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Stock Market Outlook for January 10, 2017

Energy and Utilities lead market lower on Monday.

 

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 closed marginally lower to start the week, dragged down by the energy sector as the price of oil came under selling pressure.  The price of WTI Crude closed marginally below $52, a key pivot point in the long-term trend of the commodity.  Despite the price of oil charting a new 52 week high in the past couple of weeks, momentum indicators have failed to confirm the higher-high.  A divergence with respect to MACD and RSI suggests that the recent gains were fuelled by diminishing demand, leading to Monday’s downfall.  A confirmed break below $52 could see a test of the next pivot point around $48; variable support at the 200-day moving average is an important line in the sand for the longer-term trend.  The period of seasonal strength for oil begins on February 12th, on average.

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As for the S&P 500 Energy Sector Index, the benchmark continues to roll over from the high set late last year, following the breakout above the neckline of a massive head-and-shoulders bottoming pattern.  As highlighted recently, a retracement back to this breakout point could provide an ideal setup to the period of seasonal strength for the sector, which is directly around the corner.  Relative performance has largely flat-lined in recent weeks as buyers stick to the sidelines.  Seasonally, the sector kicks off its period of strength at the end of January, leading the commodity into this favourable period.

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Energy Sector Seasonal Chart

ENERGY Relative to the S&P 500
ENERGY Relative to the S&P 500

ENERGY Monthly Averages

Energy wasn’t the only significant mover on the day.   The utilities sector shed over 1.3%, despite a downtick in yields.  The Utilities ETF (XLU) charted an outside reversal candlestick, opening above Friday’s high and closing below this previous session’s low.  This is typically a bearish setup.  Both stochastics and MACD triggered sell signals.  Support is apparent around the 50-day moving average at $47.50.  As highlighted at the end of last year, strength in this sector is typically reversed at the start of the new year, weakening through the beginning of March.

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Utilities Sector Seasonal Chart

UTILITIES Relative to the S&P 500
UTILITIES Relative to the S&P 500

UTILITIES Monthly Averages

Sentiment on Monday, as gauged by the put-call ratio, ended neutral at 1.00.

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Seasonal charts of companies reporting earnings today:

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S&P 500 Index

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TSE Composite

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