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Stock Market Outlook for December 3, 2015

 

The US Dollar Index has ended lower in 70% of Decembers, the weakest month of the year for the currency. 

 

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:

Teck Resources Limited (TSE:TCK-b) Seasonal Chart

National-Oilwell Varco, Inc. (NYSE:NOV) Seasonal Chart

 

The Markets

Stocks ended firmly lower on Wednesday as investors reacted to comments from Fed chair Janet Yellen, as well as the unfortunate news of another mass shooting in the US.  The S&P 500 Index gave up yesterday’s gain to end lower by 1.10%, testing support at the 20-day moving average, yet again.  The reluctance of investors to bid the market higher from this shorter-term average emphasizes the uncertainty that exists going into the central bank announcements ahead.   The US Dollar Index confirms.  Following a sharp jump higher in the currency benchmark at the open of the session, the index dipped, along with the market, into the afternoon trade.  The US Dollar Index sits around 100, a key psychological level that has already shown some weight in restraining upside activity earlier in the year.  Seasonally, following strength in the month of November, the Dollar Index averages a decline of 0.7% in the month of December, the worst month of the year for the currency, based on the last 20 years.  The US Dollar Index has ended lower in 70% of Decembers since the mid 1990’s.  The currency benchmark continues to hover around overbought levels following the substantial move charted over the past month in anticipation of the pending central bank actions.

Leading the declines on Wednesday were shares of energy companies, following a plunge in the price of Oil.  The Energy Information Administration reported another build in oil inventories in the latest week, this time by 1.2 million barrels.   The days of supply, however, continued to dip, down another half of a day to 30.0.  The level of supply remains over 6 days above average, although the gap versus the average trend is very slowly shrinking.  Seasonally, ending stocks of Crude Oil typically decline by 0.8%, on average, in the month of December.  This decline typically supports the price of the commodity following an average low of December 11.  Since 1986, WTI Crude has ended higher 70% of the time in the last three weeks of the year, averaging a gain of 3.16%. The price of oil closed around the psychologically important $40 level; resistance is evident around the 20-day moving average.

And, perhaps counterintuitively, transportation stocks were down almost as much as those in the energy sector.  Railroad operator CSX lowered its earnings outlook for the year as coal volumes continue to decline.  Given the plunge in energy commodity prices, coal has become less competitive compared to other energy sources, such as natural gas.  The Dow Jones Transportation Average closed lower by 2.12%, breaking below its 50-day moving average.  The longer-term trend of the transportation benchmark is implied to be lower, as indicated by the direction of the 200-day moving average.  Seasonally, transportation stocks weaken relative to the broad market in the month of December, falling out of favour after what is typically a strong October and November.

S5TRAN Index Relative to the S&P 500

Sentiment on Wednesday, as gauged by the put-call ratio, ended bearish at 1.04.

 

 

Seasonal charts of companies reporting earnings today:

 

 

S&P 500 Index

 

 

TSE Composite