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Stock Market Outlook for March 5, 2020


So far (through the end of February), data does not show any material deviation of the trend of the economy as a result of the coronavirus: gasoline product supplied, a gauge of demand, trending above average.

 

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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Air Products and Chemicals, Inc. (NYSE:APD) Seasonal Chart

Air Products and Chemicals, Inc. (NYSE:APD) Seasonal Chart

EnerVest Diversified Income  (TSE:EIT/UN.TO) Seasonal Chart

EnerVest Diversified Income (TSE:EIT/UN.TO) Seasonal Chart

Savaria Corp. (TSE:SIS.TO) Seasonal Chart

Savaria Corp. (TSE:SIS.TO) Seasonal Chart

Old Republic Intl Corp. (NYSE:ORI) Seasonal Chart

Old Republic Intl Corp. (NYSE:ORI) Seasonal Chart

Polyone Corp. (NYSE:POL) Seasonal Chart

Polyone Corp. (NYSE:POL) Seasonal Chart

Vail Resorts, Inc. (NYSE:MTN) Seasonal Chart

Vail Resorts, Inc. (NYSE:MTN) Seasonal Chart

RBC Bearings Inc. (NASD:ROLL) Seasonal Chart

RBC Bearings Inc. (NASD:ROLL) Seasonal Chart

SunOpta, Inc. (TSE:SOY.TO) Seasonal Chart

SunOpta, Inc. (TSE:SOY.TO) Seasonal Chart

AbbVie Inc. (NYSE:ABBV) Seasonal Chart

AbbVie Inc. (NYSE:ABBV) Seasonal Chart

Magna Intl, Inc. (TSE:MG.TO) Seasonal Chart

Magna Intl, Inc. (TSE:MG.TO) Seasonal Chart

iShares Convertible Bond Index ETF (TSE:CVD.TO) Seasonal Chart

iShares Convertible Bond Index ETF (TSE:CVD.TO) Seasonal Chart

VanEck Vectors High Yield Municipal Index ETF (NYSE:HYD) Seasonal Chart

VanEck Vectors High Yield Municipal Index ETF (NYSE:HYD) Seasonal Chart

 

 

The Markets

Stocks surged on Wednesday as investors embraced the increased momentum of Joe Biden’s campaign for president following some key “Super Tuesday” wins. The S&P 500 Index closed with a gain of 4.22%, instantly retracing the 3.6% loss recorded in the prior day’s session.  The benchmark continues to rebound from deeply oversold levels as investors take advantage of last week’s plunge to add favoured equity positions.

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Given the speed of the moves, the hourly chart continues to provide a useful guide.  We noted in our last report that as long as the benchmark held support at its 20-hour moving average, “reason to be constructive may still be apparent.”  The benchmark bounced firmly from this level early in the session, confirming the first higher-low on the hourly chart since early February.  Resistance at the 50-hour moving average was taken out in the afternoon trade, sending the benchmark back to around the high recorded in the prior day’s session.  A short-term head-and-shoulders bottoming pattern can be derived with the neckline around Tuesday’s peak of 3136.  If the bullish setup is fulfilled, the pattern suggests an upside target of 250 points, which is back to the all-time high.  Obviously, in this highly uncertain market environment, we’ll keep an open mind.  Next hurdle on the upside (its a big one) is previous short-term horizontal support at 3215.  At this point, it seems likely that the benchmark may need a catalyst to break through this apparent ceiling.  The level is 2.7% above Wednesday’s close.  As emphasized, the situation surrounding the virus remains highly fluid and can change on a moment’s notice.  Make sure to subscribe in order to not miss out on any reports that provide guidance on how to position in this market.

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On Wednesday, we received a few data-points that touch on how the economy is holding up through the end of February.  ADP reports that employment increased by 183,000, a beat versus estimates of an increase of 165,000.   As for energy commodity inventories, the Energy Information Administration reported a larger than expected draw in product stockpiles through the last week of February.  The year-to-date change in the level of product supplied has been trending above average, hinting of healthy demand.  We will receive more February data on Friday with the Nonfarm Paryroll report.  So far, the data does not show any material deviation of the trend of the economy as a result of the coronavirus.  We released further insight to subscribers pertaining to the state of consumer spending with a report on US Vehicle Sales for February.  In an environment of panic and uncertainty, we crave data in order to confirm or dismiss the concerns of the market, therefore don’t miss this timely insight on how the consumer is performing through the end of February.

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

One of the indicators in our tool-chest that we use to determine the level of demand for stocks is the Dark Index, which provides indication of dark pool buying activity.  Theory has it, when big orders are placed in the market, they are often routed through dark pools, which “are a type of alternative trading system that give investors the opportunity to place orders and make trades without publicly revealing their intentions during the search for a buyer or seller.”  The Dark Index advanced above 45% on Tuesday, a critical hurdle to indicate buying demand.  The suggestion is that big investors were using Tuesday’s sell-off to buy positions, typically pre-cursor to a big move higher in prices.  Wednesday’s session was the result.  The dark index  had remained depressed since the end of last year, suggesting that big buyers were not enticed by the euphoric highs in stocks in January and February.  Tuesday’s print above 45% suggests that they are coming back to the game.  The index closed Wednesday’s session at 42%, just below the 45% threshold that is desired.

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Sentiment on Wednesday, as gauged by the put-call ratio, ended bearish at 1.25.  It is a healthy indication that investors are buying stocks and hedging as it reduces the requirement to sell should markets sour again. The elastic band stretches in both directions and we are presently in the midst of a snap-back.  The ratio continues to be a reliable contrarian indicator for investors to use to determine the risk-reward of the equity market.

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Seasonal charts of companies reporting earnings today:

Costco Wholesale Corporation Seasonal Chart Canadian Natural Resources Limited Seasonal Chart Kroger Company (The) Seasonal Chart The Cooper Companies, Inc. Seasonal Chart Burlington Stores, Inc. Seasonal Chart Vipshop Holdings Limited Seasonal Chart Toro Company (The) Seasonal Chart Ciena Corporation Seasonal Chart Donaldson Company, Inc. Seasonal Chart Tech Data Corporation Seasonal Chart H&R Block, Inc. Seasonal Chart Cantel Medical Corp. Seasonal Chart Crescent Point Energy Corporation Seasonal Chart Plug Power, Inc. Seasonal Chart Methode Electronics, Inc. Seasonal Chart Renewable Energy Group, Inc. Seasonal Chart Surgery Partners, Inc. Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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