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Stock Market Outlook for January 5, 2018

Oil prices remain supported as the days of supply shrink to just three days above average.

 

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:

K12 Inc. (NYSE:LRN) Seasonal Chart

K12 Inc. (NYSE:LRN) Seasonal Chart

Charles River Laboratorie (NYSE:CRL) Seasonal Chart

Charles River Laboratorie (NYSE:CRL) Seasonal Chart

Cabela's Inc. (NYSE:CAB) Seasonal Chart

Cabela’s Inc. (NYSE:CAB) Seasonal Chart

Jack in the Box Inc.  (NASDAQ:JACK) Seasonal Chart

Jack in the Box Inc. (NASDAQ:JACK) Seasonal Chart

Halliburton Company  (NYSE:HAL) Seasonal Chart

Halliburton Company (NYSE:HAL) Seasonal Chart

Surge Energy Inc (TSE:SGY) Seasonal Chart

Surge Energy Inc (TSE:SGY) Seasonal Chart

CVS Caremark Corporation  (NYSE:CVS) Seasonal Chart

CVS Caremark Corporation (NYSE:CVS) Seasonal Chart

Loblaw Companies Limited  (TSE:L) Seasonal Chart

Loblaw Companies Limited (TSE:L) Seasonal Chart

Northrop Grumman Corporation  (NYSE:NOC) Seasonal Chart

Northrop Grumman Corporation (NYSE:NOC) Seasonal Chart

C.R. Bard, Inc. (NYSE:BCR) Seasonal Chart

C.R. Bard, Inc. (NYSE:BCR) Seasonal Chart

Sherwin-Williams Company  (NYSE:SHW) Seasonal Chart

Sherwin-Williams Company (NYSE:SHW) Seasonal Chart

Church & Dwight Co, Inc. (NYSE:CHD) Seasonal Chart

Church & Dwight Co, Inc. (NYSE:CHD) Seasonal Chart

Laboratory Corp. of America Holdings  (NYSE:LH) Seasonal Chart

Laboratory Corp. of America Holdings (NYSE:LH) Seasonal Chart

World Wrestling Entertainment, Inc. (NYSE:WWE) Seasonal Chart

World Wrestling Entertainment, Inc. (NYSE:WWE) Seasonal Chart

Target Corporation  (NYSE:TGT) Seasonal Chart

Target Corporation (NYSE:TGT) Seasonal Chart

Zumiez Inc. (NASD:ZUMZ) Seasonal Chart

Zumiez Inc. (NASD:ZUMZ) Seasonal Chart

L-3 Communications Holdings, Inc.  (NYSE:LLL) Seasonal Chart

L-3 Communications Holdings, Inc. (NYSE:LLL) Seasonal Chart

Nordstrom, Inc.  (NYSE:JWN) Seasonal Chart

Nordstrom, Inc. (NYSE:JWN) Seasonal Chart

Wal-Mart Stores, Inc.  (NYSE:WMT) Seasonal Chart

Wal-Mart Stores, Inc. (NYSE:WMT) Seasonal Chart

 

 

The Markets

Stocks jumped higher on Thursday as investors anticipate a strong result for Friday’s non-farm payroll report for the month of December.  ADP reported before Thursday’s opening bell that 250,000 private payrolls were added last month, far surpassing the 188,000 estimate forecasted by analysts.  If confirmed by the Bureau of Labor Statistics, this would mark the third consecutive month of growth over 200,000.  The current consensus estimate for Friday’s report is 191,000.  The actual level of initial jobless claims have gained inline with the seasonal average over the past month, suggesting an average result should be expected in the monthly payroll report, on a non-seasonally adjusted basis.  This would equate to no change in the actual level of employment, based on the average variance for the month over the past 50 years.  Payrolls have been running inline with the average trend through the month of November, remaining solid even at this late stage in the economic cycle.  We’ll have the complete breakdown of the results, from a seasonal perspective, in our next report.

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Total Nonfarm Seasonal Chart

The S&P 500 Index tacked on an additional four-tenths of one percent following the optimism pertaining to the state of employment in the US.  Momentum indicators, while overbought, continue to trend higher as investors continue to demand the equity asset class.  Friday marks the last day of the Santa Claus rally period, which peaks on January 6th, on average.  The benchmark tends to gyrate through the remainder of the month, attracting inflows once again when the calendar flips to February.

Released a day later than usual, the Energy Information Administration (EIA) released its latest tally of petroleum inventories in the US.  In their last weekly report for 2017, the EIA is indicating that oil stockpiles fell by an additional 7.4 million barrels, while gasoline inventories rose by 4.8 million.  The result took the days of supply of oil down to the lowest level of the year at 24.6, just three days above the seasonal norm for the end of the year.  Recall at the height of the oil glut in the winter of last year, oil supplies were around 12 days above average, forcing OPEC to step in to cap production in an attempt to bring the market back into balance.  With an 11.4% drawdown in oil inventories for 2017, the year will be marked as recording the largest calendar year decline in stockpiles in the history of the report.  The resulting loss in OPEC’s market share is to the benefit of US producers, which are pumping out the commodity at the highest rate on record.  Gaining 11.5% in 2017, the calendar year increase in US field production of crude oil is the fourth largest in history, a potential threat to the stability of the oil market into the period of seasonal strength ahead.  Seasonally, stockpiles of crude typically rise between now and May as demand for the refined product through the winter months is less.  The change in gasoline production and product supplied have reverted back to their seasonal average levels to close the year, a fairly significant shift from the above average change seen through the high demand summer period.

Weekly U.S. Days of Supply of Crude Oil excluding SPR  (Number of Days) Seasonal Chart

Weekly U.S. Days of Supply of Crude Oil excluding SPR (Number of Days) Seasonal Chart

Weekly U.S. Ending Stocks excluding SPR of Crude Oil Seasonal ChartWeekly U.S. Field Production of Crude Oil Seasonal ChartWeekly U.S. Commercial Crude Oil Imports Excluding SPR Seasonal Chart

Weekly U.S. Days of Supply of Total Gasoline  (Number of Days) Seasonal Chart

Weekly U.S. Days of Supply of Total Gasoline (Number of Days) Seasonal Chart

Weekly U.S. Ending Stocks of Total Gasoline Seasonal Chart Weekly U.S. Refiner and Blender Adjusted Net Production of Finished Motor Gasoline Seasonal Chart Weekly U.S. Product Supplied of Finished Motor Gasoline Seasonal Chart

The price of oil continued to climb following the result, gaining just over six-tenths of one percent on the day.  The commodity remains supported at the rising 20-day moving average, which now hovers around $58.50.  Resistance around $62.50 is directly overhead.  The massive bottoming pattern that has been charted for the price of WTI Crude over the past few years presents upside potential towards the upper 70’s, which, if achieved, would intersect with previous long-term support charted prior to the crash in the oil market in 2014.  Seasonally, crude oil tends to show gains between early February and mid May.

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Crude Oil Futures (CL) Seasonal Chart
FUTURE_CL1 Relative to the S&P 500FUTURE_CL1 Relative to Gold

FUTURE_CL1 Monthly Averages

The rise in the price of oil was a significant factor behind the strength in November’s report on industrial Product Prices in Canada.  In a report released from Statscan, the total industrial product price index (IPPI) increased by 1.4% in the second to last month of the year, well above the –0.1% average change for the month.  The index is now back above its seasonal average trend for the year, shaking off the dip that was attributed to the rise in the Canadian dollar through the summer.  Strength in energy and petroleum products over the past few months has been a significant factor in the rebound from the summer low.  The rebound in chemicals, pulp and paper products, and packaging has been similarly robust.  Industrial product prices tend to follow the seasonal manufacturing cycle, ramping up through the spring as demand for commodities increases.  A complete breakdown of the report is available in the chart database at http://charts.equityclock.com/canada-industrial-product-price-index-ippi-by-north-american-product-classification-system-napcs.

Canada Total, Industrial product price index (IPPI) Seasonal Chart

Monthly Canada Total, Industrial product price index (IPPI) Data

Sentiment on Thursday, as gauged by the put-call ratio, ended bullish at 0.82.

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Seasonal charts of companies reporting earnings today:

Cal-Maine Foods, Inc. (CALM) Seasonal Chart Constellation Brands Inc (STZ) Seasonal Chart Greenbrier Companies, Inc. (The) (GBX) Seasonal Chart Shiloh Industries, Inc. (SHLO) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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