Stock Market Outlook for April 18, 2019
In just a few months, the Healthcare sector has shed 6 years of outperformance versus the market, but this may prove to be an opportunity for seasonal investors.
*** 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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The Intergroup Corp. (NASD:INTG) Seasonal Chart
Astro-Med, Inc. (NASD:ALOT) Seasonal Chart
Humana, Inc. (NYSE:HUM) Seasonal Chart
Kroger Co. (NYSE:KR) Seasonal Chart
Cirrus Logic, Inc. (NASD:CRUS) Seasonal Chart
Molina Healthcare, Inc. (NYSE:MOH) Seasonal Chart
The Markets
Stocks closed mildly lower on Wednesday as a selloff in healthcare overshadowed upbeat results pertaining to economic activity in China. The S&P 500 Index closed down by just less than a quarter of one percent, consolidating above the ascending triangle pattern highlighted last week. Upside target of the continuation pattern points to 2930, just a hair below the previous peak around 2940. The market is attempting to digest the downfall in the second largest sector constituent, health care, by rotating into the largest sector, technology. The S&P 500 Technology Sector Index continues to chart new all-time highs and the trend relative to the market continues to point higher. Seasonally, the sector tends to outperform the broader market between the middle of April and the middle of July as investors trim exposure to cyclical bets and gravitate towards growth, which tends to have defensive characteristics into the summer months.
The selloff in the health care sector, which represents close to 14% of the S&P 500 Index, has eliminated all of the year-to-date gains for this previous steady performer. Rhetoric pertaining to “Medicare for All,” which caused the CEO of United Health to weigh in suggesting that it would destabilize the nation’s health system, has sent a wave through this market segment, leaving no stock immune. The Health Care Providers ETF (IHF) is down by over 11.5% in just five sessions; the Biotech ETF (IBB) is down around 7% during that span. Even though the prospect of “Medicare for All” being enacted is slim, the talk has certainly fuelled panic, causing significant outflows as investors trim exposure to the former market darling. The healthcare benchmark relative to the S&P 500 Index is at the lowest level since 2013, implying that in just a few months the sector has given back approximately six years of outperformance. For seasonal investors, the panic and weakness is welcome as it provides the opportunity to pick up unfairly punished constituents for the period of seasonal strength for the sector that begins on April 25th, on average. This is an allocation that we are presently monitoring for the Seasonal Advantage Portfolio that we manage in partnership with CastleMoore. More inclined to manage your own portfolio? Subscribers to our service were provided with a model allocation, identifying the percentage portfolio weight that has delivered the best portfolio performance during the seasonal holding period ahead.
Sentiment on Wednesday, as gauged by the put-call ratio, ended bullish at 0.81.
Seasonal charts of companies reporting earnings today:
S&P 500 Index
TSE Composite
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