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Stock Market Outlook for April 5, 2018

Reversal candlestick from significant support: a strong signal.

 

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:

Clearwater Seafoods Inc (TSE:CLR) Seasonal Chart

Clearwater Seafoods Inc (TSE:CLR) Seasonal Chart

ARC Resources Ltd (TSE:ARX) Seasonal Chart

ARC Resources Ltd (TSE:ARX) Seasonal Chart

ABIOMED, Inc. (NASDAQ:ABMD) Seasonal Chart

ABIOMED, Inc. (NASDAQ:ABMD) Seasonal Chart

Clairvest Group Inc. (TSE:CVG) Seasonal Chart

Clairvest Group Inc. (TSE:CVG) Seasonal Chart

Freehold Royalties (TSE:FRU) Seasonal Chart

Freehold Royalties (TSE:FRU) Seasonal Chart

 

 

The Markets

Stocks charted a massive reversal on Wednesday, first falling sharply in reaction to the retaliatory tariffs proposed by China, then rallying throughout the session to close higher by over one percent. At the end of the session, reversal candlesticks were charted on key US equity benchmarks with the day’s range exceeding that of the previous session. This candlestick formation at a point of significant support, such as the 200-day moving average, is typically a powerful signal that the bulls have retaken control and further upside is likely.

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Of course, headline risk remains high, but, with investors noticeably hedging their books in the past few weeks, it is difficult to get downside momentum going. On the hourly chart of the S&P 500 Index, a positive momentum divergence led to the breakout in the benchmark above its declining 50-hour moving average, a level that has been constraining upside momentum for the past month. Next level to watch is the gap resistance around 2700, which may provide a hurdle as we head into earnings season.

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On the economic front, the final tally of factory orders for the month of February was released during Wednesday’s session.  The headline print indicated that factory orders increased by 1.2%, shy of the 1.7% increase forecasted by analysts.  Stripping out the seasonal adjustments, the actual increase was 1.4%, less than half of the average increase for the second month of the year of 3.5%.  The year-to-date change now sits at –5.6%, which is 1.3% below average through the first two months of the year.  Shipments, meanwhile, continue to hover around the seasonal norm.  Non-durable goods acted as the weight on the aggregate result as shipments of petroleum and chemicals fell below average.  Standouts in the report are the new orders of construction machinery and boats, which surged well above average in the month, a testament to the strong economic fundamentals in the US.  Both categories are hovering 14.2% and 59.8%, respectively, above average through the first two months of the year.  Other categories, excluding some of the non-durable components, are predominantly trending inline with historic trends, suggesting that the strength in the manufacturing economy is holding pace into the new year.  Strength in manufacturing through the spring typically gives lift to some of the key cyclical sectors of the market between January and May, including Materials, Industrials, and Energy.  However, with headlines distracting investors from the solid fundamentals, prices in these market segments have gone the other way.  March tends to provide an important read for manufacturing activity as orders are pushed through before the close of the quarter.  For a complete look at the report, the seasonal charts are available in the database at https://charts.equityclock.com/u-s-factory-orders.

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' Total Inventories for All Manufacturing Industries  Seasonal Chart Value of Manufacturers' Shipments for All Manufacturing Industries  Seasonal Chart

While shipments of petroleum products may have been a drag on February’s report of factory orders, demand for petroleum products continues to be apparent in the weekly EIA inventory report.  The administration reported that oil inventories fell by 4.6 million barrels last week, while gasoline fell by 1.1 million barrels.  The result continued to pressure the days of supply of each commodity, now at 25.4 for oil and 25.5 for gasoline; the average for each at this point in the year is 23.5 and 25.3, respectively.  Oil stockpiles are now around the levels that were present at the end of 2017, showing the narrowest gain through the first quarter, in percentage terms, since 1995.  Strong demand for product is more than offsetting the record levels of domestic production, which continue to climb at an above average pace.

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 demand for energy commodities bodes very well for the price of oil, which is sitting very close to multi-year highs.  However, oil stocks have yet to react.  The price of WTI crude is up by around 28% in the past three years, while the S&P 500 Energy Sector Index is down by 12% over the same timeframe.  Equity investors remain sceptical.  The days of supply of oil is slowly moving back to normal levels, but the above average gains in domestic production threatens the discontinuation of the OPEC production cuts.  Growth in US oil exports have been well above average in the past few years, eroding market share of the commodity organization, something that investors have taken notice of.  For now, the demand side warrants more respect than it is currently generating, presenting a possible catalyst to the energy sector through the remainder of the period of seasonal strength that peaks in May.  The energy sector benchmark continues to consolidate below its 200-day moving average, perhaps waiting for the equity market volatility to fade.

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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 Wednesday, as gauged by the put-call ratio, ended close to neutral at 0.98.

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Seasonal charts of companies reporting earnings today:

Conn's, Inc. (CONN) Seasonal Chart  Monsanto Company (MON) Seasonal Chart PriceSmart, Inc. (PSMT) Seasonal Chart RPM International Inc. (RPM) Seasonal Chart Schnitzer Steel Industries, Inc. (SCHN) Seasonal Chart WD-40 Company (WDFC) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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