Dow Jones Industrial Average at one of the most overbought levels in over 85 years. 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: Interpublic Group of Companies, Inc. (NYSE:IPG) Seasonal Chart Carnival Corporation (NYSE:CCL) Seasonal Chart Analog Devices, Inc. (NYSE:ADI) Seasonal Chart The Markets Equity benchmarks in the US charted fresh all-time highs on Wednesday, in part due to strength in shares of IBM, which had an outsized impact on the Dow Jones Industrial Average. The blue-chip benchmark surged through the psychologically important 23,000 level, tacking on a gain of around two-thirds of one percent. The Dow has significantly outperformed the large-cap S&P 500 Index since June of this year, coincidentally the same time that it was profiled as a Top Pick of ours on an appearance of BNN’s Market Call. Looking ahead, the Dow Jones industrial Average has historically recorded one of the strongest months of the year relative to the S&P 500 Index in the month of November, outperforming by an average of 0.5% and showing outperforming results 70% of the time. As with other market indices, the Dow is battling with one of the most overbought readings in years. The Relative Strength Index (RSI) has moved above 80 on three different occasions this year, highlighting the demand for the constituents within. Levels above 70 are generally considered to be overbought. With Wednesday’s close, the RSI stands at 85.36, the 11th highest level looking at data spanning the past 85 years. Prior to this past year, you would have to look back to November 25th of 1996 to find an RSI that is higher than today. While overbought readings are a sign of strength in the market, they can often lead to periods of exhaustion where upside potential over the short-term becomes limited. $INDU Relative to the S&P 500 On schedule for this time of week was the energy information administration’s (EIA) petroleum status report for the period ending October 13th. The EIA reported that oil stockpiles fell by 5.7 million barrels last week, while gasoline inventories rose slightly by 900,000 barrels. The result continues to place downward pressure on the days of supply of oil, which now sits at 28.6, retracing around half of the climb attributed to Hurricane Harvey. Oil inventories, meanwhile, are back to the lows of the year, down 4.7% year-to-date, still on track for the largest calendar year drawdown since 2002. But the key highlight in the report may not be what has been stockpiled, but what is being produced domestically. Domestic oil production fell by 1.07 million barrels per day as of the end of last week, the largest one week decline in the history of the report. Producers shut down operations amidst Hurricane Nate impacting the Gulf of Mexico. Imports also remain very subdued compared to the levels recorded prior to hurricane season in August. The price of oil closed relatively flat following the report, holding around intermediate resistance at $52. Seasonally, the price of oil tends to decline through to early December as demand for the commodity wanes following the summer driving season. Weekly U.S. Days of Supply of Crude Oil excluding SPR (Number of Days) Seasonal Chart Weekly U.S. Days of Supply of Total Gasoline (Number of Days) Seasonal Chart On the economic front, a report on housing starts weakened last month, but the aggregate decline can’t be pinned on the hurricanes alone. The headline print indicated that starts fell by 4.7% to a seasonally adjusted annual rate of 1.127 million. Expectations were for a rate of 1.170 million. Stripping out the seasonal adjustments, starts actually fell by 2.4%, marginally better than the average decline for September of 3.4%. Still, the result does little to improve the 23.4% gap that remains apparent versus the seasonal average trend year-to-date, the weakest performance since 2008. And while the hurricane that hit the south region can be held responsible for some of the lag, weak results in the mid-west and west regions are also holding back the aggregate result. The mid-west is showing the weakest year-to-date performance since 1981, predating the recent recession attributed to the housing crisis. Only the north-east is showing a year-to-date trend that is relatively inline with the seasonal norm, but this is still a significant give-back from the above average results recorded through the month of June. Housing units completed are still holding around seasonal average levels, yet to see the impact from this subdued pace of gains that is being realized earlier in the building process. Previously, the lacklustre start data could be chalked up to the lack of available plots on which to build, but with housing units authorized, but not started, trending well above average, the inventory of available building sites is growing. CNBC is reporting that a labor shortage may be to blame, something that would be difficult to resolve with the economy in a state of full employment. If workers are not enticed to this industry presently, it is difficult to foresee what could change that or how much it would cost. New home buyers are already strapped with the median price of new homes up around 50% since the recessionary lows in 2009 and 2010, a rate that far surpasses the pace of wage growth or inflation. Adding more to the cost of new homes may be out of the question. The strength in house prices may cap housing market activity going forward. Housing Starts Seasonal Chart North of the border, a report on manufacturing activity hinted of a rebound in August, but the impact of the strong Canadian dollar remains apparent. The headline print for Canada’s Manufacturing Sales indicated an increase of 1.6% in August, well above the forecast that called for a decline of 0.7%. Stripping out the seasonal adjustments, sales actually increased by 12.3%, firmly above the 10.1% average increase for this summer month. Year-to-date, however, manufacturing sales are still running 1.2% below average on the year, a gap that was opened in July when the Canadian currency rose sharply through the summer. Unfilled orders, a gauge of the backlog impacting the industry, is well below average, dipping deeper into negative territory, showing an inverse correlation to the currency rise. Inventories are also increasing at an above average rate, raising concerns pertaining to demand and the price at which manufacturers will be forced to sell their products at. A breakdown of the industries shows that the biggest drags on the aggregate year-to-date trend are seafood, petroleum, chemical, electrical equipment, transportation, and motor vehicle manufacturing, each showing below average performance through the end of August. Brewery and winery manufacturing, along with the production of tires and wood products are the few bright spots on the year. The currency impact on the manufacturing industry has moderated since the dollar peaked at the start of September, but the overhang could persist until a more sizeable retracement is realized. Seasonally, the Canadian dollar tends to weaken through the fourth quarter, following the direction of the price of oil. Sales of goods manufactured (shipments) Seasonal Chart The investment implications based on Canada’s manufacturing report may seem a bit obvious when looking at the areas of strength; Canadian forestry stocks have played well this year, but publicly traded wine companies in Canada have been largely unmoved. Looking at Corby Spirits and Andrew Peller, the stocks have been range-bound and are now testing levels of resistance. Peller broke out of a trading range just a few weeks ago and is back to resistance at its all-time high around $12.50. Corby is showing a similar pattern, holding around resistance at $22. A break of these trading ranges projects upside potential of the magnitude of the range that preceded it, therefore approximately a $2 move for each. Seasonally, the profiles for each are slightly varied with Peller showing its optimal period between May and August, while Corby remains in a period of seasonal strength that peaks in November. Sentiment on Wednesday, as gauged by the put-call ratio, ended close to neutral at 0.95. Seasonal charts of companies reporting earnings today: S&P 500 Index TSE Composite