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Stock Market Outlook for November 7, 2017

Heavy truck sales show very rare decline in October as total vehicle sales weaken.

 

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:

Second Cup Ltd (TSE:SCU) Seasonal Chart

International Speedway Corp. (NASD:ISCA) Seasonal Chart

Uni-Select (TSE:UNS) Seasonal Chart

Heroux, Inc. (TSE:HRX) Seasonal Chart

Hooker Furniture Corp. (NASD:HOFT) Seasonal Chart

Martin Marietta Materials (NYSE:MLM) Seasonal Chart

Enbridge Income Fund Holdings (TSE:ENF) Seasonal Chart

CRH, PLC (NYSE:CRH) Seasonal Chart

Endo Pharmaceuticals Holdings (NASD:ENDP) Seasonal Chart

Steel Dynamics, Inc. (NASDAQ:STLD) Seasonal Chart

Magic Software Enterprises Ltd. (NASDAQ:MGIC) Seasonal Chart

 

 

The Markets

Stocks closed mildly higher on Monday, fuelled by deal news in the technology and media sectors.  The S&P 500 Index added just less than two-tenths of one percent, inching closer to the psychologically important 2600 level.  Energy stocks were, by far, the leader on the session as the price of oil surged following the arrest of a number of princes and ministers in Saudi Arabia.  The price of oil closed higher by over 3%, continuing to advance above resistance at $55, which was broken on Friday.  Next point of reference likely to see reaction is $60, a key psychological level and a range from which the commodity resisted in mid 2015.  The target of a reverse head-and-shoulders pattern on the chart of oil points to previous support from which the commodity broke down in 2014 around $77.  The move is contrary to seasonal norms for this time of year that typically results in lower prices into December.

With the price of oil retracing the losses from the past few years, the energy sector is finally attracting the attention of investors.  The S&P 500 Energy Sector Index added over 2% on the day, breaking above resistance around 510.  The energy benchmark had cleared a key hurdle around the 50-day moving average back in September and recently tested this intermediate level as support in the past two weeks.  Momentum indicators are pointing higher and chart patterns suggest that the longer-term path of lower-highs and lower-lows has been broken.  Seasonally, the energy sector tends to underperform the market between mid-October and early December, following the price of the commodity.

ENERGY Relative to the S&P 500

Oil wasn’t the only commodity to post solid gains on Monday. Metal prices also rallied with gold and silver posting gains of 0.98% and 2.38%, respectively.  Investors cited rising geopolitical risks as the catalyst, along with a decline in the US Dollar following strength in recent weeks.  The price of gold is currently pinned between horizontal support around $1262 and variable resistance at the 20-day moving average, now at $1282.  Until a break of this 20-point range is realized, one way or the other, a neutral position is prudent.  Seasonally, the next period of strength for metal commodities begins around the middle of December, running through the first few months of the new year as industrial production ramps up following the winter slowdown.

FUTURE_GC1 Relative to the S&P 500

On Friday, the monthly payroll report for October was released and while the headline result indicated a healthy rebound from the month prior, there was fairly good reason to suspect that the strength would not continue through the months ahead.  Strength related to the post-hurricane recovery was evident in the report, including automobile dealers, who theoretically benefitted from the replacement of damaged vehicles related to the flooding that followed the storms.  Well, October’s vehicle sales are out and they don’t reflect the same strength that the payroll report is indicating.  Total vehicle sales were down by 10.9% in the month, falling to the lowest level since last winter.  On average, vehicle sales in October are typically unchanged from the month prior.  Year-to-date, vehicle sales are down by 19.5%, the weakest performance since the last recession in 2008.  Even heavy truck sales, which have been higher in the month of October 86% of the time over the past 50 years, were sharply lower in the month.  Year-to-date, heavy truck sales are down by 5.5%, around 5% below average for this time of year.  Weakening vehicle sales are obviously a threat to automobile dealer employment moving forward.  Seasonally, auto sales tend to weaken through November, then spike in December as consumer take advantage of end-of-year deals.

Total Vehicle Sales Seasonal Chart

Sentiment on Monday, as gauged by the put-call ratio, ended bullish at 0.92.

 

 

 

Seasonal charts of companies reporting earnings today:

     

 

 

S&P 500 Index

 

 

TSE Composite