Stock Market Outlook for March 10, 2020
Put-call ratio charting the highest level on record after surpassing the December 2018 peak.
*** 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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Dover Corp. (NYSE:DOV) Seasonal Chart
Mack-Cali Realty Corp. (NYSE:CLI) Seasonal Chart
Select Medical Holdings Corp. (NYSE:SEM) Seasonal Chart
Everi Holdings Inc. (NYSE:EVRI) Seasonal Chart
The Markets
An absolutely brutal day for equity markets around the globe as the price of oil crashed amidst an unwind of one of the most consensus trades of this decade, which was to go long oil and short treasury bonds. The S&P 500 Index fell by 7.6%, trading to the lowest levels since last spring. The plunge was so severe that circuit breakers were triggered for the first time in two decades as programs sought to limit the panic and bring some calm to the chaos. The May 2019 low at 2728 presents a minor level of support; the more substantial level of support is around 2600, representing the lows charted a number of times throughout 2018. The benchmark continues to hold firmly below its 200-day moving average, which implies a certain degree of instability given that major moving averages are no longer supporting the trend. I provided further comments during Monday’s episode of Market Call Tonight on BNN Bloomberg. Watch the replay at the following link: https://www.bnnbloomberg.ca/market-call-tonight/full-episode-market-call-tonight-for-monday-march-9-2020~1915108
The action during Monday’s session, while pronounced, wasn’t all that much of a surprise to us. In our special report to subscribers released early in Friday’s session, we noted that a bearish continuation pattern presented the likelihood of follow through to the losses recorded during the week prior. We also noted that the move “ below the 200-day moving average suggests caution.” If you’re not receiving these timely insights, be sure to subscribe to be included on our distribution list.
When all points of reference are violated on your chart, the only thing you can do is zoom out to find the next logical point that may act to support the ultra long-term rising trend in stocks. The weekly chart may be key. During the fourth quarter of 2018, the bear market decline that was realized leading up to the low recorded on Christmas eve almost precisely tested the 200-week moving average before charting a significant reversal candlestick that led to the massive rebound rally through the first half of 2019. The 200-week moving average is now at 2640, which, if achieved, would present an incredibly enticing risk-reward entry point to re-accumulate risk. The relative strength index (RSI) on this weekly look has fallen to the lowest level since the December bottom just over a year ago; the benchmark hasn’t become substantially oversold according to this metric since 2008, which, of course, was part of a massive recessionary downturn that culminated with the March 2009 low. There is a chance that the momentum indicator falls into oversold territory (RSI <30) before the selling climaxes.
Sentiment on Monday, as gauged by the put-call ratio, ended bearish at 1.83. This reading is higher than the December 2018 high of 1.82, which was the highest level on record. Back in 2018, following the similar overly bearish reading, it took just two sessions for the equity market to chart a significant low, leading to the massive gains that followed through the first half of 2019. Bearish readings, such as this, are indicative of investor hedging, which has the influence of mitigating selling pressures as the requirement to sell stocks is diminished.
Seasonal charts of companies reporting earnings today:
S&P 500 Index
TSE Composite
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