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Stock Market Outlook for May 21, 2020


While holders of the S&P 500 Index eye resistance at the 200-day moving average, investors in the NASDAQ 100 are scrutinizing resistance at the all-time high.

 

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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Idacorp, Inc. (NYSE:IDA) Seasonal Chart

Washington Federal, Inc. (NASD:WAFD) Seasonal Chart

Independent Bank Corp. (NASD:INDB) Seasonal Chart

Insulet Corp. (NASD:PODD) Seasonal Chart

iShares NASDAQ 100 Index ETF (CAD-Hedged) (TSE:XQQ.TO) Seasonal Chart

ProShares UltraShort Oil & Gas (NYSE:DUG) Seasonal Chart

 

 

The Markets

Stocks recorded another day of strong returns as traders continue to look towards ongoing measures to reopen the economy.  The S&P 500 Index gained 1.67%, continuing to grind towards the widely scrutinized 200-day moving average.  After the appearance of deterioration in momentum indicators last week, even triggering a MACD Sell signal, these indicators have improved with the burst in momentum coming into this week.  MACD has now crossed back above its signal line, seemingly violating the previous sell signal.  The Relative Strength Index (RSI) has turned higher from its middle line.  And Stochastics have moved back into overbought territory.  While momentum is certainly not what it was following the March low, is certainly positive, nonetheless.

But as broad market benchmarks look towards the 200-day moving average as resistance overhead, technology stocks are eying all-time highs.  The NASDAQ 100 Index is less than 2.7% from the all-time intraday high charted on February 19th at 9736.57.  The sector has been less impacted by the disconnect in the economy versus seasonal norms, making this growth sector a perpetual outperformer.  The index is now over 13% above its long-term level of support at the 200-day, which will matter at some point, but, for now, traders continue to bid the investment higher.  A strong pace of outperformance has been apparent since early December, suggesting buying demand.  Seasonally, the NASDAQ 100 has been an ideal core position in portfolios between the middle of April and the beginning of October as investors gravitate toward growth during the slower summer timeframe.  In the Seasonal Advantage Portfolio, we’ve held a core position in the NASDAQ 100 since the end of March.

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Relative to the S&P 500" src="http://charts.equityclock.com/seasonal_charts/indexes/$NDX_RELATIVETOSPX.PNG" alt="$NDX Relative to the S&P 500" width="290" height="199" border="0" />

Interested in reviewing the technical status of other major benchmarks, currencies, commodities, or cryptocurrencies?  We are thrilled to announce the launch of Weekly Chart Books, highlighting the technical status of a wide array of financial instruments.  These chart books will be updated weekly, providing an up-to-date view of whether you should avoid or accumulate a certain segment of the market.  Look for more chart books in the weeks ahead as we broaden out this service, which is included with your subscription to Equity Clock.  Simply login to the web portal at https://charts.equityclock.com/ and look for the heading “Weekly Chart Books” on the left hand side of the reports archive.

On schedule for the Wednesday session, the Energy Information Administration (EIA) released its tally of petroleum inventories for the week just past.  The EIA reported that oil inventories declined by 4.982 million barrels last week, which is a divergence compared to the over 1 million barrel build that was expected by analysts. Gasoline stockpiles, meanwhile, increased, rising by 2.8 million barrels and distillates rose by 3.8 million barrels. The result saw the days of supply of oil fall by seven-tenths of a day to 41.3, while gasoline days of supply dipped by almost two days to 38.3. Both statistics remain in record high territory for this time of year. The average days of supply for each at this time of year is 23.5 and 24.7, respectively.  Subscribers received further insight intraday.  Subscribe now to receive our report why we think the tide has changed in the oil market and what has us concerned.

On the economic front, Statscan released its report on consumer prices in Canada for the month of April.  The headline print, which is non-seasonally adjusted, indicated that the consumer price Index (CPI) in Canada fell by 0.7% last month, which was inline with the consensus analyst estimate.  The result is a negative divergence compared to the 0.3% increase that is average for this time of year.  The year-to-date change is now down by 0.5%, which is the first time that the index has declined through the first four months of the year since 1994.  The average change through this point in the year is an increase of 1.4%.  Inflationary pressures tend to be strongest in the first half of the year, fuelled by increases to the price of shelter and transportation.  With the economy disconnected from seasonal norms, so too have these typical price dynamics.  The shelter component of the report is down 0.2% year-to-date, while gasoline prices are down a whopping 31.5% through the first four months of the year.  Subscribers can login to the chart database to view the seasonal charts for this report at https://charts.equityclock.com/canada-consumer-price-index-c...

Sentiment on Wednesday, as gauged by the put-call ratio, ended bullish at 0.81.  The ratio remains around the lowest levels since the middle of February as investors let down their guard.

 

 

 

Seasonal charts of companies reporting earnings today:

 

 

S&P 500 Index

 

 

TSE Composite

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