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Stock Market Outlook for September 7, 2018

Energy stocks breaking down following the peak to the summer driving season.

 

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:

Aspen Insurance Holdings Ltd. (NYSE:AHL) Seasonal Chart

Aspen Insurance Holdings Ltd. (NYSE:AHL) Seasonal Chart

Heico Corp. (NYSE:HEI) Seasonal Chart

Heico Corp. (NYSE:HEI) Seasonal Chart

Sierra Wireless, Inc. (NASD:SWIR) Seasonal Chart

Sierra Wireless, Inc. (NASD:SWIR) Seasonal Chart

Pampa Energia SA (NYSE:PAM) Seasonal Chart

Pampa Energia SA (NYSE:PAM) Seasonal Chart

Renaissance RE Holdings Ltd. (NYSE:RNR) Seasonal Chart

Renaissance RE Holdings Ltd. (NYSE:RNR) Seasonal Chart

 

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The Markets

Stocks closed lower for a third straight session on Thursday as Technology and Energy stocks weighed.  The S&P 500 Index shed around half of one percent, trading back to short-term support around its rising 20-day moving average.  Investors continue to book profits in this summer’s winners, particularly in the technology sector, in part the result of the threat of greater regulation following testimony of social media CEOs in front of congress on Wednesday.  The technology sector benchmark is now testing rising trendline support, a break of which could have downside implications all the way to the 200-day moving average.  Obviously, such a move would have significant negative impacts on the broader market given the sector’s weight in many benchmarks.

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Also acting as a drag were energy stocks as the price of oil shed over one percent during the session.  The S&P 500 Energy Sector Index was lower by 1.93%, moving back to its 200-day moving average.  Long-term rising trendline support can be seen hovering around 515.  In Canada, the S&P/TSX Capped Energy Index has broken below the neckline of a head-and-shoulders topping pattern, a negative setup that projects downside potential towards the spring lows around 174.  Seasonally, stocks in the energy sector tend to underperform the broader market through the fourth quarter as the positive impact of summer driving season fades.  The Seasonal Advantage Portfolio closed its positions within the sector on Friday with the expectation that the stocks were vulnerable into the month of September.  To learn more about the Seasonal Advantage Portfolio that we manage with CastleMoore, click on the following link: http://www.equityclock.com/About/Seasonal-Advantage-Portfolio/.

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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

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The negative move in the energy sector followed the latest read on oil inventories in the US.   The Energy Information Administration (EIA) reported that oil inventories declined by 4.3 million barrels last week, while gasoline inventories increased by 1.8 million barrels.  The result stripped three-tenths of a day of supply of oil from the market and a tenth of a day of supply of gas.  The days of supply of oil is attempting to converge with its seasonal average before the typical injection season begins at the end of this month, while gasoline days of supply remains firmly above normal (24.3 vs 22.7).  The level of gasoline product supplied remained at a high level going through the Labor Day long weekend, but production continues to be depressed compared to the highs charted earlier in the summer.  Plentiful supply of gas is expected to keep a lid on production into the fall, threatening to pressure oil stockpiles higher earlier than average.  Seasonally, oil stockpiles rise between the end of September and the middle of November.

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

On the economic front, US factory orders provided somewhat of a disappointing read on the headline look.  Factory orders are indicated to have decline by 0.8% in July, slightly worse than the 0.7% decline forecasted by analysts.  Stripping out the seasonal adjustments, the Value of Manufacturers’ New Orders for All Manufacturing Industries actually declined by 9.6%, which is better than the 10.4% decline that is average for this summer month.  Factory orders are now running 3.6% above average through the first seven months of the year, which is the best performance since 2014.  Sluggish commercial aircraft orders are preventing an even better result, but the robust strength amongst durable goods orders is mitigating any negative impact.  New orders of computers and related products continue to stand out, running a whopping 24.5% above the seasonal average trend through the month of July.  This is the best performance on record, reiterating the contention that we are in a new era of technology production and buying.  Seasonally, factory orders bounce back from their July lows in August and September as goods are produced and shipped ahead of the end of year buying period.  For a complete breakdown of the results, the 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' New Orders for Durable Goods Industries: Transportation Equipment: Nondefense Aircraft and Parts Seasonal ChartValue of Manufacturers' New Orders for Computers and Related Products Industries Seasonal Chart

Sentiment on Thursday, as gauged by the put-call ratio, ended bearish at 1.05.

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Seasonal charts of companies reporting earnings today:

Genesco Inc. (GCO) Seasonal Chart Shiloh Industries, Inc. (SHLO) Seasonal Chart Tsakos Energy Navigation Ltd (TNP) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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