Market at a Glance

Market at a Glance - 4/27/2017

By: Christopher Mistal

April 27, 2017

Psychological: Bullish. According to the most recent Investors Intelligence Advisors Sentiment survey bulls have rebounded to 54.7%, bears are at 17.9% and correction is 27.4%. Bullish sentiment has been on the rise since bottoming in the second half of March. Sentiment is elevated, but not yet in treacherous territory. Now just isn’t the best time to establish new long positions.

Fundamental: Mixed. Corporate earnings for Q1 have largely been a success. S&P Capital IQ estimates an 11.1% year-on-year gain and a new all-time 12-month high in S&P 500 earnings. But, Q1 GDP is anticipated to be an anemic 0.2% based upon Atlanta Fed’s GDPNow model and March’s jobs report was weaker than expected with just 98k net new jobs. Counteracting soft(ish) data and supporting the rally are expectations for tax reform. (After the healthcare fumble, this may not be something to bet big on.)

Technical: Mixed. NASDAQ and Russell 2000 have broken out to new all-time highs this week, but DJIA and S&P 500 are lagging. Bullishly, all four indices are above their respective 50-day moving averages and Stochastic, relative strength and MACD indicators are all positive. NASDAQ and Russell 2000 need to hold onto break out levels and DJIA and S&P 500 will likely catch up and continue on. Previous all-times for DJIA and S&P 500 will offer some resistance, but higher, highs are expected before any substantial pullback transpires later this summer or fall.

Monetary: 0.75-1.00%. Next week, on May 2-3, the Fed will meet again. They will be have a flattening yield curve, a cooling labor market, likely tepid Q1 GDP report and a massive balance sheet to discuss. Unloading some of their longer-dated Treasury holdings would likely prop up the long end of the yield curve, but would likely further cool economic activity. Another increase in rates is not likely at the upcoming meeting.

Seasonal: Neutral. May officially marks the beginning of the “Worst Six Months” for the DJIA and S&P. To wit: “Sell in May and go away.” In post-election years, May ranks 4th for DJIA and #3 on S&P 500 with average gains of 1.3% and 1.7% respectively. Small caps and tech fair better due to their “Best Months” lasting until June. May is the #1 post-election year month for NASDAQ (+3.4%) and Russell 2000 (+4.6%).