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Stock Market Outlook for April 26, 2016

 

The weak spring housing market could have side effects on other areas of the economy.

 

Real Time Economic Calendar provided by Investing.com.

 

**NEW** As part of the ongoing process to offer new and up-to-date information regarding seasonal and technical investing, we are adding a section to the daily reports that details the stocks that are entering their period of seasonal strength, based on average historical start dates.   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:

Meredith Corporation (NYSE:MDP) Seasonal Chart

Biogen Idec Inc. (NASDAQ:BIIB) Seasonal Chart

 

 

The Markets

Stocks ended marginally lower on Monday ahead of the start of the FOMC meeting.  The S&P 500 Index closed down by 0.18%, coming close to touching support at its rising 20-day moving average at the lows of the session.  A negative momentum divergence with respect to MACD remains evident on the daily chart of the large-cap benchmark, suggesting waning buying pressures as investors battle with overhead resistance.

Perhaps capturing the attention of investors on Monday was the fact that the S&P 500 Index realized a “golden cross” whereby the 50-day moving average moved above its 200-day, typically perceived as a bullish sign for stocks.  While using the position of the 50-day moving average relative to the 200-day can be an indication of the strength of the longer-term trend, the crossover event itself is typically a poor timing signal.  Look no further than the bullish crossover charted in December, following a sharp rebound from October lows and directly ahead of the subsequent decline to start 2016.  The 50-day moving average has trended predominantly below the 200-day moving average for the past 8 months, suggesting a weak intermediate trend.  This is a reversal of the trend of the 50-day holding predominantly above the 200-day since mid-2009, conducive the to bull market that has so far peaked in 2015.  Whether or not the intermediate moving average can derive a new trend above its longer-term counterpart has yet to be realized, but as can be seen by looking at the 50-day moving average alone, a trend of lower-highs and lower-lows remains very much present.

On the economic front, a report on new home sales rounded out the latest set of housing data for the month of March.  The headline print indicated that sales of new homes declined by 1.5% to a seasonally adjusted annual rate of 511,000.  The consensus estimate was for a print of 522,000.  Stripping out seasonal adjustments, sales of new one-family houses increased by 6.7%, much less than the average increase for March of 17.8%, based on data from the past 50 years.  The March print is causing a significant lag versus the average trend; new home sales are higher by 26.3% in the first three months of the year versus the average increase of 48.6%.  Breaking down the report into its individual buckets of not started, under construction, and completed, each is showing a below average change year-to-date with sales of homes under construction showing the worst lag at 21.4% versus the norm of 62.7%.  Sales categorized as not started or under construction typically have implications as to expectations of future economic strength, whether on the part of the buyer or the seller.  A report released last week indicated that housing starts in the month of March were significantly below average, which may have limited sales of homes classified as under construction.  Overall, we’ve seen a few reports that suggest the spring housing market is not as robust as what historical norms suggest, the impact of which could ripple down to other industries that rely on this spring bump, such as appliances and furnishings.  Seasonally, new home sales start to decline in April, turning lower following the peak in sales of homes not started as build schedules tighten later in the spring season.  Touching briefly on the median selling price of new homes, values were down by 3.2%, much more than the average change for March of –0.2%.  In a environment where the months of supply suggest a sellers market, the below average change of house prices suggest that builder pricing power is just not present.

Sentiment on Monday, as gauged by the put-call ratio, ended bullish at 0.76.  The average true range (ATR) continues to rise as investors flip-flop between bullish and bearish allocations, a sign of market uncertainty.

 

 

 

 

 

Seasonal charts of companies reporting earnings today:

 

S&P 500 Index

 

 

TSE Composite