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Stock Market Outlook for March 11, 2020


Chinese equities trading around 52-week highs as their economy gets back to work while other economies around the globe suffer from escalating coronavirus tallies.

 

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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Sprint Corp. (NYSE:S) Seasonal Chart

Sprint Corp. (NYSE:S) Seasonal Chart

Pine Cliff Energy Ltd. (TSE:PNE.TO) Seasonal Chart

Pine Cliff Energy Ltd. (TSE:PNE.TO) Seasonal Chart

Newpark Resources, Inc. (NYSE:NR) Seasonal Chart

Newpark Resources, Inc. (NYSE:NR) Seasonal Chart

Annaly Capital Management, Inc. (NYSE:NLY) Seasonal Chart

Annaly Capital Management, Inc. (NYSE:NLY) Seasonal Chart

Invesco S&P International Developed Quality ETF (AMEX:IDHQ) Seasonal Chart

Invesco S&P International Developed Quality ETF (AMEX:IDHQ) Seasonal Chart

Invesco International Dividend Achievers ETF (NASD:PID) Seasonal Chart

Invesco International Dividend Achievers ETF (NASD:PID) Seasonal Chart

Invesco S&P SmallCap 600 Pure Growth ETF (NYSE:RZG) Seasonal Chart

Invesco S&P SmallCap 600 Pure Growth ETF (NYSE:RZG) Seasonal Chart

 

 

The Markets

A large snap-back for stocks on Tuesday as markets attempted to recoup the loss from the previous session.  The S&P 500 Index gained 4.94%, closing at the highs of the session.  The benchmark is presently moving back into the open gap that was charted during Monday’s session between 2850 and 2900, providing a hurdle for traders to grind through as they attempt to rally the market in the short-term.  As with previously opened gaps, resistance around these hurdles is implied.  The next gap to the upside is Friday’s gap around 2980 to 3000.  But while these levels of resistance appear threatening, the first sign of waning selling pressures is being observed.  On the hourly chart, MACD and RSI are both positively diverging from price, an indication that selling pressures are weakening, despite the losses.  This is typically a precursor to the confirmation of a short-term low, such as what was realized at the end of January.  The technical setup is very enticing, assuming the benchmark can move meaningfully above gap resistance at the previously mentioned hurdle of 2900.  In our special report to subscribers, we ask the question “Is The Worst Over?”  The report highlights the seasonal influences pertaining to viral outbreaks, using reported influenza-like-illnesses as a proxy.  Signup now to receive this subscriber-exclusive content.

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While investors continue to watch the growing tally of coronavirus cases outside of China, Chinese equities have shown exceptional strength as activity starts to return to normal.  The China A-Shares ETF (ASHR) is hovering very close to 52-week highs, showing a pattern on the chart that resembles a cup-and-handle.  This is a bullish setup that projects significant upside potential should price break above resistance around $30.  The number of new cases of the coronavirus has been subsiding over the past month, seemingly providing the all-clear to investors to accumulate exposure to an economy that is poised to benefit from economic stimulus that has rolled out around the globe.  Seasonally, Chinese equities tend to outperform US stocks at this time of year.   In the Seasonal Advantage Portfolio that we manage in partnership with Castlemoore, we have held exposure to Chinese equities over the past few months.

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$SSEC Relative to the S&P 500

Perhaps suggesting a bit of optimism pertaining to the Chinese market, the price of copper has held up remarkably well in the midst of the commodity market volatility, mainly with respect to energy commodity prices.  The price of the industrial metal has held firm at a level of declining trendline support for the past year and a half.   Recent activity shows significant outperformance versus the GSCI Commodity Index.  The pattern between mid-2017 and mid-2019 revealed what continues to appear as a head-and-shoulders topping pattern.  The bearish pattern presented significant downside risks towards the 2016 lows around $2 per pound charted amidst a manufacturing recession that took a toll on the broader commodity market.  While the price of oil is closing on those manufacturing recession lows, the industrial metal has held firm.  Major moving averages are still pointing lower, suggesting that the momentum behind the price is still negative and the longer-term bearish setup could be fulfilled, particularly if the coronavirus continues to take a toll, but the resiliency around a level of significant support is impressive, nonetheless.  Seasonally, the price of copper typically gains into the spring amidst the ramp up in manufacturing activity, but the virus clearly has caused things to deviate from the normal path for this time of year.

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Copper Futures (HG) Seasonal Chart

One commodity sensitive market charted a particularly interesting candlestick pattern during Tuesday’s session.  I’m sure you’ve seen commentary of hammer candlestick patterns in recent weeks based on the performance of equity markets in the US amidst the volatility.  The pattern is derived by a long lower-wick combined with a positive body; in downturns, where the bears have control, they send prices lower through the middle of the session, but, as selling becomes exhausted, bulls regain control of the market into the close, forcing the end of day value above the opening price.  We’ve seen a couple of these candles on the S&P 500 over the past couple of weeks, but their closing values were unable to exceed the close from the prior session.  The Australia All Ordinaries Index showed a hammer candlestick that is more reliable as an indication of a significant low.  The commodity sensitive market closed higher by almost 3% on Tuesday after trading down by almost 4% at the lows of the session.  The benchmark is deeply oversold, suggesting that selling pressures are at or near a peak.  The impact of weak commodity prices is apparent on the relative chart versus the S&P 500 Index, suggesting better opportunities elsewhere.  Still, to realize a candlestick pattern of this nature is indication that investors are starting to step in to buy depressed equity positions, an essential element to deriving a bottoming pattern to get the broader market more enticed.

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ALL ORDINARIES Seasonal Chart

Sentiment on Tuesday, as gauged by the put-call ratio, ended bearish at 1.19.  The result follows the overly bearish result recorded on Monday at 1.83, which was the highest total put-call ratio that we have on record (going back 25 years).  Overly bearish indications, such as this, typically precede significant market lows.

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Seasonal charts of companies reporting earnings today:

Wheaton Precious Metals Corp. Seasonal Chart Semtech Corporation Seasonal Chart Hanger, Inc. Seasonal Chart DAQO New Energy Corp. Seasonal Chart Ready Capital Corporation Seasonal Chart Fortuna Silver Mines Inc. Seasonal Chart Novavax, Inc. Seasonal Chart Inseego Corp. Seasonal Chart Rosetta Stone Seasonal Chart PDL BioPharma, Inc. Seasonal Chart Calithera Biosciences, Inc. Seasonal Chart McEwen Mining Inc. Seasonal Chart Pfenex Inc. Seasonal Chart Allied Motion Technologies, Inc. Seasonal Chart United Natural Foods, Inc. Seasonal Chart Craft Brew Alliance, Inc. Seasonal Chart Dynavax Technologies Corporation Seasonal Chart Limoneira Co Seasonal Chart BioLife Solutions, Inc. Seasonal Chart Vera Bradley, Inc. Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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