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Stock Market Outlook for January 23, 2018

Biotech and energy stocks on the move within their period of seasonal strength.

 

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:

Sasol Limited (ADR) (NYSE:SSL) Seasonal Chart

Sasol Limited (ADR) (NYSE:SSL) Seasonal Chart

Schlumberger Limited  (NYSE:SLB) Seasonal Chart

Schlumberger Limited (NYSE:SLB) Seasonal Chart

 

 

The Markets

Another day, another set of record highs.  Stocks continued to climb higher on Monday as US Senators agreed to a resolution to bring the government shutdown to an end.  The S&P 500 Index added eight-tenths of one percent, following through with the target of a short-term triangle continuation pattern charted late last week.  The parabolic ascent on the large-cap benchmark is quickly nearing the 3,000 target proposed previously, marking the upper limit to the long-term rising trend channel.  This target, however, was suspected to present more of a longer-term potential for the market benchmark rather than a near-term target.  Momentum indicators remain significantly overbought, but have yet to show signs of exhaustion.

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Deal news in the biotech industry helped to fuel a breakout on the biotech ETF (IBB), which moved back to the highest level since 2015.  The industry ETF has charted a series of higher-highs and higher-lows over the past year, holding longer-term support at the 200-day moving average.  Performance relative to the broader market over this period has been flat, but the catalyst of further M&A may finally be sufficient to fuel real buying pressures as the period of seasonal strength enters its final innings.  Between December 16th and February 18th, the S&P 500 Biotechnology Index has gained an average of 8.72% over the past 20 years, outperforming the market benchmark in 12 of those periods.  With Monday’s gain, the industry ETF (IBB) is within a fraction of a percent of matching this average result.

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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

In sector activity, energy stocks were by far the market leader during the session as investors continue to look for value in some of the more depressed areas of the market.  The S&P 500 Energy Sector Index moved above the neckline of a massive head-and-shoulders bottoming pattern , the upside target of which suggests a move towards the all-time high of 738.71, or a whopping 28% above present levels.  Stocks in the sector have been playing a bit of catch-up following the move in the price of oil, which is showing a similar bottoming pattern.  According to the seasonal strength timeline, the period of strength for the sector begins on January 21st, on average, running through to May 9th.  The drawdown in gasoline inventories through the spring and into the summer acts as a factor, but recently gasoline inventories have been on the rise as oil stockpiles are drawn down.  The dynamic between the change in gasoline and oil stockpiles warrants monitoring going into the trough period of demand for the energy commodities as any fluctuations contrary to seasonal norms could cause some volatility in the energy trade ahead.  We’ll have the breakdown of the weekly EIA inventory report in Thursday’s report.

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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

Sentiment on Monday, as gauged by the put-call ratio, ended bullish at 0.89.

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Sectors and Industries entering their period of seasonal strength:

CAC 40 Index Seasonal Chart

^FCHI Relative to the S&P 500
^FCHI Relative to the S&P 500

^FCHI Monthly Averages

 

 

Seasonal charts of companies reporting earnings today:

Allegheny Technologies Incorporated (ATI) Seasonal Chart Canadian National Railway Company (CNI) Seasonal Chart Capital One Financial Corporation (COF) Seasonal Chart Cree, Inc. (CREE) Seasonal Chart Fifth Third Bancorp (FITB) Seasonal Chart H. B. Fuller Company (FUL) Seasonal Chart Huntington Bancshares Incorporated (HBAN) Seasonal Chart Johnson & Johnson (JNJ) Seasonal Chart Kimberly-Clark Corporation (KMB) Seasonal Chart LG Display Co., Ltd. (LPL) Seasonal Chart Navient Corporation (NAVI) Seasonal Chart Procter & Gamble Company (The) (PG) Seasonal Chart Prologis, Inc. (PLD) Seasonal Chart State Street Corporation (STT) Seasonal Chart Synovus Financial Corp. (SNV) Seasonal Chart Texas Instruments Incorporated (TXN) Seasonal Chart The Travelers Companies, Inc. (TRV) Seasonal Chart Total System Services, Inc. (TSS) Seasonal Chart Union Bankshares Corporation (UBSH) Seasonal Chart United Community Financial Corp. (UCFC) Seasonal Chart United Continental Holdings, Inc. (UAL) Seasonal Chart Verizon Communications Inc. (VZ) Seasonal Chart Waters Corporation (WAT) Seasonal Chart WesBanco, Inc. (WSBC) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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