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Stock Market Outlook for July 20, 2017

Energy sector coming back to life as summer demand for oil helps to alleviate the supply glut.


Real Time Economic Calendar provided by


**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:

  • No stocks identified for today



The Markets

Investors welcomed the return of new highs across all of the major benchmarks on Wednesday as stocks tacked on further gains amidst continued optimism surrounding earnings season.  The S&P 500 Index added over half of one percent, “fuelled” by strength in the energy sector, which topped the leaderboard with a gain of 1.40%, according to the S&P 500 Energy Sector Index.  The energy sector benchmark closed above its declining 50-day moving average for the first time since the start of April when price struggled against resistance at the 200-day.  A positive momentum divergence over the past month suggests that selling pressures have faded, allowing for the recent bounce and close, albeit marginal, above declining trendline resistance.  The move follows another large draw of oil inventories as summer driving demand alleviates some of the supply burden that has overhung the market for the past couple of years.  The EIA reported on Wednesday that oil inventories declined by 4.7 million barrels last week, while gasoline stockpiles fell by 4.4 million barrels.  The result helped to draw on the days of supply of oil and gas, which both fell by around a third of a day to 28.7 and 23.9, respectively.  The draw in oil comes amidst another rise in domestic production of the commodity, which is now higher on the year by 7.5%, still well above average.  Imports of crude also ticked higher, but the year-to-date change remains below the average trend, at least for now.  As for the gasoline side, both production and the level of product supplied appear to have reached cruising altitude for the summer season, both carving out a range around the high charted during the July 4th holiday week.  The above average demand for gasoline should continue to be conducive to further inventory draws in the weeks to come, as per seasonal norms through to the start of September.  The price of oil closed at short-term resistance at $47.32, on a path to test trendline resistance that currently hovers around $50.  Seasonally, the price of crude oil tends to gain, on average, through the end of August, helping stocks of the producers in the process.

On the economic front, housing starts rebounded in June, but the year-to-date pace still leaves much to be desired.  The headline print indicated that starts jumped by 8.3% to a seasonally adjusted annual rate of 1.215 million.  The result beat the consensus analyst estimate that called for an annual rate of 1.170 million.  Permits, meanwhile, were higher by 7.4% to an annual rate of 1.254 million.  Stripping out the seasonal adjustments, housing starts were actually higher by 11.1%, much better than the average gain for this time of year of 0.7%.  The upbeat result makes some progress in closing the gap with respect to the year-to-date and seasonal average trend, which had been widening through the height of building season in the spring.  June’s push can be easily pegged to strength in the Northeast, which saw starts almost double (89.9%) compared to the month prior.  The South was the only region to post a decline.  Elsewhere in the report, permits are once again on the rise, climbing 11.0% in June, more than double the 4.4% average gain.  This is helping to push the housing units authorized but not started well above the seasonal average trend as builders seek to replenish their inventory of lots on which to build following weakness in this category in 2016.  The lack of building lots has done little to negatively influence completions, however, as the year-to-date change continues to trend well above average through the first half of the year.  Completions are now showing the best pace through the first half of the year since 2010 when the housing market rebounded from the recessionary slowdown of the years prior.  Housing often acts as a leading indicator to the broader economy and while the year-to-date trends across some of the categories warrants further monitoring, little in the report suggests reason to be concerned, as of yet.  Next week will be a big week for housing data with reports on existing and new home sales, both of which have been trending above average through the first five months of the year.

Turning north of the border, a report on manufacturing sales rebounded in the month of May, moving to an above average position on the year.  Statistics Canada reported that manufacturing sales rose by 1.1% in May, edging past analyst estimates calling for a 1.0% increase. Stripping out the seasonal adjustments, Sales of goods manufactured in Canada jumped by 13.5%, more than double the 5.8% average increase for May, based on data from the past 20 years.  The year-to-date change has moved into an above average position for the first time since December, attempting to recover from the manufacturing slowdown of the past couple of years.  Durable goods industries accounts for the bulk of the strength, showing an above average trend on the year, thanks to a bump in the production of transportation equipment.  But along with the increase in sales comes an increase in inventories, which are higher on the year by 9.0%, above the average increase of 4.2% through the fifth month of the year.  Manufacturers had been taking steps to rein in inventories through the recent manufacturing slowdown, but it appears that they are back to their usual habits as demand falls short of meeting supply.  The Canadian Dollar added to its recent string of gains following the report, moving to a new 52-week high and closing in on resistance at 0.80.

Sentiment on Wednesday, as gauged by the put-call ratio, ended bullish at 0.77.



Seasonal charts of companies reporting earnings today:



S&P 500 Index



TSE Composite