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Stock Market Outlook for January 6, 2020


Days of supply of oil showed the largest one week decline in six months as an abrupt end of year drawdown of inventories helped to alleviate bloated stockpiles.

 

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:

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Halliburton Co. (NYSE:HAL) Seasonal Chart

Halliburton Co. (NYSE:HAL) Seasonal Chart

Vanguard FTSE Developed Europe All Cap Index ETF (TSE:VE.TO) Seasonal Chart

Vanguard FTSE Developed Europe All Cap Index ETF (TSE:VE.TO) Seasonal Chart

SPDR Barclays Emerging Markets Local Bond ETF (NYSE:EBND) Seasonal Chart

SPDR Barclays Emerging Markets Local Bond ETF (NYSE:EBND) Seasonal Chart

Target Corp. (NYSE:TGT) Seasonal Chart

Target Corp. (NYSE:TGT) Seasonal Chart

Computer Modelling Group Ltd. (TSE:CMG.TO) Seasonal Chart

Computer Modelling Group Ltd. (TSE:CMG.TO) Seasonal Chart

IDEXX Laboratories, Inc. (NASD:IDXX) Seasonal Chart

IDEXX Laboratories, Inc. (NASD:IDXX) Seasonal Chart

iShares MSCI Thailand Capped ETF (NYSE:THD) Seasonal Chart

iShares MSCI Thailand Capped ETF (NYSE:THD) Seasonal Chart

 

 

The Markets

Stocks dipped on Friday as news crossed the tape that the US conducted an airstrike in Iran overnight, killing a top General and flaring geopolitical tensions.  The S&P 500 Index by fell seven-tenths of one percent, giving back much of the gain charted in the previous session.  The Relative Strength Index (RSI) of the large-cap benchmark crossed below 70, falling out of overbought territory and indicating a signal to sell.  MACD and Stochastics have yet to trigger a similar bearish crossover.  On the hourly chart, a negative momentum divergence with respect to MACD and RSI suggests buying exhaustion, typically a precursor to a change in the prevailing direction.  Seasonally, the second trading day of the year typically marks the peak to the positive timeframe for stocks that started at the beginning of the fourth quarter.  The large-cap benchmark is higher by 8.67% over this timeframe.  Looking to find out what comes next in the seasonal playbook?  Subscribe now and we’ll send you our 79-page outlook for January, including our proprietary monthly portfolio allocation.

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For the week, the large-cap index was lower by less than two-tenths of a percent.  The index continues to hold above rising trend channel resistance, hinting of a new trajectory for the benchmark.  Momentum indicators are showing early signs of rolling over in overbought territory, but they are still a long way from triggering sell signals equivalent to the daily and hourly looks.

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On the economic front, the Energy Information Administration (EIA) released its latest look at oil inventories in the US. The EIA reported that oil inventories dropped by 11.5 million barrels in the week ending December 27th. The result was offset by an almost equivalent rise in product inventories with gasoline stockpiles up by 3.2 million barrels and distillates up by 8.8 million barrels. The result saw the days of supply of oil fall by almost a full day to 25.5, while gasoline expanded by four-tenths to 26.5. The average days of supply for each at this time of year is 21.9 and 24.2, respectively.  We sent out further insight to subscribers updating them of the seasonal trade in the energy sector, including what to pursue and what to avoid.  Subscribe now and we’ll send you our report.

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

Also released by the EIA was the tally of natural gas inventories for the last full week of 2019.  The administration reported that stockpiles declined by 58 billion cubic feet (bcf) for the week ending December 27th.  This is less than half of the 161 bcf decline reported in the week prior.  Last year, natural gas inventories showed the largest percentage increase since 2006, a big factor pressuring the price of the commodity lower in recent months. Stockpiles of the commodity were up by over 18% in 2019, well above the 5.3% increase that is average for the calendar year.  Seasonally, natural gas stockpiles continue to decline through the end of Mach, around the same time that the next period of seasonal strength for the price of the commodity begins.  The commodity is testing levels around 52-week lows, unable to sustain any traction above major moving averages that might provide support.

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Elsewhere in the economy, the latest read of construction spending in the US was disseminated during Friday’s session.  The headline print indicated that construction spending in the US increased by 0.6% in November, exceeding the consensus analyst estimate that called for an increase of 0.3%.  Stripping out the seasonal adjustments, Total Construction Spending actually declined by 6.1% in in the second to last month of the year, which is stronger than the 7.1% decline that is average for the month.  The year-to-date change is higher by 16.0% through the end of November, which is better than the 15.0% rise that is normal.  Subscribers can login to the chart database to view the seasonal charts of this report via the following link: https://charts.equityclock.com/u-s-construction-spending

Total Construction Spending  Seasonal Chart

Sentiment on Friday, as gauged by the put-call ratio, ended bullish at 0.85.

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Seasonal charts of companies reporting earnings today:

Commercial Metals Company Seasonal Chart Cal-Maine Foods, Inc. Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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