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Stock Market Outlook for April 3, 2019


This breadth indicator is suggesting stability has returned to the equity market following the volatile trend over the past two quarters.

 

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:

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AerCap Holdings NV (NYSE:AER) Seasonal Chart

AerCap Holdings NV (NYSE:AER) Seasonal Chart

Chegg, Inc. (NYSE:CHGG) Seasonal Chart

Chegg, Inc. (NYSE:CHGG) Seasonal Chart

Wellesley Bancorp, Inc. (NASD:WEBK) Seasonal Chart

Wellesley Bancorp, Inc. (NASD:WEBK) Seasonal Chart

 

 

The Markets

Stocks were essentially unchanged on Tuesday as investors digested gains from the previous day’s session.  The S&P 500 Index was flat, maintaining the gap above previous resistance around 2815.  Gainers were led by real estate stocks, which advanced following a slight pullback in yields.  The MSCI US REIT Index broke above a key level of resistance in the past month, resolving a 200-point trading range that the benchmark has been stuck in for the past few years.  The breakout comes at an important time for the sector from a seasonal perspective.  REITs  tend to rise between March and May, following a similar trend as that of real estate prices into the spring.

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MSCI US REIT Index Seasonality

Gradually, benchmarks are stabilizing following the volatility realized between October and February.  The S&P 500 Index is just over 2% away from its all-time high around 2940 and momentum indicators continue to show bullish characteristics.  The stabilization is also being picked up in the percent of stocks trading above 200-day moving averages.  For the S&P 500 Index, now just over 65% of stocks are trading above this long-term hurdle.  You may recall us profiling this breadth indicator in the past, highlighting that equity market volatility typically follows periods when less than 62% of stocks are trading above their 200-day moving averages.  The indicator has been below this threshold since the start of last October, but the surge in equity benchmarks to start the second quarter has resulted in a break of this hurdle.  The implication is that stability has returned to the equity market, which may be conducive for a grind higher over time.  For historical context, the last time the indicator moved from a pronounced volatile trend below 62% to above this pivotal threshold was in March of 2016, leading to the almost 40% steady rise in stocks through to January of last year;  support at the long-term moving average was maintained throughout.  The 200-day moving average is a technical hurdle widely followed by investors, therefore it is no wonder that volatility ensues following a break of this level of support.  With the long-term moving average firmly embed below the present level of the benchmark, the level of support is established.

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On the economic front, the impact of February’s unfavourable weather is showing up in the month’s durable goods orders in the US. The headline print indicated a decline in new orders of 1.6% in this winter month, which is actually better than the 1.8% decline forecasted by analysts. Core capital goods were lower by 0.1%, which is a miss versus expectations of a 0.2% increase. Stripping out the seasonal adjustments, the value of manufacturers’ new orders for durable goods was actually higher by 1.7%, which is short of the 5.9% increase that is average for February. The year-to-date change is now 1.0% below the seasonal average trend.  Equity Clock subscribers received our analysis of this report directly in their inbox. Want to be included on future distributions?  Subscribe now.

Value of Manufacturers' New Orders for Durable Goods Industries Seasonal Chart

Sentiment on Tuesday, as gauged by the put-call ratio, ended bullish at 0.83.

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Seasonal charts of companies reporting earnings today:

Acuity Brands, Inc. (AYI) Seasonal Chart Landec Corporation (LNDC) Seasonal Chart Resources Connection, Inc. (RECN) Seasonal Chart Signet Jewelers Limited (SIG) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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