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Stock Market Outlook for April 17, 2019


An unwind of defensive bets as stocks reach previous highs could actually bode well for cyclical sectors.

 

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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Pretium Resources Inc. (TSE:PVG.TO) Seasonal Chart

Pretium Resources Inc. (TSE:PVG.TO) Seasonal Chart

Monarch Casino & Resort, Inc. (NASD:MCRI) Seasonal Chart

Monarch Casino & Resort, Inc. (NASD:MCRI) Seasonal Chart

Franco-Nevada Corp. (TSE:FNV.TO) Seasonal Chart

Franco-Nevada Corp. (TSE:FNV.TO) Seasonal Chart

AirBoss of America Corp. (TSE:BOS.TO) Seasonal Chart

AirBoss of America Corp. (TSE:BOS.TO) Seasonal Chart

Dollar Tree, Inc. (NASD:DLTR) Seasonal Chart

Dollar Tree, Inc. (NASD:DLTR) Seasonal Chart

 

 

The Markets

Stocks closed mixed on Tuesday as investors took in the latest set of earnings.  The S&P 500 Index closed nearly unchanged, weighed down by weakness in health care, utilities, and REITs; financials, meanwhile, topped the leaderboard.  Following a number of months of defensive assets moving higher alongside cyclicals, an unwind appears underway.  Treasury bond prices have been collapsing in recent days, pushing yields higher and having a direct impact on the interest rate sensitive areas of the market.  Recall that yields peaked around the same time as the equity market into the fourth quarter and subsequently declined as investors shed equity allocations and rotated towards safe-haven alternatives into the end of the year.  But as major equity benchmarks rebounded, treasury yields continued to trend lower, creating a divergence between the positioning of equity and fixed income investors.  This divergence between stocks and yields may be in the process of being rectified, which could entail lower bond prices and an unwind of the popular defensive bets that have attracted significant fund flows during the past two quarters.  The shift bodes well for cyclical assets as those areas that have been unloved could be poised to benefit from the rotation.  This includes financials and energy, which have lagged broad market performance for over a year. 

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Looking at treasury bond prices through the lens of the iShares 7 – 10 year treasury bond ETF (IEF), the fund gapped below its 20-day moving average at the end of last week and is now approaching support at its rising 50-day moving average.  A negative momentum divergence with respect to MACD suggests upside exhaustion, which could result in weakness into the start of the period of seasonal strength for the asset class that runs through the third quarter.  Bonds typically gain during the volatile summer period for stocks, making them an ideal place to collect yield during the weaker time of year for stocks.

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10 Year U.S. Treasury Notes Futures (TY) Seasonality

On the economic front, an exceptionally weak report on industrial production diverges from some of the soft indications of manufacturing activity in the US. The headline print of March’s Industrial Production report indicated that activity declined by 0.1% in this third month of the year, a miss versus expectations of a 0.3% increase. The manufacturing component was unchanged, but this was still a miss versus estimates of a 0.3% rise. Stripping out the seasonal adjustments, Total Industrial Production actually increased by 0.3%, which is far from the 0.8% increase that is average for March. The result puts the year-to-date change higher by a mere 0.4%, which is less than half of the average increase for the first quarter of 1.0%.  Subscribers to our service received further insight on the metrics driving the aggregate result, as well as what the report says about the sectors of the market to focus on.

http://charts.equityclock.com/seasonal_charts/economic_data/IPB50001N_seasonal_chart.PNG

North of the border, weak manufacturing activity in Canada confirms the weather related toll on this segment of the economy during the month of February. The headline print of February’s Manufacturing Sales for Canada indicates a decline in activity of 0.2%, clawing back some of the strength realized in the month prior. Analysts were expecting a decline of 0.5%. Stripping out the seasonal adjustments, sales of goods manufactured actually fell by 4.3%, which is much weaker than the 0.3% decline that is average for this time of year. The year-to-date change is now down by 2.0%, which is eight-tenths of one percent below the seasonal average trend through the first two months of the year. Subscribers received a report with our analysis pertaining to the state of the manufacturing economy in Canada.

Sales of goods manufactured (shipments) Seasonal Chart

Sentiment on Tuesday, as gauged by the put-call ratio, ended bullish at 0.92.

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Seasonal charts of companies reporting earnings today:

Abbott Laboratories (ABT) Seasonal Chart ADTRAN, Inc. (ADTN) Seasonal Chart Alcoa Corporation (AA) Seasonal Chart ASML Holding N.V. (ASML) Seasonal Chart Badger Meter, Inc. (BMI) Seasonal Chart BancorpSouth Bank (BXS) Seasonal Chart Bank Of New York Mellon Corporation (The) (BK) Seasonal Chart Bank OZK (OZK) Seasonal Chart Cathay General Bancorp (CATY) Seasonal Chart Cohen & Steers Inc (CNS) Seasonal Chart Crown Castle International Corporation (CCI) Seasonal Chart Crown Holdings, Inc. (CCK) Seasonal Chart E*TRADE Financial Corporation (ETFC) Seasonal Chart Ericsson (ERIC) Seasonal Chart Kansas City Southern (KSU) Seasonal Chart Kinder Morgan, Inc. (KMI) Seasonal Chart Las Vegas Sands Corp. (LVS) Seasonal Chart Morgan Stanley (MS) Seasonal Chart Pentair plc. (PNR) Seasonal Chart Pepsico, Inc. (PEP) Seasonal Chart Pier 1 Imports, Inc. (PIR) Seasonal Chart SL Green Realty Corp (SLG) Seasonal Chart Sleep Number Corporation (SNBR) Seasonal Chart SLM Corporation (SLM) Seasonal Chart Texas Capital Bancshares, Inc. (TCBI) Seasonal Chart Textron Inc. (TXT) Seasonal Chart Torchmark Corporation (TMK) Seasonal Chart U.S. Bancorp (USB) Seasonal Chart Umpqua Holdings Corporation (UMPQ) Seasonal Chart United Rentals, Inc. (URI) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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