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Stock Market Outlook for May 6, 2019


Stocks at all-time highs, but indications of waning momentum and breadth beneath the surface.

 

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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CorVel Corp. (NASD:CRVL) Seasonal Chart

CorVel Corp. (NASD:CRVL) Seasonal Chart

Canadian REIT (TSE:REF.UN) Seasonal Chart

Canadian REIT (TSE:REF.UN) Seasonal Chart

Haemonetics Corp. (NYSE:HAE) Seasonal Chart

Haemonetics Corp. (NYSE:HAE) Seasonal Chart

Qualys, Inc. (NASD:QLYS) Seasonal Chart

Qualys, Inc. (NASD:QLYS) Seasonal Chart

Altria Group Inc. (NYSE:MO) Seasonal Chart

Altria Group Inc. (NYSE:MO) Seasonal Chart

Sun Life Financial (NYSE:SLF) Seasonal Chart

Sun Life Financial (NYSE:SLF) Seasonal Chart

Allergan plc (NYSE:AGN) Seasonal Chart

Allergan plc (NYSE:AGN) Seasonal Chart

Ensign Group Inc. (NASD:ENSG) Seasonal Chart

Ensign Group Inc. (NASD:ENSG) Seasonal Chart

Fresh Del Monte Produce (NYSE:FDP) Seasonal Chart

Fresh Del Monte Produce (NYSE:FDP) Seasonal Chart

Athenahealth Inc. (NASD:ATHN) Seasonal Chart

Athenahealth Inc. (NASD:ATHN) Seasonal Chart

 

 

The Markets

Stocks jumped higher on Friday as investors digested a much stronger than expected employment report for April.  The headline print for April’s Nonfarm Employment report indicated that 263,000 payrolls were added last month, an improvement versus the 189,000 payrolls added for March and beating expectations that called for an increase of 180,000. The unemployment rate dipped by two-tenths of a percent to 3.6% and average hourly earnings climbed 0.2%, placing the year-over-year increase at 3.2%. Stripping out the seasonal adjustments, 1.126 million payrolls were added in April, or an increase of 0.8%, which edges out the average increase for the month of 0.7%. The year-to-date change stands at two-tenths of a percent above average, just off of the pace set by this time last year.  We sent out our analysis pertaining to the state of employment in the US to subscribers during Friday’s session.  Subscribe now to view our report in the Intraday Report Archive.

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

The S&P 500 Index added just less than one percent to close the week, pushing the large-cap benchmark just above the flatline for the five-day period.  The candlestick for the week suggests indecision around these all-time highs.  A slight narrowing of momentum indicators versus their signal lines suggests, quite obviously, waning momentum.  The benchmark has recouped all of the fourth quarter decline without a standard 5% to 10% drawdown, and while the trajectory of the market over the intermediate-term remains higher, a short-term corrective phase is becoming increasingly likely.  Seasonally, the weaker half of the year for the large-cap benchmark begins in the week ahead, but this does not imply a negative result should be expected.  You can read more in our monthly report, which profiles the strategy of Sell In May and Go Away.

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Along with signs of waning momentum are indications of waning breadth. The NYSE Advance-Decline Volume line has flatlined over the past month around all-time highs as traders commit equal volume to up and down issues.   Similar signs of waning breadth can be seen in the percent of stocks trading above major moving averages.  The indicator showing the percent of S&P 500 stocks trading above 50-day moving averages has been grinding lower for the past couple of months and the percent above the 200-day has just begun to roll over.  The S&P 500 Bullish Percent Index and NYSE Summation Index have similarly rolled over.  These are all indications that a pullback may be brewing.

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An area that we have been highlighting as indication of investor sentiment pushed firmly above resistance during Friday’s session.  The Russell 2000 Index shot above its previous high just above 1600, continuing to carve out the right shoulder to a head-and-shoulders bottoming pattern.  The bottoming setup projects a move back towards the all-time highs.  Strength in the small-cap benchmark is commonly used as a gauge of investor risk sentiment, a leading indicator of equity market strength or weakness.  Recent signs of outperformance in the market segment essentially bodes well for stocks overall. Seasonally, the small-cap benchmark outperforms the large-cap counterpart, on average, through the back half of the second quarter.

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RUSSELL 2000 Index Seasonal Chart

$RUT Relative to the S&P 500
$RUT Relative to the S&P 500

$RUT Monthly Averages

Sentiment on Friday, as gauged by the put-call ratio, ended bullish at 0.77.

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Seasonal charts of companies reporting earnings today:

Abraxas Petroleum Corporation (AXAS) Seasonal Chart Alaska Communications Systems Group, Inc. (ALSK) Seasonal Chart American International Group, Inc. (AIG) Seasonal Chart American States Water Company (AWR) Seasonal Chart Assurant, Inc. (AIZ) Seasonal Chart Bausch Health Companies Inc. (BHC) Seasonal Chart Cabot Corporation (CBT) Seasonal Chart Central Garden & Pet Company (CENT) Seasonal Chart Douglas Dynamics, Inc. (PLOW) Seasonal Chart Ecopetrol S.A. (EC) Seasonal Chart Howard Hughes Corporation (The) (HHC) Seasonal Chart Hudbay Minerals Inc. (HBM) Seasonal Chart Iamgold Corporation (IAG) Seasonal Chart International Flavors & Fragrances, Inc. (IFF) Seasonal Chart KLA-Tencor Corporation (KLAC) Seasonal Chart Lannett Co Inc (LCI) Seasonal Chart Luminex Corporation (LMNX) Seasonal Chart Mosaic Company (The) (MOS) Seasonal Chart Occidental Petroleum Corporation (OXY) Seasonal Chart Pioneer Natural Resources Company (PXD) Seasonal Chart Sysco Corporation (SYY) Seasonal Chart Tidewater Inc. (TDW) Seasonal Chart Tyson Foods, Inc. (TSN) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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