Contact | RSS Feed

Stock Market Outlook for March 3, 2020


Watching the levels of potential resistance following a bounce from a significant range of support.

 

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:

Subscribers – Click on the relevant link to view the full profile. Not a subscriber? Signup here.

Senior Housing Properties Trust (NASD:SNH) Seasonal Chart

Senior Housing Properties Trust (NASD:SNH) Seasonal Chart

TAL Education Group (NYSE:TAL) Seasonal Chart

TAL Education Group (NYSE:TAL) Seasonal Chart

Apollo Commercial Real Estate Finance, Inc. (NYSE:ARI) Seasonal Chart

Apollo Commercial Real Estate Finance, Inc. (NYSE:ARI) Seasonal Chart

Federal Signal Corp. (NYSE:FSS) Seasonal Chart

Federal Signal Corp. (NYSE:FSS) Seasonal Chart

SunOpta Inc. (NASD:STKL) Seasonal Chart

SunOpta Inc. (NASD:STKL) Seasonal Chart

First Trust High Income ETF (NASD:DDIV) Seasonal Chart

First Trust High Income ETF (NASD:DDIV) Seasonal Chart

SPDR S&P Insurance ETF (NYSE:KIE) Seasonal Chart

SPDR S&P Insurance ETF (NYSE:KIE) Seasonal Chart

 

 

The Markets

Although today may be Super Tuesday, investors that were long stocks coming into the start of the week must be thinking that Monday was pretty super.  The S&P 500 Index gained a whopping 4.6%, achieving the best point gain on record.  The benchmark closed back above its 200-day moving average, instantly moving into the gap that was opened during Thursday’s session between 3070 and 3110.  The summer lows are being confirmed as a level of support between 2820 and 2850, but, while the benchmark has bounced firmly from this zone, given the pronounced plunge that was recorded in the past week, it would not be out of the question to see this zone tested again before stability is achieved.  The situation remains highly fluid and we’ll be monitoring accordingly.  The moves in stocks, while wild, present tremendous alpha generating opportunities, something that we’ve effectively taken advantage of; subscribers have been notified at each pivot, enabling them to act without having to panic.  In our Market Outlook for February 19 (released on February 18th), we indicated that it was “prudent to look at risk parameters within portfolios” and “the technicals … [suggest] caution, at least for the short-term.  Complacency in this market remains elevated, which makes stocks vulnerable should a shock event be realized.”  This was followed by cautious commentary in the days that followed to lead us to conclude that we have the “highest likelihood of a full blown pullback.”  This was all reported to subscribers at or near the all-time highs in stocks.  But, in this business, you’re only as good as your last move.  On Thursday, we released a special report to subscribers indicating that,  as a result of a number of factors, an appealing risk-reward entry point had been achieved and that “ portfolio managers unwilling to show losing positions on their books are likely to complete those sales today (Thursday)”.  Equity benchmarks in the US are firmly higher since.  If these signals would be of value to your investment process, consider subscribing to our service.  A Monthly ($25) or Yearly ($250) subscription entitles you to a wealth of subscriber exclusive content that will help to guide you through this market. We indicated on Thursday that we are now looking for levels that stocks may resist upon a rebound attempt and are willing to act accordingly around those hurdles.  Stay tuned!

image

As of Friday, the below chart is our playbook.  The large-cap benchmark was showing signs of support around the previously mentioned range around last summer’s lows.  On Monday, the benchmark moved above its 200-day moving average, which investors reacted to intraday.  The door is now open for a move to the next hurdle at the 100-day, at 3168.  The previously mentioned gap between 3070 and 3110 is also a hurdle where the supply to sell may be a factor.  While previous virus events have led to a V-shaped rebound, we’ve lowered the probability of that occurring this time given the damage that has been charted over the past week; this market will likely need time to heal before a return to all-time highs can be entertained.  The probable path is a standard A-B-C correction, where the first move lower accounts for the A-wave, followed by a B-wave rebound, then a C-wave that potentially undercuts the A-wave low.  This is not a forecast, but rather a guide; we’re willing to alter that viewpoint should the technicals suggest otherwise.  Looking for more of a robust playbook?  Our monthly outlook for March was just released to subscribers at the end of last week, detailing things to look out for and how to position for the month(s) ahead, covering everything from equities, currencies, to commodities, where relevant.  Signup now and we’ll send you this timely insight.

image

Important note to Subscribers…

We received indication over the weekend that our monthly outlook distribution may have been filtered into some member’s spam folders.  If you are subscribed to our service, please check your spam folder to assure any distribution from us has not been re-routed by mistake.  Be sure to include our email domain “@equityclock.com” in your approved senders list.

Looking for indications of what may sustain the equity market rebound, look no further than the bond market.  In the Seasonal Advantage Portfolio that we manage in partnership with Castlemoore, we took off risk in our equity portfolio and rotated into bonds in the middle of February in order to hedge against the risk of a pronounced market downfall.  We subsequently rotated out of our bond market position on Thursday and back into stocks.  The bond market has been the hideout in this market plunge, forcing yields to record lows.  The yield on the 10-year treasury note fell below 1.1% during Monday’s session, but ended the day higher for the first time since February 19th.  The intermediate bond fund (IEF) reversed a gain of around two-thirds of one percent on the day, charting a candlestick with a long upper-wick.  This is typically a topping setup, suggesting that the fixed income ETF may have peaked, at least in the short-term.  The fund had moved higher in a parabolic manner in recent days and had become the most overbought since December of 2018.  Of course, December of 2018 didn’t bring an end to the strength in the bond market, but it did mark a significant low in stocks that followed.  Continued alleviation of the fear-trade could be conducive for stocks to try to stabilize.  As mentioned previous, the situation remains fluid given the unprecedented panic that has surrounded this event and we’ll be monitoring things accordingly.

image

On the economic front, a report on construction spending in the US provided a bit of good news to go along with the broad equity market rally.  Construction spending in the US is indicated to have risen by 1.8% in January, which is well above the 0.6% increase that was expected by analysts.  The year-over-year change is now +6.8% up from +6.4% previous.  Stripping out the seasonal adjustments, total construction spending actually fell by 6.9%, which is much stronger than the 9.1% decline that is average for the first month of the year.  The result follows at 6.8% increase recorded for all of 2019, firmly stronger than the 3.3% increase that is average.  We’ve uploaded the seasonal charts for this report at the following link: https://charts.equityclock.com/u-s-construction-spending

Total Construction Spending  Seasonal Chart

Sentiment on Monday, as gauged by the put-call ratio, ended bearish at 1.29.  Despite the tremendous rebound rally in stocks, the put-call ratio remained elevated all day, suggesting that investors were more inclined to hedge positions rather than to speculate on the upside.  This is the exact opposite situation that was apparent at the start of the year when low levels of the ratio suggested complacency, leading to the shock decline in stocks that followed.  Now that investors are hedged, the impetus to sell stocks is mitigated, typically conducive to supporting prices.

image

 

 

Seasonal charts of companies reporting earnings today:

Target Corporation Seasonal Chart Ross Stores, Inc. Seasonal Chart AutoZone, Inc. Seasonal Chart Veeva Systems Inc. Seasonal Chart Hewlett Packard Enterprise Company Seasonal Chart Kohl's Corporation Seasonal Chart Nordstrom, Inc. Seasonal Chart BRF S.A. Seasonal Chart LATAM Airlines Group S.A. Seasonal Chart Fox Factory Holding Corp. Seasonal Chart Urban Outfitters, Inc. Seasonal Chart International Game Technology Seasonal Chart Ambarella, Inc. Seasonal Chart AeroVironment, Inc. Seasonal Chart Cornerstone Building Brands, Inc. Seasonal Chart Cytokinetics, Incorporated Seasonal Chart OneSpan Inc. Seasonal Chart Vectrus, Inc. Seasonal Chart Green Brick Partners, Inc. Seasonal Chart

 

 

S&P 500 Index

image

image

 

 

TSE Composite

image

image

 

Sponsored By...
Seasonal Advantage Portfolio by CastleMoore

Comments are closed.