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Stock Market Outlook for May 10, 2018

Benchmarks close above their descending triangle patterns.


Real Time Economic Calendar provided by


*** 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:

Extreme Networks, Inc. (NASD:EXTR) Seasonal Chart

Extreme Networks, Inc. (NASD:EXTR) Seasonal Chart, inc. (NYSE:CRM) Seasonal Chart, inc. (NYSE:CRM) Seasonal Chart

Dominion Resources, Inc. (NYSE:D) Seasonal Chart

Dominion Resources, Inc. (NYSE:D) Seasonal Chart

Intuit Inc.  (NASDAQ:INTU) Seasonal Chart

Intuit Inc. (NASDAQ:INTU) Seasonal Chart

Perrigo Co. (NYSE:PRGO) Seasonal Chart

Perrigo Co. (NYSE:PRGO) Seasonal Chart

Old Dominion Freight Line (NASD:ODFL) Seasonal Chart

Old Dominion Freight Line (NASD:ODFL) Seasonal Chart



The Markets

Stocks rallied on Wednesday as key cyclical sectors fuelled a breakout in the broader market benchmarks.  The S&P 500 Index added  around one percent, closing above the descending triangle pattern that has been widely profiled for the past couple of months.  The energy sector led the advance as the price of oil touched multi-year highs.  As well, strength in financials, industrials, and materials created a well-rounded cyclical rally, suggestive of renewed risk sentiment.  Utilities, consumer staples, and telecom closed flat to negative on the day.


Slowly we are seeing new highs re-emerge following a three month hiatus.  The number of new highs on the NYSE hit 158 in its mid-week session, rebounding from the low of 10 charted in the days surrounding February’s plunge.  Gradually, investors are finding comfort in the level of support achieved in recent months around the 200-day moving average and the breakout on the S&P 500 Index above declining trendline resistance may draw in further buyers in the coming days, assuming no catalysts to counteract the trend are realized.


On schedule for the Wednesday session was the EIA Inventory report, providing insight as to the state of petroleum inventories in the US.  The Energy Information Administration indicated that both oil and gas inventories declined by 2.2 million barrels last week.  The result left the days of supply of oil unchanged at 26.0, while gasoline saw its days of supply shrink by half of a day to 25.0.  A big rebound in the level of product supplied of gasoline and a slight decline in production contributed to the inventory withdrawal from the product side.  Seasonally, demand for products continues to ramp higher through to the end of May when the unofficial start to the summer driving season kicks off with the Memorial Day holiday.  Production would be expected to rebound in the weeks ahead, which could have a neutral impact on inventories through the remainder of May as refiners bring supply back inline with demand.  As for the raw input, domestic production of oil is once again reaching a new all-time high, up close to 10% year-to-date, firmly above the 6.0% pace seen by this time last year and considerably higher than the average change that calls for a slight decline in production through the start of May.  With so much crude being produced domestically, the need to import is lessened and this is being picked up in the year-to-date change for imports.  The level of crude brought into the US from external sources was down sharply last week, placing the level around 8% below were it was at the end of 2017.  The historical average change by this time of year is a gain of close to 12%.  While the price of oil is presently seeing heavy influence from geopolitical pressures, it appears inevitable that at some point OPEC will take notice of this this trend of increasing US production at a time when participating countries are limiting production in order to bring supplies back inline with historical levels.  There still remains over 2 days of supply of excess over historical norms and the gap versus the average trend has started to expand again.  Seasonally, the days of supply of oil typically declines through the middle of September.

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 gained over 2% during Wednesday’s session, not so much the result of the report, but rather the result of heightened geopolitical tensions now that President Trump has withdrawn the US from the Iran nuclear deal.  As has been highlighted for many weeks, the target of an ascending triangle pattern projects upside towards $73 for the price of WTI Crude.


Crude Oil Futures (CL) Seasonal Chart

FUTURE_CL1 Monthly Averages

On the economic front, a report on producer prices showed a rather tame headline result, but the underlying details suggest that inflation is increasing at an above average rate.  The Producer Price Index Final Demand increased by 0.1% in April, much less than the 0.3% increase forecast by analysts.  Stripping out the seasonal adjustments, PPI for all commodities actually increased by 0.6% in the month, edging out the April average increase of 0.5%.  The year-to-date trend is running a similar tenth of a percent above average.  Less the more volatile components of food and energy, PPI is running around four-tenths of one percent above the seasonal norm through the end of April.  Whatever way you cut it, inflation is here, which may act as a negative influence for bond prices through the summer months are investors price in the risks that the Fed will be forced to hike rates at a faster pace.  We’ll receive insight as to how inflation is affecting the consumer on Thursday when the consumer price index is released.

  Producer Price Index by Commodity for Final Demand: Finished Goods Seasonal Chart  Producer Price Index by Commodity for Final Demand: Finished Goods Less Foods and Energy Seasonal Chart

Sentiment on Wednesday, as gauged by the put-call ratio, ended bullish at 0.83.




Seasonal charts of companies reporting earnings today:

ACI Worldwide, Inc. (ACIW) Seasonal Chart Air Lease Corporation (AL) Seasonal Chart Algonquin Power & Utilities Corp. (AQN) Seasonal Chart AMC Networks Inc. (AMCX) Seasonal Chart B2Gold Corp (BTG) Seasonal Chart Charles River Laboratories International, Inc. (CRL) Seasonal Chart Choice Hotels International, Inc. (CHH) Seasonal Chart Comstock Resources, Inc. (CRK) Seasonal Chart Consolidated Water Co. Ltd. (CWCO) Seasonal Chart Diana Shipping inc. (DSX) Seasonal Chart Duke Energy Corporation (DUK) Seasonal Chart Enbridge Inc (ENB) Seasonal Chart Flowserve Corporation (FLS) Seasonal Chart Hecla Mining Company (HL) Seasonal Chart Magna International, Inc. (MGA) Seasonal Chart NVIDIA Corporation (NVDA) Seasonal Chart Pilgrim's Pride Corporation (PPC) Seasonal Chart Ritchie Bros. Auctioneers Incorporated (RBA) Seasonal Chart Stantec Inc (STN) Seasonal Chart Symantec Corporation (SYMC) Seasonal Chart TELUS Corporation (TU) Seasonal Chart The Stars Group Inc. (TSG) Seasonal Chart Wheaton Precious Metals Corp. (WPM) Seasonal Chart



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