Equity Clock

Stock Market Outlook for July 21, 2020

Technology stocks rebound, pushing the S&P 500 Index into the downside gap that started the entire February through March decline.

 

 

 

*** 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:

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Brown & Brown Inc. (NYSE:BRO) Seasonal Chart

Cardtronics Inc. (NASD:CATM) Seasonal Chart

Weyco Group, Inc. (NASD:WEYS) Seasonal Chart

Capital City Bank Group (NASD:CCBG) Seasonal Chart

Community Trust Bancorp, Inc. (NASD:CTBI) Seasonal Chart

NMI Holdings, Inc. (NASD:NMIH) Seasonal Chart

WisdomTree LargeCap Dividend Fund (NYSE:DLN) Seasonal Chart

VelocityShares Daily Long VIX Short Term ETN (NASD:VIIX) Seasonal Chart

 

 

The Markets

A very perplexing day for stocks on Monday as the S&P 500 Index charted a new recovery high.  The S&P 500 Index gained 1.00%, moving above recent short-term resistance at 3235.  Technology-centric stocks led the gain, rebounding from last week’s selloff that followed a massive reversal early last week.  Other sectors largely sat out of Monday’s gain.  Consumer staples, energy, financials, industrials, materials, utilities, and REITs all closed firmly in the red amidst ongoing caution related to the reopening of the economy.  The ballooning number of coronavirus cases in the US, and subsequent increase of restrictions, is keeping investors skittish of risk.  Technology, predominantly encompassing the stay-at-home trade, has been taking the news as a positive catalyst.  We continue to maintain an “Accumulate” rating in our chart books for technology industries, but given how stretched that they have become above long-term levels of support, some type of consolidation appears inevitable.  Last week saw the first signs of buying exhaustion as the risk-reward became skewed after the euphoric gains year-to-date.

 

TECHNOLOGY Relative to the S&P 500

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With the S&P 500 Index at a new recovery high following the March selloff, the question arises, is the trend sustainable longer-term?  A look at the percent of stocks in the S&P 500 Index above their 200-day moving averages suggests that we have not achieved that sustainable threshold, as of yet.  Historically, sustainable long-term rising trends have typically coincided with with the percent of stocks above 200-day moving averages above 62.5%.  The breadth gauge did get their briefly around the start of June, but ultimately failed.  The technical indicator now sits at 51.50%.  When less than two-thirds of stocks are trading above their 200-day moving averages, periods of volatility typically follow.  That doesn’t mean that we can’t take advantage of trading opportunities, as we just have with the summer rally, but reason to be a long-term holder does not exist, yet.

Sentiment on Monday, as gauged by the put-call ratio, ended bullish at 0.77.

 

 

 

 

Seasonal charts of companies reporting earnings today:

 

 

S&P 500 Index

 

 

TSE Composite

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