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Stock Market Outlook for April 19, 2018

The commodity strength that was expected for 2018 is finally playing out, in a big way.

 

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:

MaxLinear Inc. (NYSE:MXL) Seasonal Chart

MaxLinear Inc. (NYSE:MXL) Seasonal Chart

TransDigm Group Inc. (NYSE:TDG) Seasonal Chart

TransDigm Group Inc. (NYSE:TDG) Seasonal Chart

TransForce Inc (TSE:TFII) Seasonal Chart

TransForce Inc (TSE:TFII) Seasonal Chart

Baxter International Inc. (NYSE:BAX) Seasonal Chart

Baxter International Inc. (NYSE:BAX) Seasonal Chart

Andrew Peller Ltd. (TSE:ADW-A) Seasonal Chart

Andrew Peller Ltd. (TSE:ADW-A) Seasonal Chart

Northwest Pipe Co. (NASD:NWPX) Seasonal Chart

Northwest Pipe Co. (NASD:NWPX) Seasonal Chart

 

 

The Markets

Stocks posted marginal gains on Wednesday as earnings played tug-of-war on stock prices during the session.  The S&P 500 Index added less than a tenth of one percent, continuing to hold above its 50-day moving average; the intermediate moving average is showing slight indications of flat-lining following the down draft that weighed on the average for the past month.  Commodities were a significant mover on the day, despite the rise in the US dollar during the session.  The price of energy and industrial commodities saw gains in the realm of 2% to 3%, which in turn gave boost to the commodity sensitive TSX Composite.  The level of the Canadian benchmark moved above its recent consolidation range, surpassing the neckline of a short-term head-and-shoulders pattern, which had been highlighted in the past week for US indices.  The bullish setup projects upside potential towards horizontal resistance just above 15,750.  Moving average resistance at the 200-day is directly overhead.  The benchmark has been performing on par with US indices over the past three months as the energy and material sectors catch a bid.

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Topping the leaderboard on Wednesday were once again energy stocks as the price of oil shot up to another multi-year high.  This follows another bullish inventory report from the EIA, which indicated that oil stockpiles fell last week by 1.1 million barrels, while gasoline inventories fell by 3.0 million barrels.  A substantial jump in the level of of product supplied, a gauge of demand, helping to draw on the stockpiles of both the refined product as well as the raw input.  Gasoline product supplied is higher on the year by 14.0%, the second best year-to-date change on record and  above seasonal average trend by a whopping 13.6%.  The result stripped seven-tenths of a day of supply of gasoline from the market, leaving the supply equation around the seasonal norm at 25 days.  Seasonally, the days of supply of gasoline typically falls trough the end of April before rising into the back half of spring as production ramps higher ahead of the summer.  As for oil stockpiles, last week’s draw keeps the level of inventories in a tight range, hovering very close to the levels seen at the end of last year.  Oil inventories are higher by a mere 0.7% year-to-date.  This is a noted divergence from the 6.1% average gain in inventories through the middle of April, certainly offsetting any concerns pertaining to record high production levels in the US.  A dip in imports also helped the final tally of oil inventories for this reporting period.  Overall, product demand is very strong going into the high demand summer season, certainly supportive of higher prices for the commodity and the stocks, both of which remain in a period of seasonal strength through to May.

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 continues to move above an ascending triangle pattern, the setup alone projects upside potential towards $73.  The S&P 500 Energy Sector Index is firmly higher from the test of rising trendline support that was recorded at the start of the month.  Horizontal resistance around 575 presents the upper limit to its own ascending triangle pattern, a break above which projects upside potential that would easily surpass the all-time high around 738.  The S&P 500 Energy sector index is the only segment of the market that is negative over the past decade, beaten down by the collapse in oil prices between 2014 and 2016.  The commodity strength that was expected for 2018 is finally playing out, in a big way.

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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

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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

Aside from energy, cyclical sectors factored prominently in Wednesday’s session as commodity prices jumped.  Materials and Industrials topped the market return, while the more defensive consumer staples and utilities closed lower.  The performance of the energy, materials, and industrial sectors are often indicative of the strength of the core economy and the outperformance in recent days certainly expresses that investors are confident of economic activity for the year ahead.  Economic data has been coming in better than average through the first three months, including in the industrial economy, which relies on the inputs of the three aforementioned sectors.  Materials and Industrials, along with energy, remain seasonally strong into the month of May as the stocks benefit from strength in the manufacturing economy during the spring.

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Materials Sector Seasonal Chart

MATERIALS Relative to the S&P 500
MATERIALS Relative to the S&P 500

MATERIALS Monthly Averages

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Industrials Sector Seasonal Chart

INDUSTRIAL Relative to the S&P 500
INDUSTRIAL Relative to the S&P 500

INDUSTRIAL Monthly Averages

Sentiment on Wednesday, as gauged by the put-call ratio, once again ended around neutral at 0.96.

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Seasonal charts of companies reporting earnings today:

ABB Ltd (ABB) Seasonal Chart Alliance Data Systems Corporation (ADS) Seasonal Chart Bank Of New York Mellon Corporation (The) (BK) Seasonal Chart BB&T Corporation (BBT) Seasonal Chart Brandywine Realty Trust (BDN) Seasonal Chart Chemed Corp. (CHE) Seasonal Chart Cherokee Inc. (CHKE) Seasonal Chart Danaher Corporation (DHR) Seasonal Chart E*TRADE Financial Corporation (ETFC) Seasonal Chart Genuine Parts Company (GPC) Seasonal Chart KeyCorp (KEY) Seasonal Chart Novartis AG (NVS) Seasonal Chart Nucor Corporation (NUE) Seasonal Chart Pentair plc. (PNR) Seasonal Chart Philip Morris International Inc (PM) Seasonal Chart Pool Corporation (POOL) Seasonal Chart Quest Diagnostics Incorporated (DGX) Seasonal Chart Rogers Communication, Inc. (RCI) Seasonal Chart Skechers U.S.A., Inc. (SKX) Seasonal Chart Snap-On Incorporated (SNA) Seasonal Chart Sonoco Products Company (SON) Seasonal Chart Taiwan Semiconductor Manufacturing Company Ltd. (TSM) Seasonal Chart The Blackstone Group L.P. (BX) Seasonal Chart W.W. Grainger, Inc. (GWW) Seasonal Chart Wabco Holdings Inc. (WBC) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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