market participants generally deem this favourable timeframe attributed to the arrival of the man in the red suit to the days between Christmas and the second session of the new year.  Thanks to the strong start to 2017, the Santa Claus rally has amounted to a gain of 0.31% for the S&P 500 Index, 0.04% for the Dow Jones Industrial Average, and 0.26% for the Nasdaq Composite.  Health Care and Materials are presently tied as the top performers in this new year, both higher by 2.1% in just two sessions.  Recall from our report earlier this week that these two sectors typically close the month on opposite ends of the performance spectrum, with health care acting as one of the best performers in January and Materials one of the worst.  Freeport-McMoRan (FCX) is acting as one of the standouts on the materials side, reacting to some of the strong PMI results released around the globe over recent days.  Shares of FCX are bouncing from previous resistance, now support, around $13.50, triggering momentum buy signals in the process.  The level of previous horizontal resistance also forms the basis of the neckline to a reverse head-and-shoulders pattern, the upside potential of which calculates to $23.50, or over 58% above present levels.  Seasonally, the period of seasonal strength for the stock is directly around the corner, running from mid-January to the beginning of May.  The company is scheduled to report fourth quarter results on January 24th.





With stocks on their second day of gains, major benchmarks are back to short-term resistance that stalled the rally through the last half of December.  The S&P 500 Index got within points of this short-term hurdle at 2275, while the Dow Jones Industrial Average shows the equivalent level just below the widely watched 20,000.  Reaction to the employment reports ahead could provide the make-or-break moment to the short-term bound overhead.



And as stocks close to home test their previous highs, the MSCI World ex-US Index is starting to show signs of life.  The global benchmark was higher by 1.34% on Tuesday, bouncing from around its rising 20-day moving average.  Two bullish setups are materializing on this international index.  A reverse head-and-shoulders pattern charted over the past year and a half remains in-play and projects upside potential towards resistance at 1950.  Previous trendline resistance and the neckline to the bullish setup was tested as support in the past month.  In addition, a bullish ascending triangle has become apparent, the upper limit of which is apparent around present levels.  A break of this level of resistance projects similar upside potential as the head-and-shoulders setup, both based on the same low charted almost one year ago.  While recent performance relative to the S&P 500 Index has been picking up, the longer-term relative trend of this index is clearly lower, a trend that has been maintained since 2009.  Seasonally, the MSCI World ex-US follows a similar average pattern as equity benchmarks in Canada and the US, with gains frequent between October and May.




Sentiment on Wednesday, as gauged by the put-call ratio, ended bullish at 0.87.







Seasonal charts of companies reporting earnings today:



S&P 500 Index





TSE Composite




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