Stocks Rally for a Second Day Amid Easing Concerns of the Economic Impact of Coronavirus

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Key Points

  • Stocks Rally Led By Technology and Industrials
  • Oil Closes Below $50 for the First Time in More Than a Year
  • Sentiment Becomes Less Greedy; Easing Overly Bullish Readings
  • Momentum Begins to Outperform
  • Futures Point to a Higher Open Today

Key Chart – iShares Edge MSCI Momentum Factor ETF – MTUM

The iShares Edge MSCI Momentum Factor ETF (MTUM) has a Very Bullish Chaikin Power Gauge ETF Rating and has recently begun to outperform the SPY. The fund is oversold as it trades near record highs and Chaikin Money Flow is bullish. MTUM is above the rising long-term trend line and has a bullish Power Bar Ratio at 26 to 17.

Today’s Chaikin Signals – S&P 500

  • Oversold Buy: EIX
  • Momentum Breakout: ADBE, CBRE, MNST
  • Reversal Buy: ACN, CTL, IVZ, XRX
  • Money Flow Buy: BAX, BLK, FTNT, HLT, INTU, MDT, SIVB, SNPS, VRTX
  • Relative Strength Buy: AGN, AMAT, AMP, HLT, ITW, NKE, PH, RJF, RL, ROK, TPR, ZBH
  • Relative Strength Breakout: AMAT, HCA, ITW, KLAC, MDT, MYL, NKE, PH, SNPS, TPR, ZBH
  • Relative Strength Sell: ICE
  • Relative Strength Breakdown: HSY, ICE, NOC

Stock of the Day – Monster Beverage Corp. (MNST) – Bullish Rating

Monster Beverage Corp. (MNST) has a Bullish Chaikin Power Gauge Rating and is now leading the SPY. The stock is oversold based on our OB / OS Indicator and Chaikin Money Flow has been bullish since December. After a brief consolidation, MNST is moving to new highs and triggered a Momentum Breakout signal today. Above $65.75, the stock is likely to continue to move higher.

Pre-Market Movers

Advancers: COTY (7%), QGEN (6%), JAZZ (5%), PCG (5%), A (4%)

Decliners: NEWR (14%), F (7%), MTCH (6%), TTWO (5%), OLN (5%)

Mid-Week Market Update

The SPDR S&P 500 ETF (SPY) has a Bullish Chaikin Power Gauge ETF Rating and rallied for a second consecutive day after holding support in the zone between $320 and $325 which we have been highlighting for the past few weeks. The OB / OS Indicator remains in an oversold position and Chaikin Money Flow is bullish. SPY is above the rising long-term trend line and is now testing resistance near $330. The Power Bar Ratio is bullish at 125 to 81.

The iShares Russell 2000 ETF (IWM) has a Neutral Chaikin Power Gauge ETF Rating and continues to lag the SPY. The fund is also oversold based on our indicator and Chaikin Money Flow is bullish. IWM is above the rising long-term trend line which acted as support (along with the $160 breakout level) during the recent pullback. The Power Bar Ratio is bullish at 469 to 264.

Based on the breakout, there is upside potential to the $176 level should the $160 level hold as support.

The Invesco QQQ ETF (QQQ) has a Bullish Chaikin Power Gauge ETF Rating and continues to lead the SPY. The OB / OS Indicator is also in an oversold position despite the fund trading to a new high yesterday. Chaikin Money Flow is bullish and QQQ is above the rising long-term trend line. The Power Bar Ratio is bullish at 32 to 4.

Take-Away: The major market ETFs in the US remain in well defined uptrends, trading near record levels. All three are now oversold following the coronavirus-induced pullback while remaining above their respective long-term trend lines. It seems that the fears surrounding the virus served to reset the overly bullish sentiment readings that we had seen to start the year. 

Continue to focus on the Very Bullish / Bullish stocks in leading areas of the market that are outperforming when those stocks become oversold. The Neutral rating for IWM tilts our preference toward large cap names. 

Sentiment Update

Our sentiment indicators have become less greedy over the past two weeks. You can read more about how I view sentiment in this post that I wrote for the Chaikin Blog.

The 13-day moving average of the CBOE Equity Put/Call Ratio has moved higher over the past week due to fears surrounding the coronavirus. Note that this metric became overly bullish as the S&P 500 was trading at record levels and it seems that the virus has helped to ease some of the froth that had built up in the market Directional Change: Less Greed

* Due to a data issue, this chart is different from the chart that we normally use here. However the underlying message remains the same.

The VIX has moved to 15.53 from 12.47 last week and is above the regression line as investors bid up downside protection amidst fears that the corona virus was spreading. Directional Change: Toward Fear

The CNN Fear / Greed Index moved to a reading of 55 this week from 53 last week, remaining in a neutral position. This metric has quickly reset despite the fact that the S&P 500 did not even decline 5% from the high. Directional Change: Flat

Market Commentary/Looking Ahead

US equities finished higher on Tuesday, posting their best day since August. Technology, Industrials and Consumer Discretionary led while Utilities and Energy underperformed.  Treasuries weakened with the curve steepening. The dollar was stronger vs yen and the euro. Gold ended down 1.7%. WTI Crude fell 1.0%, closing below $50/barrel for the first time since January 2019.

  • Outperformers: Tech +2.60%, Industrials +1.84%, Consumer Disc. +1.76%, Materials +1.74%, Healthcare +1.70%
  • Underperformers: Utilities (1.03%), Energy +0.20%, Consumer Spls. +0.55%, Communication Svcs. +0.70%, Financials +1.04%, REITs +1.16%

S&P futures are up 0.8%, following through on yesterday’s rally. Asian markets were higher overnight with China and Japan up over 1%. European markets are seeing good gains. Treasuries are weaker across the curve. The dollar is stronger vs the yen and euro. Gold is trading flat. WTI Crude is up 2.2%. 

Disclaimer

Disclaimer: Chaikin Analytics LLC is not registered as a securities broker-dealer or advisor either with the U.S. Securities and Exchange Commission or with any state securities regulatory authority. Chaikin Analytics does not recommend the purchase of any stock or advise on the suitability of any trade. The information presented is generic in nature and is not to be construed as an endorsement, recommendation, advice or any offer or solicitation to buy or sell securities of any kind, but solely as information requiring further research as to suitability, accuracy and appropriateness. Users bear sole responsibility for their own stock research and decisions. Read the entire at www.chaikinanalytics.com/disclaimer

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