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Stock Market Outlook for May 3, 2018

Crude oil closes higher despite strong dollar and bearish inventory report.

 

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:

Cardiovascular Systems, Inc. (NASD:CSII) Seasonal Chart

Cardiovascular Systems, Inc. (NASD:CSII) Seasonal Chart

Summer Infant, Inc. (NASD:SUMR) Seasonal Chart

Summer Infant, Inc. (NASD:SUMR) Seasonal Chart

IAMGOLD Corp. (NYSE:IAG) Seasonal Chart

IAMGOLD Corp. (NYSE:IAG) Seasonal Chart

Goldcorp (TSE:G) Seasonal Chart

Goldcorp (TSE:G) Seasonal Chart

Northwest Natural Gas (NYSE:NWN) Seasonal Chart

Northwest Natural Gas (NYSE:NWN) Seasonal Chart

Golar LNG Ltd (NASD:GLNG) Seasonal Chart

Golar LNG Ltd (NASD:GLNG) Seasonal Chart

 

 

The Markets

Stocks ended firmly lower on Wednesday as investors reacted to the latest monetary policy statement from the Fed.  The S&P 500 Index shed around three-quarters of one percent, unable to overcome resistance at the 20-day moving average, which was broken earlier in the week.  The descending triangle pattern on the chart of the large-cap index continues to constrain market activity.

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While investors reacted to the Fed’s statement, the bond market was largely unchanged.  Major treasury ETFs closed within a tenth of a percent of the flat-line on the day, leaving yields on the respective notes close to even on the day.  But this unchanged result didn’t stop the US Dollar from fluctuating wildly after the announcement.  The US Dollar Index ETF shed around half of one percent in the minutes following the announcement, trading into the red intraday. Soon thereafter, currency traders stepped in, adding around two-thirds of one percent to push the ETF to the highs of the day.  Dollar strength, in turn, took a toll on the equity market.  Consumer staples once again led the pack, falling by almost two percent to chart another 52-week low.  US Dollar strength is a notable headwind for stocks, particularly large multi-national companies that repatriate earnings back to the domestic currency.  The currency benchmark is closing in on previous support around 93, which may now act as resistance.  Seasonally, the US Dollar index tends to rise, on average, through the middle of May, then reverting to a negative trend encompassing the summer months.

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U.S. Dollar Index Futures (DX) Seasonal Chart

FUTURE_DX1 Monthly Averages

On schedule for the Wednesday session was the release of the petroleum inventory report for the week ending April 27th.  The Energy Information Administration reported that oil stockpiles increased by 6.2 million barrels, while gasoline stockpiles increased by 1.2 million barrels.  The result elevated the days of supply of each commodity, oil by half of a day and gasoline by two-tenths of a day.  While the increase in oil stockpiles did catch many off guard, gains in inventories through the middle of May is actually the average.  What is contrary to seasonal norms is the increase in the days of supply, which over the past couple of weeks has moved inverse to the seasonal average trend.  The days of supply of oil peaked about three weeks earlier than average in the first half of March.  The level of supply is still around a full day below the March peak, which clocked in at 26.9.  The domestic production of oil charted another record high, but what continues to pressure inventories is the fact that demand for product has seemingly stalled.  The level of product supplied of gasoline is back to where it was in the last half of winter, diverging from the average trend that calls for increases to the level of product supplied through the beginning of July.  Product supplied of gasoline continues to hold above the average change, however.  The level of production is showing a similar stalling trend.  As we near the memorial day holiday, both production and product supplied would be expected to increase as drivers start their engines for the summer driving season.  Rounding off the report, imports were up slightly in the previous week while exports were down slightly, another factor influencing the oil tally for the week.

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

Despite the apparent bearish report, the price of oil traded higher amidst ongoing geopolitical risks.  Investors may also be seeing the rise in inventories over the past two weeks as an anomaly that will be corrected given that peak demand season is directly around the corner.  The price of oil continues to consolidate around the upper limit of its ascending triangle pattern, a bullish setup that projects upside potential towards $73.  Energy stocks ticked higher to the upper limit of their consolidation range from recent days.  The average conclusion to the period of seasonal strength for the energy sector is May 9th.

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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

Sentiment on Wednesday, as gauged by the put-call ratio, ended bullish at 0.93.

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Seasonal charts of companies reporting earnings today:

AAON, Inc. (AAON) Seasonal Chart Activision Blizzard, Inc (ATVI) Seasonal Chart Advantage Oil & Gas Ltd (AAV) Seasonal Chart Alleghany Corporation (Y) Seasonal Chart Allscripts Healthcare Solutions, Inc. (MDRX) Seasonal Chart Atlantic Power Corporation (AT) Seasonal Chart Avon Products, Inc. (AVP) Seasonal Chart Ball Corporation (BLL) Seasonal Chart Baytex Energy Corp (BTE) Seasonal Chart BCE, Inc. (BCE) Seasonal Chart Becton, Dickinson and Company (BDX) Seasonal Chart Brookfield Renewable Partners L.P. (BEP) Seasonal Chart Canadian Natural Resources Limited (CNQ) Seasonal Chart CBS Corporation (CBS) Seasonal Chart Church & Dwight Company, Inc. (CHD) Seasonal Chart Consolidated Edison Inc (ED) Seasonal Chart Cott Corporation (COT) Seasonal Chart Crescent Point Energy Corporation (CPG) Seasonal Chart DowDuPont Inc. (DWDP) Seasonal Chart Fluor Corporation (FLR) Seasonal Chart Herbalife Nutrition Ltd. (HLF) Seasonal Chart Intercontinental Exchange Inc. (ICE) Seasonal Chart Kellogg Company (K) Seasonal Chart Mitel Networks Corporation (MITL) Seasonal Chart Pembina Pipeline Corp. (PBA) Seasonal Chart PPL Corporation (PPL) Seasonal Chart Regeneron Pharmaceuticals, Inc. (REGN) Seasonal Chart Sealed Air Corporation (SEE) Seasonal Chart Skyworks Solutions, Inc. (SWKS) Seasonal Chart Stericycle, Inc. (SRCL) Seasonal Chart Tempur Sealy International, Inc. (TPX) Seasonal Chart Teva Pharmaceutical Industries Limited (TEVA) Seasonal Chart Treehouse Foods, Inc. (THS) Seasonal Chart Xerox Corporation (XRX) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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