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Stock Market Outlook for March 24, 2020


Investment Grade Corporate Bond Fund realized the second best one-day gain on record following the Fed’s announcement of an open-ended asset purchase program.

 

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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Amazon.com, Inc. (NASD:AMZN) Seasonal Chart

Amazon.com, Inc. (NASD:AMZN) Seasonal Chart

ConAgra Brands, Inc. (NYSE:CAG) Seasonal Chart

ConAgra Brands, Inc. (NYSE:CAG) Seasonal Chart

 

 

The Markets

Another tough day for equity markets, but, compared to the recent string of 4% to 8% moves in a single session, it almost felt quiet. The S&P 500 Index shed 2.93%, charting another multi-year low.  Stocks remain overly stretched to the downside, but that doesn’t matter much when the newsreel is on a negative loop, providing the bears with the ammunition to continue hitting the sell button.  Next level of significance on the downside is previous horizontal resistance from 2015 around 2135.  While the hurdle provides a useful reference point, it would be difficult to believe that there are traders that have been sitting on their hands for the past five years waiting for a retracement to that zone in order to buy.  This is often the issue with using historical levels of support and resistance as their usefulness is only a matter of reference rather than anything that can be used to derive where the demand to buy actually is.  The downfall through a number of levels of support over the past few weeks is testament to this.  At this point, the simple alleviation of the negative news flow is enough to act as a catalyst for a rebound rally from an extremely oversold state.  In our market outlook emailed directly to subscribers, we lay out the case for when the best chance a rebound rally will play out and how.  Subscribe now to be included on our list.

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Before the market opened on Monday, the Federal Reserve announced that it would embark on an open ended asset purchase program in an effort to provide “amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy.”  While equity investors were not impressed, bond and precious metal investors rejoiced.  The iShares Investment Grade Bond Fund (LQD) rallied by 7.39%, bouncing from the lowest levels since 2017.  This is second largest one day gain in the history of the fund, rivalled only by the 9.77% gain recorded on September 30 2008, just prior to the adoption of the $700 Billion financial bailout plan as law.  Back then, the corporate bond market bottomed two weeks later, rebounding from a low well ahead of the broader equity market.  Instability in the credit market has been a compounding factor behind the risk-aversion seen in equity markets over the past few weeks, but the Fed’s intervention makes a valid attempt to remove a point of significant uncertainty from the market.  But at this point it is a matter of regaining confidence; confidence that the spread of the virus can be controlled; confidence that elected officials will execute the correct measures to mitigate the economic impact resulting from the virus; confidence that there will not be other cascading pressures resulting from the downfall of certain industries, such as energy and tourism.  Confidence can take a long time to generate, but the actions of the Fed are an effective first step.

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Sentiment on Monday, as gauged by the put-call ratio, ended bearish at 1.09.  The 20-day moving average of the ratio at 1.23 is the highest level since August of 2007, just prior to the final rebound and peak in equity benchmarks ahead of the 2008/09 recession.

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Seasonal charts of companies reporting earnings today:

Nike, Inc. Seasonal Chart IHS Markit Ltd. Seasonal Chart Synnex Corporation Seasonal Chart Neogen Corporation Seasonal Chart Noah Holdings Ltd. Seasonal Chart Steelcase Inc. Seasonal Chart QIWI plc Seasonal Chart AAR Corp. Seasonal Chart Cheetah Mobile Inc. Seasonal Chart Tsakos Energy Navigation Ltd Seasonal Chart Celyad SA Seasonal Chart Onconova Therapeutics, Inc. Seasonal Chart OpGen, Inc. Seasonal Chart WidePoint Corporation Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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