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Stock Market Outlook for August 3, 2017

Oil testing declining trendline resistance as investors react to declining inventory levels.


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**NEW** As part of the ongoing process to offer new and up-to-date information regarding seasonal and technical investing, we are adding a section to the daily reports that details the stocks that are entering their period of seasonal strength, based on average historical start dates.   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:

Choice Hotels Intl, Inc. (NYSE:CHH) Seasonal Chart

Hillenbrand Inc. (NYSE:HI) Seasonal Chart

CACI Intl, Inc. (NYSE:CACI) Seasonal Chart

Expeditors International of Washington (NASDAQ:EXPD) Seasonal Chart


The Markets

Stocks closed fairly mixed on Wednesday with much of the attention focussed on tech titan Apple following its earnings beat after Tuesday’s closing bell.  The Dow Jones Industrial Average added a quarter of one percent to chart a new milestone above 22,000.  The blue-chip benchmark continues to push further into overbought territory as price becomes elevated off of levels of support around the 20 and 50-day moving averages.  As for Apple, the almost 5% jump in the stock breaks a short-term trading range between $142 and $156, projecting upside potential towards $170, or another 8% above present levels.  Anticipation is high for the 10th anniversary iPhone, which is thought to fuel sales through the fourth quarter.  Seasonally, the stock tends to remain elevated going into its product launch events in the month of September, selling off thereafter as investors buy the rumour and sell the news. 

Turning to the weekly petroleum status report from the EIA, stockpiles of both oil and gas continue to decline as summer demand weighs on supply.  Inventories of oil fell by 1.5 million barrels last week, while gasoline saw its ending stocks fall by 2.5 million barrels.  The result saw a continued reduction in the days of supply for each, to 27.9 for oil and 23.3 for gasoline.  For oil, at 6.4 days above average, this is the narrowest range above the seasonal norm since January of 2016.  Meanwhile, gasoline continues to push below average, now showing the widest range below the seasonal norm since August of 2015.  The pace of decline in stockpiles continues to be sharp, exceeding the slope of the average trend through the month of July.  In the next couple of weeks, oil inventories may fall below the level in which they entered the year with, helping to alleviate some of the glut that continues to overhang this market.  The demand side of the equation for gasoline continues to be robust, rising to the highest level of the year, as gauged by the level of product supplied, even as production for the refined commodity dipped into the end of the month.  Seasonally, both supply and demand tend to flatline around this time of year, remaining elevated into the end of August before dipping into the fall. 

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

The price of oil caught a bid following the report, retracing some of yesterday’s loss.  In recent days, the price of oil has reacted to declining trendline resistance around the $50 level, suggesting short-term risks as investors book profits following the almost 20% rally from lower trendline support.  Seasonally, the price of oil tends to remain supported into the end of summer, on average, benefitting from seasonal driving demand.

Sentiment on Wednesday, as gauged by the put-call ratio, ended close to neutral at 0.97.



Seasonal charts of companies reporting earnings today:




S&P 500 Index



TSE Composite