Russell 2000 still being pinned within an ascending triangle, a break of which appears imminent.

Stock Market Outlook for April 29, 2019

Russell 2000 still being pinned within an ascending triangle, a break of which appears imminent.

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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McKesson Corp. (NYSE:MCK) Seasonal Chart

Tableau Software, Inc. (NYSE:DATA) Seasonal Chart

Proofpoint, Inc. (NASD:PFPT) Seasonal Chart

TripAdvisor, Inc. (NASD:TRIP) Seasonal Chart

LKQ Corp. (NASD:LKQ) Seasonal Chart

Enbridge, Inc. (TSE:ENB.TO) Seasonal Chart

TransCanada Corp. (NYSE:TRP) Seasonal Chart

First Capital Realty Inc. (TSE:FCR.TO) Seasonal Chart

Constellation Brands, Inc. (NYSE:STZ) Seasonal Chart

Scripps Networks Interactive Inc. (NASD:SNI) Seasonal Chart

The Markets

Stocks closed mildly higher on Friday following a much stronger than expected GDP report for the first quarter. The Commerce Department indicated that the US economy grew by 3.2% through the first three months of the year, easily topping the 2.5% consensus analyst estimate. The S&P 500 Index added just less than half of a percent, closing at a new record high. For the week, the large-cap benchmark was higher by 1.20%, achieving a new all-time weekly close above the previous peak charted in September. Momentum indicators on the weekly look continue to point higher, as are major moving averages. The all-time intraday and intra-week high at 2940.91 is now around one point away, representing the last hurdle in the way of this bull market trend. Seasonally, the large-cap benchmark tends to drift higher through the end of the month as month-end window dressing and start of month inflows leads to an average peak in stocks around the start of May.

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Encouraging for the prospects of the continuation of the positive intermediate trend of the equity market is the attempt by the Russell 2000 Small cap index to breakout. The benchmark has been stabilizing around the convergence of major moving averages around the 20, 50, and 200-day. Resistance just below 1600 forms the basis of a head-and-shoulders bottoming pattern, which would provide an upside target of the previous highs if broken. The relative performance of small cap stocks provides good indication of investor risk sentiment and while the market segment has underperformed since the end of February, around the time of the conclusion of its period of seasonal strength, signs of stability are emerging. Outperformance would be a sign of buying demand and be suggestive of investors chasing risk in attempt to play catch-up with the market return, at least for those that sat out the market rally from the December low. Seasonally, the Russell 2000 tends to gain on an absolute and relative basis in the months of May and June.

$RUT Relative to the S&P 500

Diverging from the market performance on Friday was the energy sector as the price of oil plunged by over 3%. Negative reaction to earnings from some sector bellwethers was also a factor. The S&P 500 Energy Sector Index was down by 1.21%, pushing the chart of the sector benchmark relative to the S&P 500 Index to the lowest level since 2000. The sector strongly outperformed the market leading into the last recession, but in the decade since the recession ended the sector has underperformed by a substantial margin as “growthier” areas of the market attract the fund flows. The price of oil is up by around 40% year-to-date, while energy stocks are higher by just less than 16%. Seasonally, the sector concludes its period of seasonal strength at the beginning of May. We sent out a report to subscribers on Wednesday highlighting the near-term risks for the price of oil. Subscribe now and view our analysis pertaining to the state of the energy market in the US.