Stock Market Outlook for May 6, 2020
Natural gas prices breaking above a bottoming pattern as the commodity continues to climb during its period of seasonal strength.
*** 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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Ensign Group Inc. (NASD:ENSG) Seasonal Chart
United Fire & Casualty Co. (NASD:UFCS) Seasonal Chart
Universal Health Realty Income Trust (NYSE:UHT) Seasonal Chart
S.Y. Bancorp, Inc. (NASD:SYBT) Seasonal Chart
Cass Commercial Corp. (NASD:CASS) Seasonal Chart
CorVel Corp. (NASD:CRVL) Seasonal Chart
The Markets
Stocks managed to eke out a gain on Tuesday as oil prices continued to rebound amidst optimism pertaining to the reopening of the economy. The S&P 500 Index closed higher by nine-tenths of one percent, which was well off of the high of the session that saw a gain of 1.91%. A bull/bear battle has begun. The large-cap benchmark moved into the downside gap that was charted during Friday’s session, but ultimately failed, rather abruptly, at the upper limit of the gap-range at 2900. While cognizant that we are sounding like a broken record, momentum indicators on the daily chart continue to roll over with MACD converging on its signal line. A bearish crossover with respect to MACD appears imminent. The benchmark remains bound by a number of major moving averages with the 200-day in a position of significant resistance and the 20 and 50-day averages in positions of support. The benchmark appears to be coiling, preparing for some kind of explosive move.
We highlighted our exposure to natural gas a few weeks ago and we just got a nice payday on Tuesday. The price of natural gas jumped by over 7% on the day, moving above recent short-term highs and resolving a head-and-shoulders bottoming pattern that saw its neckline around $2.00. The bottoming pattern projects upside towards $2.45, although theory and reality don’t always align. The commodity is presently testing resistance around its declining 200-day moving average. Seasonally, natural gas prices tend to rise between April and June.
On the economic front, Statscan released trade data for the month of March. The headline print showed that the Canadian trade deficit expanded to $1.4 billion in March from $0.9 billion previous. The result was narrower than the consensus analyst estimate that called for a deficit of $2.0 billion. Imports in the country fell by 3.5%, while exports declined by 4.7%. Stripping out the seasonal adjustments, imports actually increased by 9.2% in March, while exports increased by 8.1%. The average change for this time of year is +14.2% and +13.5%, respectively. Both imports and exports are trending below their seasonal norms, year-to-date, a path that had been apparent prior to the coronavirus related shutdown during the month of March. The hardest hit areas on the export side include energy products, machinery, transportation equipment, and furniture/fixtures. Obviously, much like everything else in the economy, the trends are disconnected from seasonal norms. Subscribers can login to view the seasonal charts for this report at the following link: https://charts.equityclock.com/canadian-international-merchandise-trade-exports-imports
Sentiment on Tuesday, as gauged by the put-call ratio, ended bullish at 0.89.
Upcoming Presentation
The Money Show will be holding a Canadian Webinar series on May 7th, titled “Opportunities and Strategies for What Comes Next.” We’ll be presenting at 5:20pm ET on the topic of “Using Seasonality to Invest in an Abnormal Economic Environment.” Attendance is free. Click the banner below to reserve your spot now.
Seasonal charts of companies reporting earnings today:
S&P 500 Index
TSE Composite
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