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Stock Market Outlook for September 9, 2016


Exploration & Production stocks move higher following bullish oil inventory report.


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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:

  • No stocks identified for today



The Markets

Another flat day for North American equity indices masked some large moves amongst sector constituents.  The S&P 500 Energy sector index was higher by almost 2%, helped by the price of oil, while the largest sector allocation amongst a number of market benchmarks, technology, acted as a drag, weighed down by a drop in shares of Apple following their iPhone 7 product launch.  The S&P 500 Technology sector index is presently testing support at its 20-day moving average as momentum indicators show signs of rolling over.  A correction from the overbought levels charted over recent weeks certainly appears to be in order.   Logical retracement is back to the previous range of resistance between 740 and 750 that was broken in the past couple of months.  The sector enters a period of seasonal strength in October.

Flipping back to the energy sector, a surprise drawdown in oil inventories led to a rally in the price of the commodity, thereby giving lift to sector constituents, particularly those in the exploration and production industry.  The Oil & Gas Exploration & Production ETF (XOP) was higher by almost 3%, continuing to push above a massive head-and-shoulders bottoming pattern.  The industry remains in a period of seasonal strength that concludes, on average, in the middle of September.

The drawdown in crude oil inventories amounted to 14.5 million barrels, the biggest one week decline since January of 1999.  The drop in oil inventories was “fuelled” by an abrupt decline in imports, which fell to the lowest level of the year, a factor of bad weather restricting cargo ships from reaching port, a fairly common occurrence during hurricane season.  There is a high likelihood that imports will snap back in the week ahead.  The result chopped a full day of supply from storage, which now sits at 30.5, which is still almost 8 days above average for this time of year.  The days of supply of oil typically hits an important low for the year in the month of September, marking the conclusion of the high demand summer driving season; the trend typically turns higher into the fourth quarter.  The price of oil was higher by over 4% following the release.

As for gasoline, despite an uptick in production of the refined commodity, gasoline also recorded a draw, declining by 4.2 million barrels.  The result saw the days of supply tick mildly lower by three-tenths to 23.7; the average days of supply for the start of September is 22.9.  While production of gasoline typically falls off into August and September, thus far the trend has been rather flat, suggesting that we could see gasoline supply pressures re-emerge now that the summer driving season is behind us.  The level of gasoline products supplied, a gauge of demand, has already started to turn lower, but refiners have yet to adjust.  Gasoline inventories typically start to rise between now and November.  The price of gasoline was also higher by over 4% following the release of the report.

And given the holiday shortened week, the report on natural gas inventories was released on the same day as the petroleum status report, keeping commodity traders busy through the session.  The level of natural gas in storage rose by 36 bcf last week, a slight reprieve from the rise of 51 bcf reported in the week prior.  The year-to-date change continues to lag that of the seasonal norm through to the start of September, a factor of lower than average production and above average consumption given the hot summer weather.  Following the same theme as oil and gas, the price of natural gas was also higher by over 4% as it moves to pressure overhead resistance around $2.90.

In other economic news, the weekly release on jobless claims was disseminated before the opening bell.  The headline print showed that initial claims declined by 4,000 last week to 259,000.  Analysts had expected a rise of 1,000 to 264,000.  Stripping out seasonal adjustments, the year-to-date change remains elevated versus the seasonal average as downside momentum wanes given the near decade lows in claims.  Initial claims typically start to rise starting in the month of September as summer hires file for employment insurance.

Sentiment on Thursday, as gauged by the put-call ratio, ended bullish at 0.97.



Seasonal charts of companies reporting earnings today:



S&P 500 Index



TSE Composite