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Stock Market Outlook for March 4, 2020


The iShares 7-10 Year Treasury Bond ETF is presently the most overbought on record.

 

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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Owens & Minor Inc. Holding Co. (NYSE:OMI) Seasonal Chart

Owens & Minor Inc. Holding Co. (NYSE:OMI) Seasonal Chart

Ocwen Financial Corp. (NYSE:OCN) Seasonal Chart

Ocwen Financial Corp. (NYSE:OCN) Seasonal Chart

SPDR Russell 1000 Low Volatility ETF (AMEX:LGLV) Seasonal Chart

SPDR Russell 1000 Low Volatility ETF (AMEX:LGLV) Seasonal Chart

 

 

The Markets

Stocks sold off on Tuesday following the announcement of an emergency rate cut by the US Fed, a measure intended to help mitigate the impact of the economic slowdown resulting from the coronavirus.  The S&P 500 Index shed 2.8% in another wild swing for equity markets.  The benchmark is back below its 200-day moving average and the long upper-wick to Tuesday’s candlestick indicates that supply exceeds demand in the range of last Thursday’s gap between 3070 and 3110.  Momentum indicators on the daily chart are still showing signs of attempting to rebound from deeply oversold levels.

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An hourly look probably provides a better view given the extreme and abrupt fluctuations that are being realized daily.  The benchmark moved up to its 50-hour moving average around the highs of the session, a variable hurdle that investors sold into.  But despite the benchmark ending in the the lower quartile of Tuesday’s range, reason to be constructive may still be apparent.  Clearly, the benchmark has broken that sharply negative declining trend that was apparent through the past week.  Monday’s session allowed the benchmark to advance above the 20-hour moving average, a level that the benchmark enticed a wave a buying momentum into the closing bell.  That ultra short-term hurdle is now flattening out, providing support to Tuesday afternoon’s selloff.  A hammer candlestick during the 2 o’clock hour suggests that traders attempted to defend the hurdle.  Confirmation of support around the 20-hour moving average would go a long way in forging a solid short-term low sufficient enough to entice sidelined investors back into the market.  Next hurdle to the downside is Friday’s low and significant support from last summer’s lows around 2850.  The situation remains highly fluid, but, dare we say, Tuesday’s session was the first bit of normal trading in this market swoon as investors used the massive surge in prices from Monday to reallocate.

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The oversold condition of the large-cap benchmark is easily apparent when looking at the chart of the large-cap benchmark.  The Relative Strength Index (RSI), Moving Average Convergence Divergence (MACD), and Full Stochastics touched the lowest level since December 2018, indicating a market stretched significantly to the downside.  An indicator of breadth is showing a similar oversold state.  The percent of stocks above 50-day moving averages hit a low of 3.41% at the end of last month, among the lowest levels on record.  Historically, when this indicator falls below 20% and bottoms, significant lows in prices follow.

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But, of course, the battle between the bulls and the bears is playing out in the bond market as well.  In yesterday’s report we noted the long upper-wick on the intermediate US treasury ETF (IEF), hinting of a topping setup.  The rate cut catalyst provided on Tuesday fuelled another round of buying demand, however, another “toppy” candlestick was seen.  The ETF was higher by 1.91% at the peak of the session, but trimmed those gains into the close to end higher by 1.16%.  Another long-wick candlestick is the result.  The Relative Strength Index (RSI) of the ETF touched the highest level on record around 86, indicating a significantly overbought state. We noted the 10-year treasury yield at 1.5% as a level to watch two weeks ago given that “it would be difficult to not spook the equity market should the yield on this intermediate bond break significant support.”  Any reprieve in the downward pressure on the intermediate yield, which momentarily broke below 1.0% on Tuesday, would provide indication that the fear trade is exhausted and the risk-on trade may have its time in the sun.  We cannot emphasize this enough that the situation remains highly fluid, but we have the seeds to start to stabilize the market; whether they can grow and mature is the big question given the big cloud overhanging the market.

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While this is a very technical driven market given the uncertainties surrounding the fundamentals, we must continue to monitor the three prongs to our approach encapsulating seasonal, technical, and fundamental analysis.  On Tuesday, we released a recap of fourth quarter earnings season, as gauged through the perspective of the constituents of the Dow Jones Industrial Average.  We also provide insight on what to look for to determine if a sustainable negative move for stocks is at hand. Signup now and we’ll send you this timely insight.

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Sentiment on Tuesday, as gauged by the put-call ratio, ended bullish 0.81.

 

 

Seasonal charts of companies reporting earnings today:

Brown Forman Corporation Seasonal Chart Splunk Inc. Seasonal Chart Dollar Tree, Inc. Seasonal Chart Marvell Technology Group Ltd. Seasonal Chart Campbell Soup Company Seasonal Chart Guidewire Software, Inc. Seasonal Chart Navistar International Corporation Seasonal Chart The Descartes Systems Group Inc. Seasonal Chart National Steel Company Seasonal Chart Ballard Power Systems, Inc. Seasonal Chart ABM Industries Incorporated Seasonal Chart American Eagle Outfitters, Inc. Seasonal Chart TransAlta Corporation Seasonal Chart TTEC Holdings, Inc. Seasonal Chart 21Vianet Group, Inc. Seasonal Chart Geopark Ltd Seasonal Chart Materialise NV Seasonal Chart Astec Industries, Inc. Seasonal Chart Abercrombie & Fitch Company Seasonal Chart Photronics, Inc. Seasonal Chart Cellectis S.A. Seasonal Chart Baytex Energy Corp Seasonal Chart Western Asset Mortgage Capital Corporation Seasonal Chart Ituran Location and Control Ltd. Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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