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Stock Market Outlook for March 17, 2020


20-Day moving average of the put-call ratio now the highest since September of 2015, just prior to a substantial rebound rally that retraced virtually all of the market decline.

 

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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D-Box Technologies (TSE:DBO.TO) Seasonal Chart

D-Box Technologies (TSE:DBO.TO) Seasonal Chart

John Wiley & Sons, Inc. Cl A (NYSE:JW/A) Seasonal Chart

John Wiley & Sons, Inc. Cl A (NYSE:JW/A) Seasonal Chart

Royal Dutch Shell Plc. A Shares (NYSE:RDS/A) Seasonal Chart

Royal Dutch Shell Plc. A Shares (NYSE:RDS/A) Seasonal Chart

Reitmans (Canada) Ltd. (TSE:RET.TO) Seasonal Chart

Reitmans (Canada) Ltd. (TSE:RET.TO) Seasonal Chart

IHS Markit Ltd. (NYSE:INFO) Seasonal Chart

IHS Markit Ltd. (NYSE:INFO) Seasonal Chart

Kinaxis Inc. (TSE:KXS.TO) Seasonal Chart

Kinaxis Inc. (TSE:KXS.TO) Seasonal Chart

Nuveen Enhanced Municipal Value Fund (NYSE:NEV) Seasonal Chart

Nuveen Enhanced Municipal Value Fund (NYSE:NEV) Seasonal Chart

VanEck Vectors Pharmaceutical ETF (NASD:PPH) Seasonal Chart

VanEck Vectors Pharmaceutical ETF (NASD:PPH) Seasonal Chart

Invesco China Real Estate ETF (NYSE:TAO) Seasonal Chart

Invesco China Real Estate ETF (NYSE:TAO) Seasonal Chart

 

 

The Markets

And the rollercoaster ride for equity markets continues.  The S&P 500 Index shed 11.98%, realizing the largest single session decline since 1987.  The large-cap benchmark is now within mere points of the December 2018 low, which will be heavily scrutinized by market participants as a level of support.  It should be expected that traders will at least temporarily defend the significant horizontal hurdle, but whether or not it fuels the long-awaited rebound rally is up for debate.  The 200-day moving average of the benchmark is starting to roll over, suggesting that the long-term trend of the market has changed from positive to negative.  Still, a significant lower-high, characteristic of a declining trend, has yet to be observed.  It would not be out of the question to see a rebound rally test this long-term variable level, now an astounding 27.7% above Monday’s close at 3047.  Benchmarks are severely stretched to the downside and it should be expected that the snap-back rally is just as severe as the decline that preceded it.  We’re still 40% cash, along with some hedges working in our favour, in the Seasonal Advantage Portfolio that we manage in partnership with Castlemoore and are anxious to put the money back to work to play the rebound rally.  We’ve informed subscribers of what to look for and provided a playbook for the best chance to rally this market.  Signup now to follow along.

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In this kind of market, seasonal tendencies and fundamental factors make little sense, which is why we employ technical analysis as the third prong to our approach.  Case in point is the performance of Real Estate Investment Trusts (REITs) on Monday following an unprecedented Sunday cut of the Federal Funds Rate in the US to 0%.  Despite rates at next to nothing, supposedly a benefit to this interest-rate sensitive sector, REITs led the market lower on Monday with the widely traded US Real Estate ETF (IYR) falling by almost 17%.  The ETF broke below the December 2018 low and sliced through rising trendline support that spans the underbelly of the lows from the past four years.  Seasonally, REITs tend to outperform the broader market starting in the month of March as investors become enticed by the yields presented by sector constituents and increased real estate activity at this time of year, but, as mentioned, seasonal and fundamental factors are irrelevant in a market that is being taken down to a new normal.  Attempting to rotate in this market, switching from those areas that initially led the market lower to those that outperformed, such as REITs, is proving to be detrimental as investors attempt to find anything of value to sell.  In the midst of extreme chaos, cash is king, so be very careful about portfolio rotation in this environment as it can result in even greater destruction of portfolio value, if not done correctly.

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iShares U.S. Real Estate ETF (NYSE:IYR) Seasonality

On the economic front, CASS Information Systems released its report of shipping activity for the month of February.  The company reported that its shipments index, which measures volume, increased by 6.2% in February, which is much stronger than the 3.7% increase that is average for the month. The year-to-date change in 2020 is now running eight-tenths of one percent above the seasonal average trend. The result follows a 7.9% decline in all of 2019, which was the weakest calendar year performance since 2008. The precedent of this indicator is typically not one to ignore.  We sent further insight to subscribers, including an update on how the manufacturing sector is faring amidst the coronavirus outbreak in the US.  Signup now and we’ll send you our report.

http://charts.equityclock.com/seasonal_charts/economic_data/FRGSHPUSM649NCIS_seasonal_chart.PNG

Sentiment on Monday, as gauged by the put-call ratio, ended bearish at 1.28.  The 20-day moving average of the ratio, now at 1.18, is the highest since September of 2015, just prior to the substantial rebound rally for stocks that followed the downfall in equity prices just a month earlier.  The rebound spanned from the low at the end of September to a short-term peak at the start of November, recouping the vast majority of the initial decline.  The ultimate low for stocks, however, was not achieved until February of 2016 in what ended up being another pronounced downturn within the so-called “best six months for stocks.”

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Seasonal charts of companies reporting earnings today:

Baxter International Inc. Seasonal Chart FedEx Corporation Seasonal Chart HD Supply Holdings, Inc. Seasonal Chart TerraForm Power, Inc. Seasonal Chart Designer Brands Inc. Seasonal Chart The Michaels Companies, Inc. Seasonal Chart McEwen Mining Inc. Seasonal Chart China Distance Education Holdings Limited Seasonal Chart Lands' End, Inc. Seasonal Chart Westport Fuel Systems Inc Seasonal Chart Commercial Vehicle Group, Inc. Seasonal Chart Performant Financial Corporation Seasonal Chart Strata Skin Sciences, Inc. Seasonal Chart Gevo, Inc. Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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