Largest ever weekly increase in oil inventories confirms the glut is still intact.
**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
Stocks closed lower after the latest FOMC decision, which kept rates unchanged between 0.25% and 0.50%. Despite no movement this time around, investors are becoming increasingly confident that the Fed will move in the December meeting with the probability of a hike now sitting at 71.5%. The S&P 500 Index shed two-thirds of one percent, closing below psychological support at 2100. The decline was led by interest rate sensitive areas of the market, such as utilities and REITs, which saw losses hover around twice the market return. Utilities and REITs remain in a period of seasonal weakness through late November/early December.
As stocks trade lower, investors are seeking refuge in Gold. The price of the yellow metal traded higher by over 1.5% during Wednesday’s session, bouncing from around its rising 200-day moving average. Resistance at the broken level of support at 1310 is directly overhead. The trend, in the intermediate-term, remains that of lower-lows and lower-highs, something that is being confirmed by momentum indicators. Investors are betting on continued fear and volatility in equity markets to fuel higher prices in the commodity, enough to overcome the significant headwind imposed by the stronger US Dollar. The US Dollar has been charting higher-highs and higher-lows since May, a trend that is not supportive of strength in the commodity market. Seasonally, the price of Gold tends to gyrate in the month of November, eventually ending the period higher.
The US Dollar Index remains in a massive consolidation pattern above 92, spanning all the way up to 100. A move above or below this range is likely to lead to a substantial move in the direction of the break. Calculated target on either move, higher or lower, is an 8-point range surrounding the present range. The result could be a significant headwind to stocks and commodities if the break is higher, as the intermediate trend is suggesting. The election and the next FOMC decision are likely to be significant catalysts for the direction of the currency, depending on the outcome. Seasonally, the US Dollar Index tends to turn lower between mid-November and the end of the year.
On schedule for this time of week was the release of the EIA petroleum inventory report. The administration reported that inventories of oil surged by 14.4 million barrels, the largest one week gain in the history of the report. The result was influenced by a significant rebound in imports, which jumped to the highest level of the year as the hurricane hiatus came to an end. The report puts the days of supply of the energy commodity at 31.2, up over a full day from the previous report and back inline with the level it was at this time last year. Previously, the change in oil inventories on the year were returning to average levels as a result of the difficulties in getting the tankers to ports on the US east coast, but, in an instant, the glut has returned. Stocks and days of supply of oil typically hit a peak for the autumn season in mid to late November as demand for the refined products picks up through the holiday season. The price of oil shed almost 3% on the headline, breaking below a rising trendline that had supported the commodity since the February low. The price of crude oil remains in a period of seasonal weakness through to early December.
As for gasoline, the refined commodity reported a minor draw of 2.2 million barrels, keeping the days of supply of the end product relatively stable around 24.6. The days of supply is hovering around a full day above average, despite demand, as gauged by the product supplied, continuing to hold well above average for this time of year. Gasoline production remains similarly high and the trend may be about to turn higher in the weeks ahead as the holiday travel season gets underway. The price of gasoline remains supported around its 50-day moving average.
Sentiment on Wednesday, as gauged by the put-call ratio, ended bearish at 1.31.
Seasonal charts of companies reporting earnings today:
S&P 500 Index