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Stock Market Outlook for April 6, 2016

 

Negative momentum divergence on the daily chart of the S&P 500 Index suggesting waning buying pressures.

 

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 traded lower on Tuesday as investors took some chips off the table ahead of the coming earnings season.  The S&P 500 index dipped by 1.01%, testing horizontal support around 2040.  While still holding short-term support at the 20-day moving average, one of the first signs of concern regarding the short-term trend has become apparent.  While the large-cap benchmark charted a new year-to-date high at the beginning of April, following the release of the monthly employment report, MACD (or moving average convergence divergence) did not confirm the move, instead charting a lower high.  This negative divergence and crossover of the signal line reveals that momentum is waning around the previously reported level of resistance at 2080.  This could be foretelling of a retracement ahead as investors digest gains before earnings season reaches full swing.  Overhead levels of resistance on the S&P 500 Index are plentiful between 2040 and 2130, but so to are levels of support with the 20 and 200 day moving averages not far below.  A logical point to test upon confirmation of a more significant downside move would be to the 50-day moving average, now hovering around 1965.

Also flashing a warning signal is the peak in the percent of stocks in the S&P 500 Index trading above 50-day moving averages.  The technical indicator has now rolled over from levels above 90%, an event that has historically coincided with flat to negative returns shortly thereafter.

On the economic front, the monthly Job Openings and Labor Turnover Survey was released.  The headline print indicated that job openings declined by 2.8% to 5.445 million.  Stripping out seasonal adjustments, openings were lower by 6.1%, which is better than the average decline for February of 10.3%.  The year-to-date change is now hovering slightly above average after posting a below average print in January.  Total hires is showing a similar above average year-to-date trend.  But the concern in the report was evident in the change of quits, which is down on the year by 6.7%, below the average change of –0.9% through the end of February.  While this stat does hint of a tightening labour market, it also implies a lack of confidence amongst workers to find alternate employment upon leaving their present position.  Confidence in the economy is key to allow for a healthy labor turnover.  Each component of the report typically trends higher through the spring as summer hiring provides a lift to the labor market.

Sentiment on Tuesday, as gauged by the put-call ratio, ended bearish at 1.13.

 

 

 

 

Seasonal charts of companies reporting earnings today:

 

 

S&P 500 Index

 

 

TSE Composite