Stock Market Outlook for March 5, 2019
S&P 500 Equally Weighted Index consolidating above previous horizontal resistance around 4200.
*** 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:
AllianceBernstein Holding LP (NYSE:AB) Seasonal Chart
Polyone Corp. (NYSE:POL) Seasonal Chart
Old Republic Intl Corp. (NYSE:ORI) Seasonal Chart
BB&T Corp. (NYSE:BBT) Seasonal Chart
Magna Intl, Inc. (TSE:MG.TO) Seasonal Chart
Advantage Oil Gas Ltd. (TSE:AAV.TO) Seasonal Chart
Camden Property Trust (NYSE:CPT) Seasonal Chart
Vail Resorts, Inc. (NYSE:MTN) Seasonal Chart
Kaiser Aluminum Corp. (NASD:KALU) Seasonal Chart
The Markets
Stocks closed lower on Monday as investors booked profits on further trade headlines pertaining to the US and China. The S&P 500 Index closed down by four-tenths of one percent, pulling back from the widely scrutinized level of resistance just above 2800. At the lows of the session, the benchmark was at risk of charting an outside reversal day, which is accomplished by an open above the previous session’s high and a close below the previous session’s low. This candlestick formation from a level of resistance can provide a strong signal to sell as its shows the supply of investors willing exit positions around the implied barrier. Regardless of whether an outside reversal was derived or not, the benchmark has been elevated above levels of support, such as at the 50-day moving average, suggesting that a retracement/period of consolidation would be a reasonable outcome in the progression towards all-time highs.
Looking at the S&P 500 Equally Weighted Index, the benchmark pulled back to the already broken level of resistance just below 4200. The benchmark broke above this hurdle that represented the November and December highs a few weeks ago, presenting an encouraging signal that more widely followed benchmarks will do the same. The equally weighted index has been outperforming the capitalization weighted index since the year began as a broad spectrum of stocks participate in the rally from the December low. The benchmark has started to underperform the market over the past couple of weeks as momentum wanes, the result of which trigged sell signals with respect to MACD and RSI at the end of February. Seasonally, the Equally Weighted benchmark tends to outperform its Capitalization Weighted counterpart through the end of April.
On the economic front, a report on construction spending was the latest in a string of reports to show weak December results. The headline print indicated that construction spending in the US fell by 0.6% in the last month of the year, a significant miss versus estimates that called for an increase of 0.3%. The year-over-year change now sits at +1.6%, down from the +3.4% pace as of the end of November. Stripping out the seasonal adjustments, total construction spending actually fell by 9.7% in the last month of the year, which is about inline with the 9.9% decline that is average for the start of the winter season. For the calendar year, construction spending was higher by a mere 0.8%, well below the 4.0% increase that is average. This is the weakest calendar year change since 2010 when the economy was still healing from the recession in the years prior. Residential construction spending was by far the biggest drag, falling by 3.5% for the calendar year. A noticeable shift in residential construction became apparent in June as mortgage rates hit the highest level in six years, leading to an abrupt cool down in the housing market. Mortgage rates have since fallen back and are now around the mid-point to the 2018 range. With the Fed adopting a “patient” bias, mortgage rates may see further downside pressure, which could re-entice buyers into the housing market. We’ll wait for further data to confirm.
Total Construction Spending Seasonal Chart
Sentiment on Monday, as gauged by the put-call ratio, ended neutral at 1.00.
Seasonal charts of companies reporting earnings today:
S&P 500 Index
TSE Composite
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