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Stock Market Outlook for October 6, 2017

S&P 500 Index pushing back up against rising trendline resistance.

 

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:

AGCO Corporation (NYSE:AGCO) Seasonal Chart

AGCO Corporation (NYSE:AGCO) Seasonal Chart

Vale (ADR) (NYSE:VALE) Seasonal Chart

Vale (ADR) (NYSE:VALE) Seasonal Chart

Peabody Energy Corporation (NYSE:BTU) Seasonal Chart

Peabody Energy Corporation (NYSE:BTU) Seasonal Chart

SEI Investments Company  (NASDAQ:SEIC) Seasonal Chart

SEI Investments Company (NASDAQ:SEIC) Seasonal Chart

Potash Corp./Saskatchewan Inc.  (TSE:POT) Seasonal Chart

Potash Corp./Saskatchewan Inc. (TSE:POT) Seasonal Chart

KLA-Tencor Corporation  (NASDAQ:KLAC) Seasonal Chart

KLA-Tencor Corporation (NASDAQ:KLAC) Seasonal Chart

Cognizant Technology Solutions Corp.  (NASDAQ:CTSH) Seasonal Chart

Cognizant Technology Solutions Corp. (NASDAQ:CTSH) Seasonal Chart

Advanced Micro Devices, Inc.  (NYSE:AMD) Seasonal Chart

Advanced Micro Devices, Inc. (NYSE:AMD) Seasonal Chart

 

 

The Markets

Stocks charted solid gains on Thursday, moving higher following the House passing a $4.1 Trillion budget, the first step towards tax reform.  The S&P 500 Index added over half of one percent, charting the eighth straight session of gains, the longest stretch since July of 2013.  Cyclical sectors once again topped the leaderboard with financials leading the pack.  The large-cap benchmark is now testing long-term rising trendline resistance that spans the peaks over the past 18 months.  Momentum indicators remain overbought, but have yet to show signs of peaking.

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On the economic front, factory orders in the US reported another strong month.  For August, factory orders were higher by 1.2%, beating the consensus forecast that called for a 1.0% rise.  Stripping out the seasonal adjustments, the Value of Manufacturers’ New Orders for All Manufacturing Industries was actually higher by 9.6%, firmly better than the 7.9% average gain for this summer month.  The gauge of factory activity in the US is running 2.9% above average through the first eight months of the year, representing the best performance since 2011.  Durable goods remains the driver of this strong result as non-durable goods continue to lag their seasonal average given depressed commodity prices.  The commodity market is slowly improving, potentially acting as a benefit in future reports.  On the non-durable goods side, agricultural chemicals and petroleum products are notable laggards, holding well below their seasonal average trends.  But less exposed to commodity market fluctuations are the pharmaceuticals, which are seeing shipment gains of 9.1% through the end of August, a notable improvement from the trend set this time last year.  From an equity standpoint, the pharmaceuticals industry remains in a period of seasonal strength through the end of November.  Overall, manufacturing in the US remains strong and has the potential to get better should commodity prices participate.  Factory activity tends to wane in the last quarter of the year as activity shifts more towards the consumer and their spending patterns surrounding the end of year holidays.

Value of Manufacturers' New Orders for All Manufacturing Industries Seasonal Chart

Monthly Value of Manufacturers' New Orders for All Manufacturing Industries Data

Value of Manufacturers’ New Orders for All Manufacturing Industries Seasonal Chart

Value of Manufacturers' Total Inventories for All Manufacturing Industries  Seasonal Chart Value of Manufacturers' Shipments for All Manufacturing Industries  Seasonal Chart Value of Manufacturers' New Orders for Nondurable Goods Industries  Seasonal Chart Value of Manufacturers' Shipments for Nondurable Goods Industries  Seasonal Chart Value of Manufacturers' Total Inventories for Nondurable Goods Industries Seasonal Chart Value of Manufacturers' New Orders for Consumer Goods: Consumer Nondurable Goods Industries  Seasonal Chart Value of Manufacturers' Shipments for Nondurable Goods Industries: Chemical Products: Pharmaceuticals and Medicines  Seasonal Chart Value of Manufacturers' Inventories, by Stage of Fabrication: Finished Goods for Nondurable Goods Industries: Petroleum and Coal Products  Seasonal Chart Value of Manufacturers' Shipments for Nondurable Goods Industries: Paper Products: Pulp, Paper, and Paperboard Mills  Seasonal Chart Value of Manufacturers' Total Inventories for Nondurable Goods Industries: Beverage and Tobacco Products: Beverages  Seasonal Chart Value of Manufacturers' Shipments for Nondurable Goods Industries: Chemical Products: Pesticides, Fertilizers, and Other Agricultural Chemicals  Seasonal Chart Value of Manufacturers' Shipments for Nondurable Goods Industries: Petroleum and Coal Products  Seasonal Chart Value of Manufacturers' Shipments for Nondurable Goods Industries: Beverage and Tobacco Products: Tobacco  Seasonal Chart Value of Manufacturers' Shipments for Nondurable Goods Industries: Petroleum and Coal Products: Petroleum Refineries  Seasonal Chart Value of Manufacturers' Shipments for Nondurable Goods Industries: Beverage and Tobacco Products: Beverages  Seasonal Chart

North of the border, a report on international trade highlighted the impact of a stronger Canadian dollar over the past few months.  Statscan reported that the trade deficit widened to $3.4 billion in August from $3.0 billion previous.  The consensus estimate was for a deficit of $2.8 billion.   The headline print indicated that the deficit expansion was the result of a 1.0% decline in exports for the month, pushing the year-over-year change into negative territory.  Imports, meanwhile, were unchanged.  Stripping out the seasonal adjustments, exports actually rose by 6.3% and imports were higher by 8.6%; the average gain for each in this eighth month of the year is 7.3% and 8.5%, respectively.  Focussing on the export side, the year-to-date change of the aggregate result is running 9.4% below average through the end of August, inline with last year’s result when the economy was trying to recover from a manufacturing recession.  Strength in the Canadian Dollar over the past few months is obviously taking a toll, impacting the year-to-date trends of a number categories, particularly those sensitive to fluctuations in commodity prices.  Significant fluctuations were apparent in food & tobacco intermediate products, radioactive ores, and dyes & pigments, each of which fell by magnitudes that are unable to be explained away by the currency impact alone.  Shutdowns in uranium mining facilities explains the abrupt decline in radioactive ores.  Overall, outside of a few anomalies, the strength in the currency between May and early September, attributed to a more hawkish Bank of Canada, has poured cold water on the hot economy that was apparent through the spring.  While the currency strength may not be enough to derail the economy, it should certainly be enough to give pause to central bank officials in this country as they contemplate future moves.  The Canadian Dollar shed around seven-tenths of one percent following the report, closing firmly below its 50-day moving average and retracing much of the gains recorded in September.  Minor support is directly below at 0.79.  Seasonally, the Canadian dollar tends to decline between late September and mid-December.  For a complete breakdown of August’s report on Merchandise Trade in Canada, the seasonal charts can be accessed via the seasonal chart database at http://charts.equityclock.com/canadian-international-merchandise-trade-exports-imports.

Total Exports of all merchandise Seasonal Chart

Monthly Total Exports of all merchandise Data

Total Imports of all merchandise Seasonal Chart

Monthly Total Imports of all merchandise Data

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Canadian Dollar Forex (CAD) Seasonality

Monthly Seasonal Canadian Dollar Forex (CAD)

On Friday, both Canada and the US will release their monthly look at the state of employment through the month of September.  The consensus for the US is that whatever the number is, as long as it is positive, it will get a pass given the damaging storms that impacted the southern states through the month.  Recent reports on jobless claims suggest that the result will be weaker than those reported in previous months, which have seen job creation in the range of 150,000 to over 200,000.  The consensus is for a mere 100,000 jobs added in September.  While initial jobless claims did spike at the start of the month, continuing claims were largely unfazed, falling to new multi-decade lows in recent weeks.  Seasonally, September is typically one of the stronger months of the year for payrolls, rising, on average, by a non-seasonally adjusted 0.6%.  The year-to-date change in payrolls has been trending above average this year, a positive influence to the broader fundamental backdrop of the economy.  We’ll have the complete breakdown of the result in our next report.

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Total Nonfarm Employment Seasonality

Monthly Seasonal Total Nonfarm Employment

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

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Sectors and Industries entering their period of seasonal strength:

Soybeans Futures (S) Seasonal Chart
FUTURE_S1 Relative to the S&P 500FUTURE_S1 Relative to Gold

FUTURE_S1 Monthly Averages

 

 

Seasonal charts of companies reporting earnings today:

Eros International PLC (EROS) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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