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Stock Market Outlook for January 4, 2018

Home Construction ETF moves to within striking distance of all-time high following report on spending.

 

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:

  • No stocks identified for today

 

 

The Markets

Stocks continued to climb on Wednesday as fund inflows to start the year propel major benchmarks to new all-time highs.  The S&P 500 index added just over six-tenths of one percent, led once again by energy as the price of oil rises further ahead of Thursday’s petroleum status report.  Strength in biotech and chip stocks helped to fuel the Nasdaq Composite further above the psychologically important 7000 level, which was breached in the prior day’s session.  The Biotech ETF (IBB) is quickly approaching resistance charted at the end of the last period of seasonal strength that concluded at the start of October.  Support at the rising 200-day moving average bodes well for the longer-term trend.  Seasonally, this secondary period of seasonal strength that began in the middle of December spans through to the middle of February.

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Biotech Industry Seasonal Chart
S5BIOTX Index Relative to the S&P 500S5BIOTX Index Relative to the Sector

S5BIOTX Index Monthly Averages

On the economic front, a report on construction spending showed strength for the month of November.  The headline print indicated that spending on construction projects increased by 0.8% in the second to last month of the year, edging out forecasts calling for a 0.6% rise.  Stripping out the seasonal adjustments, spending actually declined by 6.3% in the month, better than the average contraction for November of 7.2%.  The aggregate result remains below its seasonal average trend for the year, impacted by weak private non-residential spending, which is on track for the first calendar year-decline since 2010.  Residential spending continues to trend inline with its average trend, while public spending is trending above average, helped by the rebuilding effort following the recent hurricanes in the south.  Construction tends to be a highly seasonal industry, influenced by the changing weather patterns throughout the year.  With the snow and cold impacting the north east through the past few weeks, December and January results are bound to be impacted.  Construction spending typically ramps up again through the spring and summer. The home construction ETF (ITB) jumped following the report, adding 2.57% and moving to within a dollar of its all-time high achieved prior to the housing crash of 2007.  Seasonally, home builders tend to rise between mid-October and early February.

Total Construction Spending  Seasonal Chart

Monthly Total Construction Spending  Data

Total Construction Spending Seasonal Chart

Private Construction Spending: Nonresidential  Seasonal Chart Private Construction Spending: Residential  Seasonal Chart Public Construction Spending Seasonal Chart

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Home Building Industry Seasonal Chart
S5HOME Index Relative to the S&P 500S5HOME Index Relative to the Sector

S5HOME Index Monthly Averages

Sentiment on Wednesday, as gauged by the put-call ratio, ended bullish at 0.85.

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Seasonal charts of companies reporting earnings today:

Aehr Test Systems (AEHR) Seasonal Chart AngioDynamics, Inc. (ANGO) Seasonal Chart Franklin Covey Company (FC) Seasonal Chart  Monsanto Company (MON) Seasonal Chart PriceSmart, Inc. (PSMT) Seasonal Chart RPM International Inc. (RPM) Seasonal Chart Sonic Corp. (SONC) Seasonal Chart Walgreens Boots Alliance, Inc. (WBA) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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