Stock Market Outlook for April 26, 2019
Stocks becoming vulnerable as bond prices perk up.
*** 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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Ohio Valley Banc Corp. (NASD:OVBC) Seasonal Chart
Boston Beer Co. Cl A (NYSE:SAM) Seasonal Chart
Equitable Group Inc. (TSE:EQB.TO) Seasonal Chart
Fortinet Inc. (NASD:FTNT) Seasonal Chart
ADTRAN, Inc. (NASD:ADTN) Seasonal Chart
Kimberly Clark Corp. (NYSE:KMB) Seasonal Chart
Alleghany Corp. (NYSE:Y) Seasonal Chart
Clarke, Inc. (TSE:CKI.TO) Seasonal Chart
Caseys General Stores, Inc. (NASD:CASY) Seasonal Chart
The Markets
Stocks closed mildly lower on Thursday as earnings from a number of sector bellwethers pushed and pulled on market benchmarks. The S&P 500 Index closed lower by a mere four basis points, weighed down by industrials and materials; health care and communication services closed solidly higher. The large-cap benchmark remains pinned to all-time high levels, but increasingly signs of vulnerability are materializing. The performance of the energy and materials sectors relative to the S&P 500 Index has fallen to the lows of the year; industrials are not that far off. Consumer discretionary and technology have been the outperformers. When investors start to shed risk, it is typically an indication of market weakness ahead. In the Seasonal Advantage Portfolio that we manage in partnership with CastleMoore, we cut our exposure to Materials in the past week, respecting the downside risks that have become apparent in the data.
While equity markets start to show vulnerabilities, the bond market has perked up. The iShares 7-10 year treasury bond ETF (IEF) gapped higher from its 50-day moving average during Wednesday’s session; momentum indicators are curling higher, continuing to show characteristics indicative of a bullish trend. The bond market has remained stubborn in the midst of the equity rally since the December lows, holding close to 52-week high levels. Traditionally, this is the time of year when investors should consider switching out of stocks and into bonds; thus far, the trend, at least on an absolute basis, is conducive to further gains in the fixed income asset class. In our monthly outlook that is slated to be released to subscribers in the coming days, we highlight an effective indicator that has historically provided clear “sell stocks, buy bonds” signals. Subscribe now and we’ll send you our monthly report when it is released.
On the economic front, durable goods orders surged higher in March, rebounding from the weather impacted slump in the month prior. The headline print indicated that new orders of durable goods increased by 2.7% last month, far surpassing the 0.7% increase that was forecasted by analysts. Core capital goods were similarly strong, up 1.3%, which also far surpasses the consensus estimate that called for a 0.1% rise. Stripping out the seasonal adjustments, the value of manufacturers’ new orders for durable goods industries actually increased by 19.3% in March, which is firmly higher than the 15.0% increase that is average for the month. The year-to-date change now sits higher by 9.2%, solidly above the 5.8% increase that is average for the first quarter. Subscribers received our full analysis of this report, including a tip pertaining to a seasonal trade in the industrial sector that is just beginning. Sign-up now and we’ll send you our report.
Sentiment on Thursday, as gauged by the put-call ratio, ended bullish at 0.85.
Seasonal charts of companies reporting earnings today:
S&P 500 Index
TSE Composite
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