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Stock Market Outlook for April 11, 2016


S&P 500 Index pulls back from weekly resistance as investors wait for earnings season to begin.



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**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:

Edison International (NYSE:EIX) Seasonal Chart

AmerisourceBergen Corp. (NYSE:ABC) Seasonal Chart



The Markets

Stocks flat-lined on Friday following an early morning bounce fuelled by the energy sector.  The price of oil surged by 5.68% as investors speculate that inventories are close to peaking as supply and demand fundamentals converge as we near the summer driving season.  West Texas intermediate continues to solidify support at $35, a level that previously acted as resistance.  Crude inventories typically peak at the end of April/beginning of May, bringing an end to the peak period of strength for the price of the commodity.  However, given the focus on inventory levels, don’t be surprised if the confirmed peak in storage levels brings upon further gains in the price given that domestic production continues to fall.  A second smaller period of strength is typically realized between June and August.

While energy stocks surged, other sectors languished, returning much of their earlier gains.  As a result, the broader market, as gauged by the S&P 500 Index, ended marginally higher by 0.28%, closing around the 20-day moving average that we’ve discussed exhaustively over the past few weeks.  With earnings season set to begin, investors will be watching closely for a catalyst to fuel a break up above resistance between 2080 and 2100, or below support between 2020 and 2040; until then, a range-bound trade should be expected.  Momentum indicators continue to roll over, indicating declining buying pressures.  With a trailing P/E for the S&P 500 Index at 18.3, at the top of the post-recession range, the market certainly isn’t cheap, which may re-ignite the valuation argument for sending stocks lower unless signs of growth re-emerge.

As for the weekly chart of the large-cap benchmark, with a decline of 1.21%, the benchmark is pulling back from declining trendline resistance that spans the market peaks from the past year.  Momentum indicators have been trending lower for almost two years, although the strength of the latest rally does muddy the outlook somewhat.  Where previous long-term declines in the equity benchmark have found resistance at the 50-week moving average, recently this has been tested as a level of support following the breakout in the middle of March.  While the perspective between the weekly and the daily chart may differ, the conclusion remains the same, which is that we are waiting for that catalyst to either break overhead resistance or bust through underlying support.  We’ll know soon enough.

Sentiment on Friday, as gauged by the put-call ratio, ended neutral at 1.00.


Seasonal charts of companies reporting earnings today:


S&P 500 Index


TSE Composite