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Stock Market Outlook for March 28, 2018

Investors turn risk averse, bidding bonds and bond proxies higher ahead of the close of the quarter.

 

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:

StoneMor Partners L.P. (NYSE:STON) Seasonal Chart

StoneMor Partners L.P. (NYSE:STON) Seasonal Chart

Scientific Games Corp.  (NASDAQ:SGMS) Seasonal Chart

Scientific Games Corp. (NASDAQ:SGMS) Seasonal Chart

Dean Foods, Inc. (NYSE:DF) Seasonal Chart

Dean Foods, Inc. (NYSE:DF) Seasonal Chart

 

 

The Markets

Stocks reversed the prior day’s gains as Monday’s leader, technology, came under pressure amidst a number of negative headlines.  The S&P 500 Index dipped by 1.73%, moving back towards the rising 200-day moving average, yet again.  The lack of follow through following Monday’s surge does raise concerns pertaining to whether or not this long-term level of support below will hold.  As highlighted in a recent report, the 20-day moving average continues to roll over below the 50-day moving average, which itself is now pointing lower.  This is more a characteristic of a significant intermediate market peak, which may suggest further weakness should be expected.  Headline risk continues to dominate this market, despite positive underlying fundamentals.  Seasonal tendencies suggest a positive bias through the end of the month and into the month of April as earnings season gets underway.  The market is in desperate need of a distraction by tangible fundamentals, something that will be received in the weeks ahead.

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The rollover in the technology sector on Tuesday came at a very pivotal point.  The S&P 500 Technology sector index traded up to and resisted precisely from its 50-day moving average, which is showing signs of curling lower.  Support at the 125-day moving average is directly below, presenting a battle-ground for the bulls and bears to fight for control.  Seasonally, the next period of strength for the sector is around the corner, in the middle of April, on average, therefore near term weakness could present opportunities for the three-month tendency ahead.

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Technology Sector Seasonal Chart

TECHNOLOGY Relative to the S&P 500
TECHNOLOGY Relative to the S&P 500

TECHNOLOGY Monthly Averages

Weighing on technology was a big unwind of the popular FANG trade, the constituents of which charted outside reversal candlesticks during the session.  Alphabet (GOOGL) fell 4.47%, closing below its 200-day moving average.  Netflix (NFLX) and Amazon fell 6.14% and 3.78%, respectively, breaking back below their 20-day moving averages.  Each of these stocks saw their trading range on Tuesday exceed that of the previous day, printing bearish candlesticks.  The moves in these names suggest that there is something more going on in the market than what the headlines point to and that investors feel more comfortable de-risking portfolios, rather than adding beta, in the volatile tape.  Rounding out the FANG universe, Facebook was down an additional 4.92%, which held within the prior day’s span.  The days ahead could be indicative of investor risk sentiment for the month ahead as portfolio managers choose which positions they want to report to clients in their monthly and quarterly reports.

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Google Inc. (NASDAQ:GOOG) Seasonality

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Amazon.com, Inc. (NASDAQ:AMZN) Seasonality

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Netflix, Inc. (NASDAQ:NFLX) Seasonality

One of the sectors that portfolio managers may want to report to clients as having been held in the month of March is Utilities, which bucked Tuesday’s loss and added 1.46%, according to the S&P 500 Sector Index.  The sector has been the best market segment, so far, in March, showing a gain of around 3%.  We have been profiling this sector for the past month as a result of the oversold technical status coming into a seasonally strong time of year for the defensive market segment.  The bond proxy received a reprieve from selling pressures in February when the yield on the 10-year treasury note hit resistance around 3%.  The yield broke below short-term support around 2.8% in Tuesday’s session, now moving below the rising 50-day moving average.  The parabolic move that brought the yield up to the 3% resistance level has been alleviated and trend channel support around 2.75% is near.  The short treasury bond trade had become overly crowded coming into the year and weak hands have likely been shaken loose, setting the stage for the next leg higher.   Long-term declining trend-channel resistance at 3% presents a make or break point to the bull market trend in this fixed income asset.  Seasonally, yields typically move higher through the month of April.

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Utilities Sector Seasonal Chart

UTILITIES Relative to the S&P 500
UTILITIES Relative to the S&P 500

UTILITIES Monthly Averages

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Sentiment on Tuesday, as gauged by the put-call ratio, ended bearish at 1.07.

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Seasonal charts of companies reporting earnings today:

BlackBerry Limited (BB) Seasonal Chart Gamestop Corporation (GME) Seasonal Chart Manitex International, Inc. (MNTX) Seasonal Chart Neovasc Inc. (NVCN) Seasonal Chart Oxford Industries, Inc. (OXM) Seasonal Chart  Progress Software Corporation (PRGS) Seasonal Chart PVH Corp. (PVH) Seasonal Chart  Sportsman's Warehouse Holdings, Inc. (SPWH) Seasonal Chart Sunworks, Inc. (SUNW) Seasonal Chart Unifirst Corporation (UNF) Seasonal Chart Verint Systems Inc. (VRNT) Seasonal Chart Walgreens Boots Alliance, Inc. (WBA) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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