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Stock Market Outlook for November 10, 2017

Natural gas injection season comes to an end with a cold spell impacting the US North-East.

 

Real Time Economic Calendar provided by Investing.com.

 

*** 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:

Ag Growth International Inc. (TSE:AFN) Seasonal Chart

Hill International Inc. (NYSE:HIL) Seasonal Chart

Covenant Transportation Group Inc. (NASD:CVTI) Seasonal Chart

Two Harbors Investment Corp. (NYSE:TWO) Seasonal Chart

Winnebago Industries Inc. (NYSE:WGO) Seasonal Chart

Bob Evans Farms, Inc. (NASD:BOBE) Seasonal Chart

Xerox Corporation (NYSE:XRX) Seasonal Chart

Oshkosh Corporation (NYSE:OSK) Seasonal Chart

Anthem, Inc. (NYSE:ANTM) Seasonal Chart

Starwood Property Trust Inc. (NYSE:STWD) Seasonal Chart

Avery Dennison Corporation (NYSE:AVY) Seasonal Chart

The Walt Disney Company (NYSE:DIS) Seasonal Chart

The Goodyear Tire & Rubber Company (NYSE:GT) Seasonal Chart

 

The Markets

Stocks sold off on Thursday as jitters pertaining to tax reform continued.  The S&P 500 Index shed more than one percent at the lows of the session, intersecting with the rising 20-day moving average around 2573.  But, as has been the case since the volatility realized in August, investors stepped in to buy at this important level of short-term variable support, trimming the bulk of the losses by the closing bell.  Momentum indicators on the large-cap benchmark continue to point lower, still showing signs of negatively diverging from price.  Defensive positioning remains apparent with consumer staples and utilities outperforming the market return on the day, while industrials, materials, and technology act as sizable drags.

While concerns pertaining to tax reform offered an easy excuse, weakness largely spilled over from the poor price action in markets overseas.  The Nikkei charted a massive doji indecision candlestick, showing the first signs of strain following an overbought rally that that fuelled the benchmark to multi-decade highs in recent weeks.  Support on the Tokyo benchmark is apparent around 21,000.  Seasonally, the Nikkei tends to outperform the S&P 500 Index between mid November and mid-April.

^N225 Relative to the S&P 500

The selling pressures that started in Japan were subsequently realized amongst European stocks.  The European STOXX 600 Index fell by 1.11%, turning lower from resistance around 396 and moving below its 20-day moving average.  Next level of support is the rising 50-day moving average at 387.  Seasonally, the European benchmark tends to underperform the S&P 500 Index through to early December, then shifting towards a trend of outperformance through to April.

On the economic front, a report on wholesale trade was rather uneventful.  The headline print indicated that sales increased in September by 1.3%, while inventories grew by 0.3%, inline with the consensus analyst estimate.  Stripping out the seasonal adjustments, sales actually declined by 3.8% in the month, while inventories were higher by 1.6%; the average change for each in September is –1.0% and +0.9%, respectively.  Both inventories and sales remain below their seasonal average trends year-to-date.  Focussing on the sales side, the only categories that are showing an above average change through the first three quarters are metals, miscellaneous durable goods, grocery, and petroleum products.  The rest of the categories continue to fall short of the seasonal average change as pricing pressures hinder growth.  One such category where pricing pressures are arguably acting as a strain is the sale of drugs, which showed an abnormal decline in the month.  The period between July and October typically sees higher shipments of pharmaceuticals going into the cold and flu season.  Not only have wholesale drug sales fallen below the average pace on the year, but they have also fallen below last year’s trend, which saw the weakest calendar year growth in a decade.  Elsewhere, weak agricultural commodity prices are taking a toll on farm product sales, which also showed an abnormal decline in September, coinciding with the harvest period.  Overall, the state of wholesale trade is rather lacklustre and highlights the lack of demand for a number of products.  The below average change in sales and above average change in inventories raises concerns that inventories may become a problem if holiday sales, realized in the month of October, fall short of expectations.  Seasonally, both sales and inventories tend to peak for the year in and around the month of October as goods are transferred to retail locations in time for Christmas shopping.

Wholesale Sales Seasonal Chart

Wholesale Inventories Seasonal Chart

Wholesale Sales Breakdown

In other news, the EIA reported that natural gas inventories expanded last week by 15 bcf, much less than the 54 bcf build reported in the same period one year ago.  The peak to injection season is typically realized on November 7th, on average, therefore it is possible that a withdrawal from inventories will be realized when the administration reports again next week.  The year-to-date change of natural gas in storage is up by 14.5%, a pace that is 9.2% below the 20-year average increase through this point in the year.  Cold weather forecast to impact the north-east is expected to increase demand for this energy commodity.  The price of natural gas closed higher on the day by almost eight-tenths of one percent, testing the high charted closer to the end of September.  The commodity, according to the continuous futures, broke above a massive triangle pattern in the past few sessions, targeting a move higher within its period of seasonal strength.  The seasonally strong period concludes in the middle of December, on average.

Sentiment on Thursday, as gauged by the put-call ratio, ended bearish at 1.10.

 

 

 

 

Sectors and Industries entering their period of seasonal strength:

$SPTHC Relative to the S&P 500

 

 

Seasonal charts of companies reporting earnings today:

  

 

 

S&P 500 Index

 

 

TSE Composite