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Stock Market Outlook for June 4, 2020


NASDAQ 100 ETF closes at a new record high, however, recent underperformance of the ETF suggests that demand for the largest stocks/sectors in the market is waning.

 

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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Canadian Western Bank (TSE:CWB.TO) Seasonal Chart

Canadian Western Bank (TSE:CWB.TO) Seasonal Chart

Main Street and Main Inc. (NYSE:MAIN) Seasonal Chart

Main Street and Main Inc. (NYSE:MAIN) Seasonal Chart

Ducommun, Inc. (NYSE:DCO) Seasonal Chart

Ducommun, Inc. (NYSE:DCO) Seasonal Chart

SJW Group Inc. (NYSE:SJW) Seasonal Chart

SJW Group Inc. (NYSE:SJW) Seasonal Chart

National Research Corp. (NASD:NRC) Seasonal Chart

National Research Corp. (NASD:NRC) Seasonal Chart

Splunk Inc. (NASD:SPLK) Seasonal Chart

Splunk Inc. (NASD:SPLK) Seasonal Chart

James River Group Holdings, Ltd. (NASD:JRVR) Seasonal Chart

James River Group Holdings, Ltd. (NASD:JRVR) Seasonal Chart

Landmark Infrastructure Partners LP (NASD:LMRK) Seasonal Chart

Landmark Infrastructure Partners LP (NASD:LMRK) Seasonal Chart

 

 

The Markets

Stocks surged on Wednesday as investors continue to rotate into the beaten down, cyclical areas of the market.  The S&P 500 Index gained 1.36%, pushing past the 3100 level of resistance that we highlighted in yesterday’s report.  The large-cap benchmark hit a high of 3130 at the peak of the session, matching the high set on March 4th following the rebound rally off of the initial late-February decline.  Next stop is the open gap between 3250 and 3325, which seems like an incredible accomplishment should it be achieved given that economic activity remains a fraction of what it was coming into the year and unemployment continues to sit around 20 million.  The end of this week will provide a couple of timely indications on the state of the labour market, including jobless claims and the monthly non-farm payroll report.  We’ll break it all down for subscribers in our daily and intraday reports in the next couple of days.

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While the S&P 500 Index eyes levels of resistance just below the previous peak, the ETF that tracks the NASDAQ 100 is already into record high closing territory.  The Invesco QQQ Trust (QQQ) added just less than half of one percent on Wednesday, ending above the closing high charted on February 19th, at the peak of the market.  The tech heavy ETF has achieved a V-shaped recovery from the March low given that the fundamentals of the companies within, including Apple, Microsoft, and Amazon, have been little impacted by the pandemic event.  Momentum in the technology sector has been waning ever since the stocks returned to levels around the previous peak.  Shares of Microsoft have been trading sideways for the past few weeks.  Similarly, Amazon is still around the same level that it closed at on April 30th.  The sector has been underperforming the market as investors rotate from former market darlings into beaten down sectors, which are making headway towards resistance around their 200-day moving averages.  Given that most broad market benchmarks are heavily weighted in the technology sector, investors have some heavy lifting ahead should demand for technology and health care constituents continue to wane around all-time highs.  Should the value/cyclical rotation become exhausted around levels of resistance, the market is vulnerable to losing altitude.

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Looking for the technical status of all of the segments of the equity market?

We are excited to announce the launch of our latest chart book covering all of the sub-sectors/industries of the market, providing our most exhaustive view of the equity market internals.  Each chart indicates a very clear rating of Accumulate, Avoid, or Neutral, providing indication of how to position to take advantage of the prevailing trend.  We expect that this will be a valuable input to your process, as well as our own, to determine how to allocate for the long-term.  Subscribers can login to the chart database and click on the Sub-sectors/Industries link under the Weekly Chart Books heading on the left hand side of the homepage, once logged in.  Alternatively, click on the following link, once logged in, to access this chart book now: https://charts.equityclock.com/featured/subsector-chart-book 

On schedule for the Wednesday session, the Energy Information Administration (EIA) released the status of petroleum inventories in the US.  The EIA reported that oil inventories declined by 2.1 million barrels last week, which is a divergence compared to the 3.0 million barrel build that was expected by analysts. Gasoline and distillate stockpiles, meanwhile, increased by 2.8 million barrels and 9.9 million barrels, respectively. The result saw the days of supply of oil fall by four-tenths of a day to 41.3, while gasoline days of supply dipped by seven-tenths to 35.6. Both statistics remain in record high territory for this time of year. The average days of supply for each at the end of May is 23.2 and 24.4, respectively.  We sent out further insight to subscribers, including what it means for investment in the energy sector.  Subscribe now.

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

On the economic front, a report on factory orders in the US was released on Wednesday.  The headline print indicated that activity declined by 13.0% in April, which is slightly better than the 14.0% decline that was expected by analysts. Stripping out the seasonal adjustments, factory orders in the US actually declined by 18.8% in this spring month, which is significantly weaker than the 7.3% decline that is average for this time of year.  Orders for aircraft and vehicles continue to weigh heavily on the headline result. Non-defense aircraft orders came in at –$9.878 Billion for April, indicating that orders are being pulled.  This is the largest net order withdrawal on record.  We sent out further insight on how durable manufactured goods are faring in a report released last week.  Subscribers can login to the chart database to view all of the seasonal charts pertaining to factory orders, shipments, and inventories in the US at the following link: https://charts.equityclock.com/u-s-factory-orders

Value of Manufacturers' New Orders for All Manufacturing Industries Seasonal Chart

Sentiment on Wednesday, as gauged by the put-call ratio, ended overly bullish at 0.69.  This is the lowest level since the middle of January and it suggests increasing complacency as stocks reach back towards their previous highs.  As has been highlighted previous, complacency in itself is not necessarily a signal to sell, but it does indicate that the market is vulnerable should a negative catalyst materialize.

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Seasonal charts of companies reporting earnings today:

Broadcom Inc. Seasonal Chart The Cooper Companies, Inc. Seasonal Chart J.M. Smucker Company (The) Seasonal Chart Ciena Corporation Seasonal Chart Vail Resorts, Inc. Seasonal Chart Toro Company (The) Seasonal Chart SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Seasonal Chart Gap, Inc. (The) Seasonal Chart Navistar International Corporation Seasonal Chart Cantel Medical Corp. Seasonal Chart Zumiez Inc. Seasonal Chart The Michaels Companies, Inc. Seasonal Chart G-III Apparel Group, LTD. Seasonal Chart Sportsman's Warehouse Holdings, Inc. Seasonal Chart Quanex Building Products Corporation Seasonal Chart Caleres, Inc. Seasonal Chart Westport Fuel Systems Inc Seasonal Chart Duluth Holdings Inc. Seasonal Chart Orion Energy Systems, Inc. Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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