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Stock Market Outlook for August 12, 2016

 

Price of oil surges, starting to carve out the right shoulder of an inverse H&S pattern.

 

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:

NetApp Inc. (NASDAQ:NTAP) Seasonal Chart

AutoZone, Inc. (NYSE:AZO) Seasonal Chart

 

 

The Markets

Stocks rebounded on Thursday, fuelled by energy stocks, the very sector that pulled the market down on Wednesday.  The price of oil surged by over 4% following the release of a report from the International Energy Agency that indicated the oil market may rebalance through 2017 as supply pressures come off amidst lower production.  The report also follows comments from Saudi oil minister indicating that possible actions to stabilize the price of the commodity would be discussed at an upcoming meeting at the end of September.  The price of oil closed above its 20-day moving average level of resistance, attempting to keep momentum pointed higher following the early August low.  Short-term declining trendline resistance is presently being tested, a break of which would lead to confirmation of the intermediate low above the February bottom that every analyst is watching for.  The higher low would form the basis of a reverse head-and-shoulders pattern.  The neckline of this bullish setup can be found at horizontal resistance of $50, a break of which could see a calculated move higher towards $74.  As mentioned yesterday, the key variable is crude imports, which have been hovering around the highs of the year.  Seasonal tendencies call for a decline in imports through the fall.  The price of oil seasonally peaks in September, on average.

On Thursday, natural gas had its turn to show its cards with the weekly release of the EIA inventory report.  Natural gas in storage rose by 29 bcf in the latest read, continuing the trend of inventory gains following last week’s abnormal decline.  The increase, however, was not enough to put the year-to-date change  back on track with the seasonal average trend as above average consumption holds back inventory gains.  The latest read on natural gas consumption, for the month of June, pegs the year-to-date change in usage about 13% above average as of the end of the first half of the year.  Above average demand combined with below average production set the framework to continue to limit supply increases during this typical injection period that peaks in November.  The price of natural gas continues to suffer from a short-term double-top pattern, the downside target of which points to its 200-day moving average around $2.23.  Seasonally, the price of natural gas enters a period of strength in September.

Turning to the weekly report on jobless claims, the read on initial claims slightly missed estimates for the week ending August 6th.  First-time claimants came in at 266,000 versus the consensus estimate of 265,000.  The level is down 1000 versus the week prior.  Stripping out seasonal adjustments, initial claims actually rose by 12,173, or 5.5%, versus the week prior, resulting in a slight uptick above the seasonal trend.  Continued claims, which lag by a week, were little changed in the week, keeping the year-to-date change elevated versus the seasonal average.  These trends warrant monitoring over the near-term as the non-farm payroll establishment survey is typically conducted mid-month and above average weekly claimant counts can often take its toll on the monthly report.

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Sentiment on Thursday, as gauged by the put-call ratio, ended bullish at 0.95.

 

 

 

 

 

 

 

 

Seasonal charts of companies reporting earnings today:

 

S&P 500 Index

 

 

TSE Composite