Stock Market Outlook for April 25, 2022
The Fed’s balance sheet has now stopped expanding, which is a problem for stocks.
*** 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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Thermo Fisher Scientific Inc. (NYSE:TMO) Seasonal Chart
Stepan Co. (NYSE:SCL) Seasonal Chart
Kura Oncology, Inc (NASD:KURA) Seasonal Chart
Alleghany Corp. (NYSE:Y) Seasonal Chart
Rogers Communications, Inc. (NYSE:RCI) Seasonal Chart
Westport Fuel Systems Inc. (NASD:WPRT) Seasonal Chart
Marsh and Mclennan Co. (NYSE:MMC) Seasonal Chart
Tennant Co. (NYSE:TNC) Seasonal Chart
Bio-Techne Corporation (NASD:TECH) Seasonal Chart
Cerner Corp. (NASD:CERN) Seasonal Chart
Agnico-Eagle Mines Ltd. (TSE:AEM.TO) Seasonal Chart
The Markets
Stocks plunged on Friday as the reversal from significant levels of resistance on the charts in the previous session had traders running for the exits. The S&P 500 Index closed down by 2.77%, resulting in the largest single session decline since March 7th. The benchmark has definitively confirmed resistance at its 200-day moving average following Thursday’s reversal from this hurdle, raising the risk that the ongoing correction has longer-term implications beyond just the intermediate term risks that would merely span a few months. The Relative Strength Index has broken below its rising trendline that had been derived from the oversold lows in January and characteristics of a bearish trend are, once again, emerging. The benchmark closed slightly below significant horizontal support at 4280, which represents the neckline to a head-and-shoulders topping pattern that targets significantly lower levels ahead. The hurdle was cracked in the middle of March, but downside momentum failed to stick given the mean reversion tendency that is typical into the end of the first quarter. While another mean reverting tendency is normal into the end of April, it tends to be much less significant than if it was at quarter-end. We will be looking for a short-term low in the market sometime mid-week, ahead of the last few days of the month, but this may just be a short-term reprieve from the more threatening intermediate trajectory that continues to play out negatively.
Today, in our Market Outlook to subscribers, we discuss the following:
- Weekly look at the large-cap benchmark and the threat provided by the head-and-shoulders topping pattern
- Market breadth and how we are far from achieving a sustainable rally in stocks
- Canada Retail Sales and the desire of the Fed to target the wealth effect
- The trajectory of the Fed’s Balance Sheet
- Investor sentiment
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Sentiment on Friday, as gauged by the put-call ratio, ended overly bearish at 1.30.
Seasonal charts of companies reporting earnings today:
S&P 500 Index
TSE Composite
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