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Stock Market Outlook for January 25, 2018

Commodities breakout as the dollar continues to breakdown.

 

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:

FuelCell Energy, Inc. (NASD:FCEL) Seasonal Chart

FuelCell Energy, Inc. (NASD:FCEL) Seasonal Chart

Tronox Inc. (NYSE:TROX) Seasonal Chart

Tronox Inc. (NYSE:TROX) Seasonal Chart

Western Union Co. (NYSE:WU) Seasonal Chart

Western Union Co. (NYSE:WU) Seasonal Chart

Aon Corp. (NYSE:AON) Seasonal Chart

Aon Corp. (NYSE:AON) Seasonal Chart

Kaiser Aluminum Corp. (NASDAQ:KALU) Seasonal Chart

Kaiser Aluminum Corp. (NASDAQ:KALU) Seasonal Chart

Mellanox Technologies Ltd. (NASD:MLNX) Seasonal Chart

Mellanox Technologies Ltd. (NASD:MLNX) Seasonal Chart

Electronics for Imaging, Inc. (NASD:EFII) Seasonal Chart

Electronics for Imaging, Inc. (NASD:EFII) Seasonal Chart

Deutsche Bank AG (NYSE:DB) Seasonal Chart

Deutsche Bank AG (NYSE:DB) Seasonal Chart

Barclays Plc (NYSE:BCS) Seasonal Chart

Barclays Plc (NYSE:BCS) Seasonal Chart

British American Tobacco PLC (NYSE:BTI) Seasonal Chart

British American Tobacco PLC (NYSE:BTI) Seasonal Chart

Total SA (ADR) (NYSE:TOT) Seasonal Chart

Total SA (ADR) (NYSE:TOT) Seasonal Chart

Royal Bank of Canada  (TSE:RY) Seasonal Chart

Royal Bank of Canada (TSE:RY) Seasonal Chart

Occidental Petroleum Corporation  (NYSE:OXY) Seasonal Chart

Occidental Petroleum Corporation (NYSE:OXY) Seasonal Chart

 

 

The Markets

Stocks closed mixed on Wednesday as a tech fuelled selloff dragged on broad market indices.  The S&P 500 Index shed a mere six basis points to chart an apparent doji (indecision) candlestick.  Weakness amongst European benchmarks spilled into benchmarks closer to home, the selling pressures of which abated once European markets closed.  The DAX, CAC, MIB, and FTSE were lower by around two-thirds to one percent, trading off of recent 52-week highs.  Despite the positive trends for each, underperformance versus the S&P 500 Index suggests a lack of real buying demand as investors remain pinned to the positive economic prospects closer to home.  The Euro Stoxx 50 Index is turning lower from triple top resistance, remaining range bound until buyers accumulate to push the benchmark above an apparent head-and-shoulders bottoming pattern.  Seasonally, the European benchmark tends to remain weak into March before rising into spring.

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On the economic front, a report on existing home sales was a slight miss versus analyst expectations.  The headline print indicated that sales of existing homes fell by 3.6% in December to a seasonally adjusted annual rate of 5.57 million.  The consensus estimate was for a print of 5.75 million.  Stripping out the seasonal adjustments, sales of existing homes actually gained 0.5% in this last month of the calendar year, well below the average December gain of 4.7%.  For calendar year 2017, sales were lower by 2.3%, the first down year since 2010.  The south was the only region to show a gain on the year, albeit below average, at 0.5%.  For the Northeast, the 6.7% calendar year decline in the worst since 2008 in the midst of the recession.  The problem appears to be more or an inventory one rather than factors pertaining to demand.  Inventories of existing single family homes are down 9.7% on the year, the largest calendar year drawdown in five years.  This has pushed prices higher by 5.8% for 2017, well above the 3.3% average increase, based on data from the past 16 years.  While not really reflected in inflationary gauges, the truth is that the price that consumers are paying for everything, from shelter to transportation, has increased well above the rate of CPI over the past year, which is likely to quickly absorb the increases to take-home pay that followed the recently enacted tax legislation.  The expected real growth rate of the economy in this new tax era could be questioned.  Evidence of how the money will flow has yet to be obtained.  Housing has historically proven to be an effective leading indicator to periods of economic strain and while greater sales activity is certainly desired, there is little to suggest weakness, now or ahead, in what accounts as consumers largest asset.

Existing Home Sales Seasonal Chart

Monthly Existing Home Sales Data

Existing Home Sales Seasonal Chart

Existing Home Sales - Northeast Seasonal Chart Existing Home Sales - Midwest Seasonal Chart Existing Home Sales - West Seasonal Chart Existing Home Sales - South Seasonal Chart

Inventory of Existing Homes for Sale Seasonal Chart

Inventory of Existing Homes for Sale Seasonal Chart

Median Sales Price of Existing Homes Seasonal Chart

Turning to the weekly state of petroleum inventories in the US, the EIA is reporting that oil stockpiles shrank by 1.1 million barrels last week, while gasoline stockpiles continued to grow, rising this time by 3.1 million barrels.  The ongoing decline in oil stockpiles is diverging from the average tendency for gains through the winter and the spring, but this benefit comes along with the expense of above average growth in gasoline stockpiles.  The days of supply of gasoline shot up by close to a day last week to 28.0, one and a half days above the seasonal norm for this point in January. Days of supply of the refined commodity typically peaks by the second week of February before drawing down through the late winter and into the spring.  Demand, as gauged by the level of product supplied, remains elevated and production dipped in the previous week as refiners cut back amidst growing supplies.  Lower production of the refined commodity may result in the first weekly build to oil inventories since early November.  Domestic oil production is closing in on the pace set last year, raising concerns that volatility in oil prices could return as we enter the period of seasonal strength for the commodity price.

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 closed higher by around 2%, moving above the $65 level that has been widely cited by analysts.

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Crude Oil Futures (CL) Seasonal Chart

FUTURE_CL1 Monthly Averages

The price of oil was also supported by the decline in the US Dollar, which collapsed by around 1% during Wednesday’s session following comments from Steve Mnuchin, who said he welcomed weakness in the currency.  The dollar index continues to retrace the sharp gains charted in 2014 and 2015 amidst expectations for a rate tightening cycle, which is now underway.  The breakdown of the approximately 7-point trading range between 93 and 100 has downside implications to around 86.  The 61.8% Fibonacci retracement level of the five-year move comes in around 88.25, also a formidable target on the present trend lower.  The dollar weakness had significant benefits for commodity prices, which posted solid gains across the board.  Metals, energy, and agriculture commodities saw gains in excess of one percent.  The CRB commodity index was higher by 1.3%, breaking above significant resistance around 196 and completing a massive bottoming pattern.  Upside implications point to previous resistance around 233, or around 16% above present levels.  Commodity prices typically excel in both mid-term election years and tax reform years as economic activity ramps up, lifting demand.  This average tendency may just be getting started.  Seasonally, the CRB index rises through the first half of the year, while the US Dollar Index typically rises through February.

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

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Seasonal charts of companies reporting earnings today:

3M Company (MMM) Seasonal Chart Alaska Air Group, Inc. (ALK) Seasonal Chart Alliance Data Systems Corporation (ADS) Seasonal Chart American Airlines Group, Inc. (AAL) Seasonal Chart American Electric Power Company, Inc. (AEP) Seasonal Chart Biogen Inc. (BIIB) Seasonal Chart Caterpillar, Inc. (CAT) Seasonal Chart Celanese Corporation (CE) Seasonal Chart Celgene Corporation (CELG) Seasonal Chart Diageo plc (DEO) Seasonal Chart Freeport-McMoran, Inc. (FCX) Seasonal Chart Intel Corporation (INTC) Seasonal Chart Intuitive Surgical, Inc. (ISRG) Seasonal Chart JetBlue Airways Corporation (JBLU) Seasonal Chart KLA-Tencor Corporation (KLAC) Seasonal Chart L3 Technologies, Inc. (LLL) Seasonal Chart McCormick & Company, Incorporated (MKC) Seasonal Chart Northrop Grumman Corporation (NOC) Seasonal Chart Oshkosh Corporation (OSK) Seasonal Chart Praxair, Inc. (PX) Seasonal Chart Raytheon Company (RTN) Seasonal Chart Rogers Communication, Inc. (RCI) Seasonal Chart Sherwin-Williams Company (The) (SHW) Seasonal Chart Southwest Airlines Company (LUV) Seasonal Chart Starbucks Corporation (SBUX) Seasonal Chart Timken Steel Corporation (TMST) Seasonal Chart Union Pacific Corporation (UNP) Seasonal Chart Western Digital Corporation (WDC) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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