This year’s hottest sector could be prone to selling pressures in December. 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: Himax Technologies Inc. (NASD:HIMX) Seasonal Chart American Software, Inc. (NASD:AMSWA) Seasonal Chart Cliffs Natural Resources Inc. (NYSE:CLF) Seasonal Chart Chicago Bridge & Iron Co. (NYSE:CBI) Seasonal Chart Acadia Pharmaceuticals Inc. (NASD:ACAD) Seasonal Chart Beacon Roofing Supply Inc. (NASD:BECN) Seasonal Chart TEGNA Inc. (NYSE:TGNA) Seasonal Chart Brinker Intl, Inc. (NYSE:EAT) Seasonal Chart Wyndham Worldwide Corp. (NYSE:WYN) Seasonal Chart Martin Marietta Materials (NYSE:MLM) Seasonal Chart CBRE Group, Inc. (NYSE:CBG) Seasonal Chart Major Drilling Group Int’l Inc. (TSE:MDI) Seasonal Chart Photon Control Inc. (TSXV:PHO) Seasonal Chart Norbord Inc (TSE:OSB) Seasonal Chart Sotheby’s (NYSE:BID) Seasonal Chart CAE, Inc. (TSE:CAE) Seasonal Chart The Markets Stocks jumped on Tuesday with headlines citing strong earnings from corporate America. The S&P 500 Index crossed another psychological milestone at 2600, adding around two-thirds of one percent. Gains were dominated by cyclical sectors, mainly technology, which continues to excel within its period of seasonal strength. The S&P 500 Technology Sector Index is moving back towards the upper limit of its rising trend channel, which has been in place for the past year and a half. Support has remained intact at the 20-day moving average. The sector index is higher by almost 10% since its period of seasonal strength began at the beginning of October, around four times more than the return generated by the S&P 500 Index. While the returns during the period of strength, which concludes early in the new year, have been strong, investors should be aware that the performance of the sector in December is typically soft as investors rebalance portfolios ahead of the end of the year. Fund managers that have been aggressively playing this market segment, particularly via the FAANG stocks, may now be seeing their allocations to this sector exceed the upper limit imposed by investment policy statements, requiring liquidation of holdings to bring allocations back inline with intended ranges. As a result, the S&P 500 Technology sector index has seen gains in only 50% of Decembers over the past 20 years, averaging a return of only 0.8%, about half of the average market return. Rotation in a number of sectors and industries that benefit from end of year spending is typical in the days surrounding the US Thanksgiving, which has historically acted as a sell-on-news event. TECHNOLOGY Relative to the S&P 500 Shifting to the currency market, the Euro is on the doorstep of its average period of strength that spans through the remainder of the year. Over the past 17 years, the euro has seen its best month of the year in December with the currency futures gaining an average of 1.6% in the month. Offsetting weakness in the US Dollar through the remaining weeks of the year is a factor. Outperformance in European equity indices over the same timeframe draws funds out of the US and into the foreign currency. As well, a bump in inflation within European countries, as gauged by the consumer price index, tends to have a direct correlation with the strength of the foreign currency. The Euro, as gauged by the Philadelphia Euro Index, recently gapped higher above its 20-day moving average, moving back to resistance around its declining 50-day. With support below at the open gap and resistance at the intermediate moving average, the currency is providing a couple of levels to shoot off of in the short-term. Momentum indicators are showing signs of breaking a trend of lower-lows and lower-highs that has been intact over the past few months, suggesting waning selling pressures. The short-term period of seasonal strength concludes at the end of the year. On the economic front, a report on existing home sales showed a better than expected result for October. The headline print indicated that sales of existing homes increased by 2.0% to a seasonally adjusted annual rate of 5.48 million. Estimates were for a rate of 5.44 million. Stripping out the seasonal adjustments, sales actually declined by 0.9%, which is slightly better than the average decline for this autumn month of 1.3%. Year-to-date, the change in home sales is hovering 3.6% below average as the affordability of housing restricts activity. The median price of homes sold is up by 5.9% since the year began, on track for the best calendar year performance since 2013. Prices are running 3.4% above average through this point in the year. The increase in house prices can help with the wealth effect, where consumers are comfortable in spending more as the value of their largest asset increases, but, at a certain point, the increase tends to lose its marginal benefit as those that have bought spend a growing share of their income to finance the purchase. It could be argued that we are already seeing the impact of a consumer under pressure when looking at vehicle and restaurant sales, which have seen the weakest performance in years. Retail sales for this holiday season should be very telling of how willing and able consumers are to spend, a dominant influence in the strength of the economy. Existing Home Sales Seasonal Chart Inventory of Existing Homes for Sale Seasonal Chart Sentiment on Tuesday, as gauged by the put-call ratio, ended bullish at 0.85. Sectors and Industries entering their period of seasonal strength: FINANCIAL Relative to the S&P 500 Seasonal charts of companies reporting earnings today: S&P 500 Index TSE Composite