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Stock Market Outlook for February 27, 2020


While everyone is looking down for levels of support, we’re staring to look up to determine where the levels of resistance come in to determine how long we can play a potential rebound trade.

 

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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Encore Capital Group Inc. (NASD:ECPG) Seasonal Chart

Encore Capital Group Inc. (NASD:ECPG) Seasonal Chart

Sanofi SA (NYSE:SNY) Seasonal Chart

Sanofi SA (NYSE:SNY) Seasonal Chart

Preferred Apartment Communities Inc. (NYSE:APTS) Seasonal Chart

Preferred Apartment Communities Inc. (NYSE:APTS) Seasonal Chart

Clearway Energy, Inc. (NYSE:CWEN) Seasonal Chart

Clearway Energy, Inc. (NYSE:CWEN) Seasonal Chart

Brookfield Global Infrastructure Securities Income Fund (TSE:BGI-UN.TO) Seasonal Chart

Brookfield Global Infrastructure Securities Income Fund (TSE:BGI-UN.TO) Seasonal Chart

SPDR Dow Jones Global Real Estate ETF (NYSE:RWO) Seasonal Chart

SPDR Dow Jones Global Real Estate ETF (NYSE:RWO) Seasonal Chart

iShares MSCI World ETF (AMEX:URTH) Seasonal Chart

iShares MSCI World ETF (AMEX:URTH) Seasonal Chart

 

 

The Markets

Stocks attempted to stabilize on Wednesday, but coronavirus jitters kept investors to the sidelines, resulting in another day of red.  The S&P 500 Index shed 0.38%, led by the energy sector as the price of oil fell below $50.  The benchmark rebounded early in the session to levels around the 100-day moving average, but the move failed, which starts to confirm the moving average hurdle as a level of resistance.  Quite simply, the supply of investors willing to sell continues to outweigh those looking to buy.  Next stop below is the 200-day, which is a significant long-term hurdle that the market should, at the very least, attempt to defend.  We’re entertaining two possibilities that we see as being likely.  First, a complete washout of bullish positioning in another panic session that eliminates any hint of complacency that existed previously and leads to a rebound based on the fact that market valuations have become too enticing to ignore.  The other possibility is stabilization of equity prices somewhere between current levels and the 200-day moving average as the negative news fades and investors readopt the optimistic bias that existed previous.  The latter scenario appears more likely, but, of course, we have to be prepared for a washout low that catches everyone off guard.  Either scenario would lead to a buying opportunity, but there are questions as to how long the rebound should be held.  Given the break of the 50 and 100-day moving averages and the significant gap in the range of 3260 and 3330, the levels of resistance overhead are significant.  Fortunately, there is a lot of room between here and there, allowing investors a quick catch-up trade for a move back to these intermediate hurdles.  

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Unfortunately for those that did not heed our guidance last week calling for a “full blown pullback,” at this point the likelihood of a rebound to previous highs in short-order is low.  Given the damaging move that has been recorded over the past week, the muscle memory of investors is likely to sell into levels of resistance in an attempt to take down risk within investment portfolios.  This may contradict a study that we released a month ago to subscribers suggesting that the equity market snaps back abruptly following the initial virus influenced drawdown.  We’re not saying it cannot be done, but rather the market will likely need more time to heal than in the past given the severity of the pullback.  Response to levels of resistance overhead will be key.  A rollover at the 50-day moving average upon a rebound move would immediately imply intermediate-term negative implications, suggesting months before the market even attempts for levels that it was hovering around prior to the pullback.  The situation remains fluid and the market is attempting to find a level of comfort.  We’ll play the rebound move first then examine levels of resistance as they are presented.

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We are busy putting the finishing touches on our monthly outlook for March, which is slated to be released to subscribers in the next day.  The report highlights tendencies for the month(s) ahead, opportunities to take advantage of, and a rundown of what is driving activity in each segment of the market.  Subscribe now to be included on this important distribution.

On the economic front, a report on New Home Sales was released during Wednesday’s session.  The headline print indicated that sales of new homes increased by 7.9% to a seasonally adjusted annualized rate of 764,000.  Analysts were expecting a rate of 710,000.  Stripping out the seasonal adjustments, the actual increase for the month was 18.8%, which far exceeds the 6.3% increase that is average for the month of January.  The strong start to the year follows the best year for the change in new home sales since 1983.  Subscribers can login and view the seasonal charts for this report at the following link: https://charts.equityclock.com/u-s-new-home-sales

New Home Sales Seasonal Chart

Sentiment on Wednesday, as gauged by the put-call ratio, ended bearish at 1.23.  The high level of the put call ratio suggests that complacency in the market is no longer a factor, but there are still some questions as to whether all of the weak hands have been shaken loose. Stay tuned!

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Seasonal charts of companies reporting earnings today:

Fomento Economico Mexicano S.A.B. de C.V. Seasonal Chart Anheuser-Busch Inbev SA Seasonal Chart Toronto Dominion Bank (The) Seasonal Chart Vmware, Inc. Seasonal Chart Ambev S.A. Seasonal Chart Baidu, Inc. Seasonal Chart Sempra Energy Seasonal Chart Autodesk, Inc. Seasonal Chart Keurig Dr Pepper Inc. Seasonal Chart Workday, Inc. Seasonal Chart EOG Resources, Inc. Seasonal Chart Monster Beverage Corporation Seasonal Chart Occidental Petroleum Corporation Seasonal Chart Edison International Seasonal Chart Best Buy Co., Inc. Seasonal Chart Pembina Pipeline Corp. Seasonal Chart CBRE Group, Inc. Seasonal Chart Discovery, Inc. Seasonal Chart Live Nation Entertainment, Inc. Seasonal Chart CenterPoint Energy, Inc. Seasonal Chart Mylan N.V. Seasonal Chart Cable One, Inc. Seasonal Chart NRG Energy, Inc. Seasonal Chart OGE Energy Corp Seasonal Chart Algonquin Power & Utilities Corp. Seasonal Chart American Homes 4 Rent Seasonal Chart Perrigo Company Seasonal Chart Erie Indemnity Company Seasonal Chart NovoCure Limited Seasonal Chart Nielsen N.V. Seasonal Chart FLIR Systems, Inc. Seasonal Chart The Stars Group Inc. Seasonal Chart Clarivate Analytics Plc Seasonal Chart Ritchie Bros. Auctioneers Incorporated Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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