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Stock Market Outlook for November 22, 2016

 

S&P 500 Energy Sector Index closing above significant resistance at 530.

 

Real Time Economic Calendar provided by Investing.com.

 

**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:

Major Drilling Group Int’l Inc. (TSE:MDI) Seasonal Chart

Patterson Companies, Inc. (NASDAQ:PDCO) Seasonal Chart

Kimco Realty Corporation (NYSE:KIM) Seasonal Chart

Lennar Corporation (NYSE:LEN) Seasonal Chart

HCP, Inc. (NYSE:HCP) Seasonal Chart

Denbury Resources Inc. (NYSE:DNR) Seasonal Chart

AvalonBay Communities, Inc. (NYSE:AVB) Seasonal Chart

 

 

The Markets

Stocks continued their ascent on Monday with the S&P 500 Index and Nasdaq Composite closing at new all-time highs; the TSX Composite closed at new 52-week highs.  Volume on the S&P 500 continues to tail off following the election day bounce, but little is preventing investors from continuing to push the buy button as stocks grind higher.  Support on any retracement attempt on the large-cap benchmark continues to be expected around the 50-day moving average, which is now curling higher after declining over the past couple of months.

Gains on the day were led by the energy sector as the price of oil jumped over 4%.  The S&P 500 Energy sector index closed above resistance at 530, charting a new 52-week high in the process.  The sector has been range bound since April between 485 and 530, but Monday’s move suggests an extension of the gains commensurate of the magnitude of the previous range.  Within that context, upside potential is to 575, or an additional 7% from present levels.  Seasonally, the price of oil tends to hit an important low in the month of December, on average, resulting in variable returns amongst the stocks through November and December.

ENERGY Relative to the S&P 500

Despite it being the period of seasonal weakness for the broad energy sector, a number of stocks in this space can and have done well over this period.  Some of the integrated and refining stocks have charted substantial returns since September and October, following their average seasonal pattern that calls for higher prices through the last quarter of the year.  Shares of Imperial Oil and Suncor continue to break higher, charting double digit returns as the price of oil gyrates between $40 and $50.  Refiners, like Valero and, to a lesser extent, Tesoro, have also charted substantial gains in the past few weeks.  The crack spread (price of Gasoline over Brent Crude) has been consolidating over the past couple of months, allowing stocks with refining operations to advance undeterred.  A move in the year-to-date change in gasoline stocks below the seasonal average has also been a benefit.  A recent surge in refining activity, however, threatens to put more of the refined product in storage should the uptick in demand over the Thanksgiving holiday period be insufficient to offset the additional supply.  Momentum indicators for each of the stocks highlighted continue to point higher with little to suggest a top is imminent.  Further analysis of petroleum stocks and activity will be provided following the release of the weekly inventory report on Wednesday.

Sentiment on Monday, as gauged by the put-call ratio, ended bullish at 0.84.  After all of the bearish readings ahead of the election, which provided an excellent contrarian buy signal, the sentiment indicator is increasingly leaning bullish.  The more bullish investors become, the more vulnerable equity benchmarks become to a panic selling event, assuming a catalyst is provided to trigger such an activity. 

 

 

Sectors and Industries entering their period of seasonal strength:

 

 

Seasonal charts of companies reporting earnings today:

 

S&P 500 Index

 

 

TSE Composite