Market at a Glance

Market at a Glance - 3/28/2019

By: Christopher Mistal

March 28, 2019

Psychological: Uneasy. According to Investor’s Intelligence Advisors Sentiment survey bulls are at 52.0%. Correction advisors are at 27.4% and Bearish advisors are 20.6%. Bullish advisors have exceeded 50% of the total for six weeks straight. There have been much, much longer streaks most notably during the “Best Months.” Bullish sentiment is elevated which suggests the majority of those that want to own stocks, likely do. Absent new demand markets could slip into a range while traders and investors await the next catalyst to push them higher.

Fundamental: Reasonably firm. Atlanta Fed GDPNow estimate is trending higher and currently stands at 1.5% with a new update due on Friday. This is a well below the current administrations goal of 3% or better, but it is still positive. Unemployment is just 3.8%. Inflation is under control. Tax cuts are still in effect and regulation has been easing. Trade issues with China remain an issue, but negotiations are in progress. There appears to be a fair foundation in place for future growth once trade is addressed and when Brexit finishes.

Technical: Mixed. Up until the end of February DJIA, S&P 500, NASDAQ and Russell 2000 were all charging higher. Since then DJIA and Russell 2000 have been trending lower while S&P 500 and NASDAQ climbed to new recovery highs in mid-March. NASDAQ and S&P 500 took a crack at breaking through resistance but failed to move any higher as DJIA and Russell 2000 were no shows. Until these divergences are rectified, each index is likely to be stuck dealing with its own issues and resistance levels.

Monetary: 2.25-2.50%. Surprise, the Fed just went full-blown dovish. Unfortunately the market was not really expecting such an abrupt change in course. The result was further inversion of the Treasury yield curve as bond traders reacted to the announcement and subsequent press conference. The tightening cycle is likely over. Another hike, even much later this year, risks fully inverting the Treasury yield curve. A fully inverted curve has proceeded every recession since 1960 with few exceptions.

Seasonal: Bullish. April is the best DJIA month since 1950, third best for S&P and fourth best for NASDAQ (since 1971). April is also the last month of the “Best Six Months.” Starting on April 1 we will begin watching for the seasonal MACD sell signal and will issue an email Alert.