Investors defensively positioned going into the weekend, giving them comfort to defend the rising 50-day moving average on the S&P 500 Index.

Stock Market Outlook for May 13, 2019

Investors defensively positioned going into the weekend, giving them comfort to defend the rising 50-day moving average on the S&P 500 Index.

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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Crown Castle Intl Corp. (NYSE:CCI) Seasonal Chart

Weyco Group, Inc. (NASD:WEYS) Seasonal Chart

QuinStreet Inc. (NASD:QNST) Seasonal Chart

Scholastic Corp. (NASD:SCHL) Seasonal Chart

Nature’s Sunshine Products, Inc. (NASD:NATR) Seasonal Chart

Intact Financial Corp. (TSE:IFC.TO) Seasonal Chart

Hawaiian Electric Industries Inc. (NYSE:HE) Seasonal Chart

Lions Gate Entertainment Corp. (NYSE:LGF/A) Seasonal Chart

RE-Max Holdings Inc. (NYSE:RMAX) Seasonal Chart

The Markets

Stocks closed higher on Friday, showing resiliency in the face of extreme adversity following the imposition of additional US tariffs on Chinese goods and a dismal initial public offering of the much anticipated Uber. The S&P 500 Index closed with a gain of just less than four-tenths of one percent, rebounding from a decline of 1.55% at the lows of the session. Typical of a market that is showing uncertainty going into the weekend, investors pinned the market to intermediate support around its 50-day moving average as portfolio managers squared away positions to mitigate any event risk by the market open on Monday. Until some certainty is derived, expect the large-cap benchmark to hold within a tight range around its 20 and 50-day moving averages at 2914 and 2862, respectively. Long-term support at the 200-day (2776) is the near-term downside risk. Often times a test of the major moving averages (the 20, 50, and 200 day) can provide an important gauge of how investors perceive the timeframe of the uncertainty at hand. The moving average acts as a pivot point to events that are perceived short-term in nature at the 20-day, intermediate-term at the 50-day and long-term at the 200-day. Investors are suggesting that, while a short-term resolution appears unlikely, a solution in the intermediate term will be achieved. And if the situation sours further to produce long-term negative implications, the 200-day becomes the bogey. Despite the very strong levels of resistance overhanging major market benchmarks, the levels of support beneath this market are many, therefore making it premature to call the conclusion to the bullish trend that began with the low on Christmas eve. As long as major moving averages are pointed higher and supporting the market, a bullish bias is warranted.

Even with the gain on Friday, the session was far from risk-on. Defensives led the market higher with gains topping one percent in the consumer staples, utilities, and real estate sectors. This is typically a sign of risk aversion as portfolio managers position for the risks in front of them. But within the recent rotation, there are also evidence of renewal in some of the risk-on areas of the market. Strength in technology is giving way to outperformance in financials. Communication services remains in an outperforming trend. And industrials are hinting of starting an outperforming trend of their own. The gravitation towards risk-off plays amidst the uncertainty creates ammunition for the risk-on plays should the risks be alleviated.

On the economic front, Statscan released employment data for the month of April. The headline print of Canada’s Labour Force Survey indicated that employment increased by 106,500 last month, which is much stronger than the 4,000 increase that was forecasted by analysts. The unemployment rate ticked mildly lower from 5.8% to 5.7%. Stripping out the seasonal adjustments, employment in Canada actually increased by 187,700 last month, or 1.0%, which is stronger than the 0.7% increase that is average for this time of year. The result puts the year-to-date pace 0.7% above the seasonal average trend, which is the best performance since 2012. Subscribe now and we’ll send you our analysis of this report, including a data-point in the results that conflicts with the postulation of a strong labour market.

Sentiment on Friday, as gauged by the put-call ratio, ended bearish at 1.24. With investors seemingly hedged by way of put options, it is no wonder they were comfortable going long into the weekend.