Technical Outlook for the Stock Market

Technical Outlook for the Stock Market
Danny's End of the Week View
Danny's End of the Week View Getty Images

Danny's End of the Week View

During yesterday's sell-off, the one bright spot was the performance of the financial stocks. The KBW Nasdaq Bank Index added 2.1%. Meanwhile, the broader consumer-staples group in the S&P fell 3.1%, led by Philip Morris International, a tobacco company which saw its worst day in a decade (down 16%).

Declining cigarette sales also dragged down other tobacco companies as cigarette shipments fell more than had been expected and sales for cigarette alternatives began to stall.  The sell-off was a bit of a wake-up call after three days of gains; and while I still think the S&P 500 and other equities want to go higher, I have mixed feelings and am still concerned about the overall health of the stocks market. With all this under consideration, I am a reluctant bull.

 

Our View:

We have now had a big rally, and while we did not hit our 2720 upside target for the S&P 500( ES), we were only off by two handles. The big question today is this: Was yesterday’s sell-off a one-day event, or is there more selling to come? According to the Stock Trader's Almanac, the April options expiration is ‘mixed,’ with the Dow down 14 of the last 28 occasions.

The other thing to consider is that Fridays have not exactly been a great day for the ES. We lean toward selling the early rallies or buying early weakness, but we are willing to recognize downside potential if momentum and selling volume pick up.

One thing we consider on Fridays is this: our research shows that the last day of the trading week is the most difficult to counter-trend trade the intraday momentum. In other words, if the equity futures sell early and are unable to find a low during the first hour and rally, then we think they will continue to be weak for the rest of the session.

Alternatively, if the market rallies through the first hour and is not pulling back, we tend to think there will be new highs made throughout the day.

We will keep our eye on the FAANG stocks (FB,AAPL, AMZN, NFLX, GOOG) today as usual, as well as financial stocks (XLF).

Today’s economic calendar is very light, featuring two morning Fed speakers. We don’t anticipate anything relevant here.

 

Economic Calendar:

  • Charles Evans Speaks 9:40 AM ET
  • John Williams Speaks 11:15 AM ET
  • Baker-Hughes Rig Count 1:00 PM ET

 

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