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Stock Market Outlook for March 22, 2012

Upcoming US Events for Today:

  1. Weekly Jobless Claims will be released at 8:30am.   The market expects Initial Claims to show 355K versus 351K previous.   Continuing Claims are expected to reveal 3363K versus 3343K previous.
  2. The FHFA Housing Price Index for January will be released at 10:00am.
  3. Leading Indicators for February will be released at 10:00am.   The market expects an increase of 0.6% versus an increase of 0.4% previous.

 

Upcoming International Events for Today:

  1. German PMI Manufacturing for March will be released at 4:30am EST.   The market expects 51 versus 50.2 previous.
  2. Euro-Zone PMI Manufacturing for March will be released at 5:00am EST.   The market expects 49.5 versus 49.0 previous.
  3. Euro-Zone Industrial New Orders for January will be released at 6:00am EST.   The market expects a decline of 3.1% versus a decline of 1.7% previous.
  4. Canadian Retail Sales for January will be released at 8:30am.   The market expects an increase of 1.8% versus a decline of 0.2% previous.
  5. Euro-Zone Consumer Confidence for March will be released at 11:00am EST.   The market expects –19.8 versus –20.3 previous.

 

Recap of Yesterday’s Economic Events:

Description Actual Forecast Previous
JPY All Industry Activity Index (MoM) -1.00% -0.70% 1.60%
USD MBA Mortgage Applications -7.40%   -2.40%
CAD Leading Indicators (MoM) 0.60% 0.60% 0.40%
USD Existing Home Sales 4.59M 4.61M 4.63M
USD Existing Home Sales (MoM) -0.90% 0.90% 5.70%
USD DOE U.S. Crude Oil Inventories -1162K 2200K 1750K
USD DOE Cushing OK Crude Inventory -176K   2519K
USD DOE U.S. Distillate Inventory 1763K -1500K -4682K
USD DOE U.S. Gasoline Inventories -1214K -2000K -1410K
NZD Gross Domestic Product (QoQ) 0.30% 0.60% 0.70%
NZD Gross Domestic Product (YoY) 1.80% 2.20% 1.80%
JPY Merchandise Trade Balance Total (Yen) ¥32.9B -¥120.0B -¥1476.9B
JPY Adjusted Merchandise Trade Balance (Yen) -Â¥313.2B -Â¥342.5B -Â¥612.8B
JPY Merchandise Trade Exports (YoY) -2.7 -6.5 -9.3
JPY Merchandise Trade Imports (YoY) 9.2 8.2 9.9
CNY HSBC Flash China Manufacturing PMI 48.1   49.6

 

The Markets

Market Close % Change Expected ST Low Expected ST High
Dow Jones Industrial Average (^DJI) 13,124.62 -0.35% 12,830.75 13,184.58
Dow Jones Transportation Average (^DJT) 5,331.81 0.82% 5,110.20 5,328.53
Dow Jones Utility Average (^DJU) 452.63 -0.16% 450.04 456.41
S&P 500 (^GSPC) 1,402.89 -0.19% 1,347.56 1,399.65
S&P/TSE Composite (^GSPTSE) 12,436.49 0.05% 12,371.00 12,700.61
NASDAQ Composite (^IXIC) 3,075.32 0.04% 2,917.14 3,052.36
Austrian Traded Index (^ATX) 2,210.50 -0.54% 2,151.25 2,232.38
French CAC 40 (^FCHI) 3,527.37 -0.10% 3,388.94 3,558.81
German DAX (^GDAXI) 7,071.32 0.23% 6,718.67 7,100.71
UK FTSE 100 (^FTSE) 5,892.00 0.01% 5,841.42 5,948.50
Swiss Market Index (^SSMI) 6,290.00 -0.10% 6,109.36 6,307.87
Brazilian IBOVESPA (^BVSP) 66,860.00 -0.65% 65,251.50 67,754.79
Mexico’s IPC (^MXX) 38,434.51 1.00% 37,746.91 38,216.62
Amsterdam Exchange Index (^AEX) 330.78 -0.38% 321.57 333.79
New Zealand NZX 50 INDEX GROSS (^NZ50) 3,481.96 -0.14% 3,304.17 3,495.35
China HANG SENG INDEX (^HSI) 20,856.63 -0.15% 20,820.07 21,522.51
Korea KOSPI Composite Index (^KS11) 2,027.23 -0.73% 1,994.33 2,040.74
Tokyo NIKKEI 225 (^N225) 10,086.49 -0.55% 9,082.19 10,059.67

 

Markets were mixed on Wednesday as a report on Existing Home Sales for February failed to impress investors.   Equity benchmarks held a fairly tight range as investors awaited a slew of data to be released on Thursday, including manufacturing PMIs from China and Europe, US weekly jobless claims, leading indicators, and home prices.   Also of note is third quarter earnings report from Fed-Ex, an economic bellwether.   The stock is overbought but seasonal tendencies for the company remain positive through to May.   Given the ties that this company has to the economy, it is a great leading indicator as to the strength and sustainability of the remainder of the period of seasonal strength, which also peaks in May.

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Although the key equity benchmarks ended mixed on Wednesday, activity on the day was rather bullish.   The Dow Transportation Index and Russell 2000 both moved higher on the session, indicative of a risk-on environment as investors accumulate exposure to higher beta stocks.   Sector activity showed equivalent interest in both cyclical and defensive sectors.   The S&P 500 equally weighted index outperformed the capitalization weighted index, implying a few influential issues accounted for the bulk of the benchmark’s decline.   Markets are now into this period at the end of the quarter where portfolio window dressing plays a prominent role.   The S&P 500 index averages a loss of 0.50% in the last week of trading as investors reallocate positions.   During this period, profits are taken in positions that have performed well, which may skew portfolios to be overweight certain areas due to capital appreciation.   Unallocated cash is then reivested into positions that portfolios may be underexposed to.   This tendency will leave sectors that have substantially outperformed the market, such as technology, vulnerable to a pullback in the near term.   Shares of Apple would be particularly susceptible.   But this gives a short-term opportunity for laggards to once again find a home in portfolios, perhaps in Energy, Materials, and even Health Care.   This reallocation amongst equities has been observed to pressure equities lower in the final week of trade during years with strong year-to-date performance.   Fund inflows at the beginning of the new quarter in April once again pushes equities higher during the first few days of trade.

And finally for today, we leave you with a chart of copper.   Just as Fed-Ex is a bellwether to strength in the economy, so to is copper.   The commodity is presently within a period of seasonal strength that runs through May.   A minor run is present in the summer as well.   Recently the commodity has been doing anything but showing strength as concerns over a slowdown in China and fears of recession in Europe weigh on the demand prospects for the metal.   Copper has charted a series of significant lower highs since February began, trading on either side of the 200-day moving average.   On the flip side, higher significant lows are also evident going back to the fourth quarter of last year.   This derives a pennant pattern, which could break in either direction, up or down.   The direction of the break could have implications toward the strength of the economy, and eventually equity markets.   Markets generally turn weaker into the beginning of the second quarter of election years, so this may be just one leading indicator of whether or not this tendency holds true.

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Sentiment on Wednesday, according to the put-call ratio, ended approximately neutral at 0.98.   On the topic of investor sentiment, the latest sentiment survey from the American Association of Individual Investors was just released.   Results indicated a decline in Bullish sentiment by 3.2% to end the week at 42.4%.   Historical average bullish sentiment is 39%.   The implication is that complacency has corrected since the extremes of the first two months of the year that pegged bullish sentiment at over 50%.   Average bullish sentiment is neither bullish nor bearish, which is actually healthy as investors are not leaning too far in any one particular direction, allowing for a reasonable interaction between buyers and sellers.

 

Sectors that Moved the Market

Sector % Price Change % Volume Change
Energy Sector (XLE) -1.19% 24.83%
Basic Materials Sector (XLB) 0.00% -15.53%
Financial Sector (XLF) -0.44% -14.23%
Health Care Sector (XLV) -0.05% 24.74%
Consumer Discretionary Sector (XLY) 0.13% -35.41%
Industrials Sector (XLI) -0.05% -42.65%
Technology Sector (XLK) -0.03% 54.47%
Utilities Sector (XLU) -0.20% -37.15%
Consumer Staples Sector (XLP) 0.15% -12.97%

 

S&P 500 Index

Support 2 Support 1 Pivot Point Resistance 1 Resistance 2
1396.65 1399.77 1403.76 1406.88 1410.87

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Chart Courtesy of StockCharts.com

Support & Resistance Analysis MACD Analysis MACD vs. Signal RSI Analysis Stochastic (Fast) Analysis
Neutral Positive/Decreasing Above/Thinning Above 50 Overbought and Declining
Current Day Candlestick Prior Day Candlestick Candlestick Analysis
Black Candlestick Black Candlestick Bearish

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TSE Composite

Support 2 Support 1 Pivot Point Resistance 1 Resistance 2
12344.70 12390.59 12426.75 12472.64 12508.80

image

Chart Courtesy of StockCharts.com

Support & Resistance Analysis MACD Analysis MACD vs. Signal RSI Analysis Stochastic (Fast) Analysis
Neutral Negative/Decreasing Below/Thinning Below 50 Neutral
Current Day Candlestick Prior Day Candlestick Candlestick Analysis
Long Lower Shadow Long Lower Shadow Neutral/Indecision

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2012 Year-to-Date Since Inception (Nov 19, 2009)
HAC.TO 3.20% 25.7%

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