Upcoming US Events for Today:
- Weekly Crude Inventories will be released at 10:30am.
Upcoming International Events for Today:
- German Industrial Production for March will be released at 6:00am EST. The market expects a year-over-year decline of 3.6% versus a decline of 1.8% previous.
- Canadian Housing Starts for April will be released at 8:15am EST. The market expects 175K versus 184K previous.
- China Consumer Price Index for April will be released at 9:30pm EST. The market expects a year-over-year increase of 2.2% versus an increase of 2.1% previous. Producer Price Index is expected to decline by 2.2% versus a decline of 1.9% previous.
The Markets
Stocks continued on their record high march with the Dow Jones Industrial Average and S&P 500 once again closing in uncharted territory. Sector performance was topped by Utilities, which on Monday broke below its 20-day moving average. Investors bought the dip in the defensive sector on Tuesday, pushing the sector back toward its short-term moving average (20-day) by the close. Recent underperformance in defensive sectors suggests rotation into riskier assets (cyclical sectors) during a period when risk is not customarily supported. Investors are now probably the least hedged to downside risks since mid-February, just prior to a minor 3% pullback in the S&P 500 Index.
Tuesday’s gain in the S&P 500 puts the equity benchmark over 60-points (almost 4%) above its 50-day moving average, levels that typically lead into market pullbacks. As equities become substantially stretched above this significant intermediate average (50-day), downside risks increase. The benchmark was last over 60-points higher than the 50-day moving average on February 19, immediately prior to a 3% pullback in the benchmark. Going back further, September 19th of last year saw a similar stretched situation, after which a correction of ensued ranging 8.9% from peak to trough. And prior to that, a similar stretched situation on March 26 of 2012 led to a pullback ranging 10.58% from peak to trough. In addition to the 50-day, the large cap index is also stretched well above the 200-day moving average by approximately 10%. Only four other instances of the S&P 500 trading 4% or higher above the 50-day moving average and 10% or higher above the 200-day moving average have been recorded since January of 2010 (January 11 2010, April 23 2010, February 9 2011, and March 26 2012); each instance resulted in an average decline for the S&P 500 Index of 10.60% as equities corrected the stretched/overbought state. With equity markets surging well beyond any significant points of support, including that pertaining to the moving averages, downside risks increase.
Seasonal charts of companies reporting earnings today:
Sentiment on Tuesday, as gauged by the put-call ratio, ended bullish at 0.89.
S&P 500 Index
Chart Courtesy of StockCharts.com
TSE Composite
Chart Courtesy of StockCharts.com
Horizons Seasonal Rotation ETF (TSX:HAC)
- Closing Market Value: $13.38 (down 0.15%)
- Closing NAV/Unit: $13.37 (down 0.01%)
Performance*
| 2013 Year-to-Date | Since Inception (Nov 19, 2009) | |
| HAC.TO | 5.14% | 33.7% |
* performance calculated on Closing NAV/Unit as provided by custodian
Click Here to learn more about the proprietary, seasonal rotation investment strategy developed by research analysts Don Vialoux, Brooke Thackray, and Jon Vialoux.
