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Stock Market Outlook for May 13, 2020


Interest-rate sensitive sectors turning lower from resistance at their 50-day moving averages, whether the rate backdrop is favourable or not.

 

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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USANA Health Sciences, Inc. (NYSE:USNA) Seasonal Chart

Under Armour, Inc. (NYSE:UAA) Seasonal Chart

Intact Financial Corp. (TSE:IFC.TO) Seasonal Chart

Lions Gate Entertainment Corp. (NYSE:LGF/A) Seasonal Chart

Arrow Financial Corp. (NASD:AROW) Seasonal Chart

iShares Exponential Technologies ETF (NASD:XT) Seasonal Chart

 

 

The Markets

Stocks fell on Tuesday, on the very day that the Fed started purchases of corporate bond ETFs in an attempt to calm the credit market.  The S&P 500 Index fell by 2.05%, falling below previously broken resistance at 2900.  Volume in the market continues to wane as has momentum as stocks try to find a new equilibrium.  Financials, industrials, and REITs dragged on broad equity benchmarks throughout the session, posting declines of over two percent on the day.  The widely traded Real Estate ETF (IYR) dropped by 4.59%, turning sharply lower from resistance at its declining 50-day moving average.  MACD triggered a Sell signal on the daily chart and other momentum indicators are deteriorating.  REITs had historically been a place to hide when equity markets turn volatile, but deteriorating fundamentals has investors thinking twice about the former defensive bet.  Declining interest rates and the search for yield in the erratic summer session would tend lift shares of these investments, allowing investors to benefit in a flat to negative market tape.  Clearly, we are not in normal times.  REITs have fallen significantly over the past couple of months, underperforming the market in the process, suggesting a lack of buying demand.  This new “remote” workforce and the inability of various companies/individuals to pay their rent in this extreme economic event is likely to keep REITs in the penalty box for some time, despite positive seasonal tendencies and a favourable rate environment.

On the economic front, a report on US Consumer Prices was released before Tuesday’s opening bell.  The headline print indicated that CPI fell by 0.8% last month, which was inline with the consensus analyst estimate.  The year-over-year change has fallen back towards the flatline at 0.3%.  Excluding the more volatile components of food and energy, the consumer price index fell by 0.4%, which was weaker than the consensus forecast that called for a 0.2% decline.  Stripping out the seasonal adjustments, CPI actually fell by 0.7%, which is the weakest April change since the Great Depression, over 80 years ago.  On average, CPI rises by 0.4% in the fourth month of the year, led by increases in foods, fuel, and housing.  Obviously, the economy is disconnected from seasonal norms.  CPI is now down year-to-date by two-tenths of one percent, which is a significant negative divergence compared to the 1.7% increase that is average through the first four months of the year.  The decline in fuel prices has been a significant weight, but, outside of the cost of transportation, consumers are paying more, in some cases a lot more. Food, vehicles, technology, communication, personal care products, and medical care services are all showing increases in prices this year that are well above average.  Despite the downfall in prices on the headline print, the consumer was likely not in a position to see a significant benefit given that the consumer is being forced to pay more for those goods that have been in demand throughout the shutdown.  Subscribers can login and view the seasonal charts for this report at the following link: https://charts.equityclock.com/u-s-consumer-price-index-cpi-...

Sentiment on Tuesday, as gauged by the put-call ratio, ended bullish at 0.88.

 

 

Seasonal charts of companies reporting earnings today:

 

 

S&P 500 Index

 

 

TSE Composite

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