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Stock Market Outlook for April 19, 2016

 

Shares of Disney breaking through resistance, on track to strengthen into its earnings release.

 

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:

  • No stocks identified for today.

 

 

The Markets

Stocks closed higher on Monday, shaking off the knee-jerk reaction to the failed Doha meeting.  The S&P 500 Index added 0.65%, led by the energy sector, as investors that had bet on a negative outcome were forced to cover short positions.  Volume on the day was amongst the lowest of the year as conviction to the move remained absent.  Equity benchmarks in the US continue to chart new year-to-date highs, including the Dow Jones Industrial Average, which closed above 18,000, a key psychological level.  Support for these benchmarks continues to be apparent at the rising 20-day moving averages, keeping the short-term positive trend intact.

Overall, the reaction to what seemed destined to be a market moving event was entirely positive, conducive to increased risk-taking.  While the influence of a rebound in the price of oil on the equity market was very much apparent on an intraday basis on Monday, over the past few weeks equity prices have separated from the apparent headwind that had taken its toll on energy stocks for almost two years.  On Monday, the price of oil bounced from the gap that was opened at the start of last week, providing a successful test of the first level of support.  Oil inventories still appear on track to confirm a peak within the next few weeks, potentially alleviating the strain that oil stocks are having on operating capacity.

While strength in the energy sector helped to support the broader market, a notable breakout in shares of Disney, a Dow component, also acted as a positive influence.  The entertainment company jumped by almost 3% following an analyst upgrade and strong results for the Jungle Book movie at the weekend box office.  Previous resistance around $100 was quickly taken out as performance of the stock relative to the market starts to show signs of ticking higher.  Disney reports earnings on May 10th and the stock has shown a tendency of rising into the event; the absolute and relative performance starts to fade shortly thereafter.  The consumer discretionary sector typically reaches a peak relative to the market in April, but strength in Disney may provide a short-term rotation strategy towards a holding that remains positive into May. 

DIS Relative to the S&P 500

On the economic front, the US Bureau of Transportation Statistics released a series of data points over the past few days that sheds light on the health of the economy.  On the rail side, both carload and intermodal ticked lower in February, although intermodal remains above the average trend while carloads lagged due to the sensitivity of the latter to a weak commodity market.  Intermodal was lower for the second month of the year by 3.8% versus the average decline for the period of 6.8% and carloads were lower 4.4% versus the average decline of 7.0%.  By water, the tonnage for internal US waterways was down by a similar 4.0%, slightly worse than the average decline for February of 3.5%.  Transportation of goods by water is also holding above the average trend year-to-date, showing some strength following a below average year in 2015.  Both rail and water see a significant uptick in volume into the month of March as all of the product produced through the first quarter is shipped and weather trends become conducive to water travel.  Shifting to the road, vehicle miles traveled in the month of January came in below average, showing a decline of 8.3% versus the norm of a 6.2% fall in the first month of the year.  But the more telling stat may be the continued below average trend in public transit ridership.  Ridership declined by 7.4% in January versus an average gain of 1.6%.  Public transit ridership has been trending below average for more than a year as the low price of gasoline makes driving personal automobiles more affordable.  The reason why transit ridership is important is that it can show a consumer that is under strain, such as when gas prices or unemployment rates are high.  This was particularly true in the years leading up to the financial crisis when public transit saw growth rates three times above average.  Presently, the below average trend in ridership suggests a healthy consumer, one that is able to maintain one of the largest expenses within the household budget.

Sentiment on Monday, as gauged by the put-call ratio, ended close to neutral at 0.98.

 

 

 

 

 

 

Seasonal charts of companies reporting earnings today:

 

S&P 500 Index

 

 

TSE Composite