Stock Market Outlook for April 21, 2017
S&P 500 clears 20-day moving average, pushing back towards trendline resistance around 2370.
**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 ended firmly higher on Thursday as earnings and comments on tax reform added much needed enthusiasm to the market. The S&P 500 Index closed higher by around three-quarters of one percent, closing marginally above its 20-day moving average; the 50-day is less than one point overhead, providing an important pivot point to the intermediate trend. Drilling down to an hourly look, declining trendline resistance now hovers just below 2370, presenting a major hurdle in the ongoing consolidation pattern of the benchmark.
On the economic front, jobless claims continue to hover around very healthy levels, higher by 10,000 over the course of last week to 244,000. Consensus was for a result of 242,000. Looking at the unadjusted year-to-date change in initial claims, the trend remains inline with the seasonal average, an improvement from this time last year when claims had become slightly elevated due to pressures in the manufacturing sector. Overall, the trend remains favourable for further strength in the labour market through the months ahead as the summer hiring period gets underway.
Turning to the latest regional manufacturing survey, while Monday’s Empire Manufacturing Survey suggested that the trend of above average results had come to an end, the Philadelphia Fed Survey did not confirm this result. The headline print fell to 22.0 in April, from 32.8 previous, slightly missing estimates calling for a read of 25.5. Looking at the unadjusted data, Philadelphia’s Manufacturing Business Outlook survey reported 31.8, still well above the average read for this time of year of 19.7. The above average trend differs from the results coming out of New York, which has been gyrating between above and below average prints through the first four months of the year. Clearly, manufacturing conditions are not even across the country, however, a larger weight would be placed on Philadelphia’s result given the hub for manufacturing activity in this region. The Philly Fed index typically declines between now and July, hitting a low during the summer factory shutdown period.
Given that it’s Thursday, the latest natural gas inventory was released during the session. The EIA reports that inventories of the commodity increased by 54 billion cubic feet, the largest increase since last November as the injection period kicks off on cue. While showing a year-to-date change that is still firmly above average, the cold weather snap that hit the US north-east in the middle of March has taken the trend off of the pace set last year, which saw significant supply pressures through the first quarter. The pace coming out of this winter withdrawal season should be critical to the price of the commodity into the summer. A shallow rise would be supportive for further gains in the commodity, while increases that are on par or greater than the average trend could result in pricing pressures into the summer period. Seasonally, the price of the commodity typically rises through to mid June.
With a slew of reports that have come in below estimates in recent days, a toll has been taken on the Citigroup Economic Surprise Index, which provides a gauge of the deviation of actual versus expected results. The gauge has fallen back to levels seen in the days surrounding the US election, which subsequently provided a boost to a number of sentiment gauges into the end of the year. The longer-term trend in the surprise index remains that of higher-highs and higher-lows, but any further weakness resulting in a break of this trend could force analysts to bring down their estimates in order to appropriately reflect the more subdued state of the economy. Downward revisions to expectations would inevitably have a negative impact on equity markets.
Sentiment on Thursday, as gauged by the put-call ratio, ended bullish at 0.90.
Seasonal charts of companies reporting earnings today:
S&P 500 Index