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Stock Market Outlook for January 25, 2019


Initial jobless claims chart fresh multi-decade lows as the year-to-date change remains firmly below average.

 

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:

Tronox Inc. (NYSE:TROX) Seasonal Chart

Tronox Inc. (NYSE:TROX) Seasonal Chart

Aon Corp. (NYSE:AON) Seasonal Chart

Aon Corp. (NYSE:AON) Seasonal Chart

Stella-Jones (TSE:SJ) Seasonal Chart

Stella-Jones (TSE:SJ) Seasonal Chart

 

 

The Markets

Stocks closed mildly higher on Thursday, but a cloud of uncertainty hung over the broader market following comments from Commerce Secretary Wilbur Ross, who suggested a trade deal with China was still far away.  The S&P 500 Index added 0.14%, once again remaining supported by its 50-day moving average.

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The session had all the hallmarks of a risk-on session: semiconductor and transportation stocks rallied strongly on the day, reacting to positive earnings before the opening bell.  Emerging markets and small cap stocks also closed solidly higher during the session.  The consumer staples sector ended down sharply.  This contrasts the action seen just one session earlier when defensive areas of the market were in demand.  This is clearly a market that is trying to gain its footing as the bulls and bears battle for control.  In the week ahead the real bets may be shown.  The average pattern for the month of January is typically strength at the start and end, book-ending slight weakness mid-month.  Fund managers will likely reallocate their portfolios ahead of the end of the period, which could either suggest a trimming of bullish bets or the further accumulation of risk.  Managers that have been cautious of this rally from the December lows are likely not going to be thrilled to report to their investors that they sat out of one of the best January gains in years, therefore they may be forced to prop up their books with token positions.  On the other hand, if the selling pressures can ramp up in the next few days, based on a negative earnings reaction, headline event, or otherwise, the buying catalyst may be taken off the table.  Question is, who will blink first, the bulls or the bears?

A day delayed due to the holiday on Monday, the Energy Information Administration (EIA) released petroleum inventories for the week just past.  The EIA reported that oil stockpiles increased by 8.0 million barrels last week, while the supply of gasoline increased by 4.1 million barrels. This is the largest weekly build for oil since the start of November. The result had an obvious impact on the days of supply with oil rising by six-tenths to 25.6 and gasoline rising by eight-tenths to 29.8. Once again, this is the highest level of days of supply of gasoline for this time of year since 1994 when the level reached 31.6. The average level of days of supply for the January 18th week is 26.5. Seasonally, increasing oil supplies and diminished demand for the refined product in the mid-winter period results in a rise in the days of supply through the middle of February, suggesting we are about three weeks off from a peak in this indicator.  To read more about what the state of petroleum inventories are suggesting, as well as where we see fair value for the price of oil, subscribe now to receive this report right to your inbox.

Weekly U.S. Days of Supply of Crude Oil excluding SPR  (Number of Days) Seasonal Chart

Weekly U.S. Days of Supply of Total Gasoline  (Number of Days) Seasonal Chart

Also released on Thursday was the latest look at jobless claims in the US.  Despite the government shutdown, the level of initial claimants fell to a new multi-decade low of 199,000, the first time the level has been below 200,000 since the 1960’s when the population was about half of what it is now.  Continuing claims came in at 1.713 million, down from 1.737 million previous.  The result remains elevated from the multi-decade low charted at the end of October at 1.630 million.  Looking at the path from a non-seasonally adjusted perspective, both initial and continuing claims continue to show trends that are firmly below the seasonal average, a sign of a healthy labor market.  Seasonally, initial claims decline through the first quarter of the year then level off into the spring.

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Sentiment on Thursday, 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:

AbbVie Inc. (ABBV) Seasonal Chart Air Products and Chemicals, Inc. (APD) Seasonal Chart Ameris Bancorp (ABCB) Seasonal Chart Colgate-Palmolive Company (CL) Seasonal Chart Community Bankers Trust Corporation. (ESXB) Seasonal Chart D.R. Horton, Inc. (DHI) Seasonal Chart Ericsson (ERIC) Seasonal Chart Hill-Rom Holdings Inc (HRC) Seasonal Chart IBERIABANK Corporation (IBKC) Seasonal Chart Lear Corporation (LEA) Seasonal Chart Moog Inc. (MOG.A) Seasonal Chart NextEra Energy, Inc. (NEE) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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