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Stock Market Outlook for April 6, 2020

Investors continue to shed risk, pushing the relative performance of small-caps versus large-caps to the lowest level since 2001.


Real Time Economic Calendar provided by



*** 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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Kansas City Southern Corp. (NYSE:KSU) Seasonal Chart

US Ecology Inc. (NASD:ECOL) Seasonal Chart

Ribbon Communications Inc. (NASD:RBBN) Seasonal Chart

Facebook, Inc. (NASD:FB) Seasonal Chart

Cable One, Inc. (NYSE:CABO) Seasonal Chart

PureFunds ISE Cyber Security ETF (AMEX:HACK) Seasonal Chart

Clearwater Seafoods Inc. (TSE:CLR.TO) Seasonal Chart

ATRION Corp. (NASD:ATRI) Seasonal Chart

CALAMOS Convertible and High Income Fund (NASD:CHY) Seasonal Chart

Clairvest Group Inc. (TSE:CVG.TO) Seasonal Chart



The Markets

Stocks closed lower on Friday following the release of the worst payroll report since 2009.  The Bureau of Labor Statistics indicates that 701,000 payrolls were lost last month, which is significantly weaker than the consensus analyst estimate that called for a decline of 150,000. The unemployment rate ticked higher by nine-tenths of one percent to 4.4% and average hourly earnings were higher by 0.4%, which is double the consensus analyst estimate that called for an increase of 0.2%. Stripping out the shock value presented by the seasonal adjustments, payrolls actually declined by 251,000, or 0.2%, in March, which is a negative divergence compared to the 0.6% increase that is average for this time of year. The year-to-date change is now hovering four-tenths of one percent below the seasonal norm through the first quarter of the year.  We sent out further insight to subscribers intraday on Friday, providing an actual look at where the strains the in the labor market existed as of the time of the survey period.  Signup now and we’ll send you this insight.

The S&P 500 Index closed down by 1.51% following the report’s release.  The benchmark remains pinned just below its declining 20-day moving average, continuing to be capped by this hurdle and the open gap between 2500 and 2575. Daily momentum indicators have stalled in recent days with RSI and stochastics showing early indications of peaking; the MACD histogram has also stalled.  The benchmark is attempting to rebound from one of the most oversold levels since the December 2018 low when a parabolic decline through the fourth quarter of that year led to a significant low in stocks ahead of the end of the year.  While comparisons to that timeframe can be made, we are really looking at a much different market now than what we saw then, particularly since stocks have just seemingly moved lower in a straight line rather than an evolving topping pattern.  The daily MACD buy signal remains intact.  We provide further technical analysis in our market outlook emailed to subscribers daily.  Signup now to join the club.

One of the hardest hit segments of the market in the midst of this shuttering of the economy has been the small caps, which continue a trend of underperformance versus the broader market that has been intact for the past year and a half.  Investors are gravitating towards large, high quality companies, those entities that have a better chance of withstanding this economic and health related event.  The relative performance of the iShares Russell 2000 Small Cap ETF (IWM) versus the S&P 500 ETF (SPY) is now the lowest level since 2001; indications of buying demand have been absent since the relative peak in 2014, which effectively marked the peak of fund flows towards these riskier, often more leveraged, market constituents.  Seasonally, it should be no surprise that small-caps tend to perform the best when investor risk sentiment is positive, primarily in the November through April timeframe; optimal holding period of the small-cap ETF, according to our chart database, is between October 28th and February 26th.  The relative performance of this segment of the market should be a good tell of risk sentiment as we seek signs of a bottom in stocks.  The relative trend is now testing the lower limit of a broadening declining range following a parabolic move lower over the past year and a half.

Sentiment on Friday, as gauged by the put-call ratio, ended bearish at 1.08.



Seasonal charts of companies reporting earnings today:



S&P 500 Index



TSE Composite

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