April 25, 2019

The market is starting to hit resistance in the 2935 area on the S&P 500. We do expect a pause and a modest selloff. This should be viewed as an opportunity to add to your positions, as we expect the second quarter to be a period of consolidation followed by a 3rd and 4th quarter rally into year end.

04-25-2019 SPY


Stocks moved very little during the holiday-shortened week (markets were closed in observance of Good Friday). The large caps of the Dow inched up a little over 0.5%, while the S&P 500 dropped less than 0.1%. With light trading, the Cboe Volatility Index® fell to an eight-month low last week. Favorable earnings reports helped push industrial shares higher, offset by dipping healthcare stocks. The yield on 10-year Treasuries stayed stagnant last week. Year-to-date, each of the benchmark indexes mentioned here are comfortably ahead of their respective 2018 closing values, led by the Nasdaq, followed by the Russell 2000, the S&P 500, the Dow, and the Global Dow.

In what is hopefully a sign of a strengthening economy, retail sales increased 1.6% in March and are up 3.6% over March 2018. This is the largest monthly increase since September 2017. Excluding motor vehicles and gas station sales, retail sales advanced 0.9% last month. Certain retailers enjoyed a boost in sales, including motor vehicle and parts dealers (3.1%), furniture and home furnishing stores (1.7%), clothing stores (2.0%), and gas stations (3.5%). Online retail sales increased 1.2% in March and are up 11.6% over the past 12 months.

  • Durable goods orders rebounded 2.7% in March, the most in seven months, and above the consensus of 0.8%, led by civilian aircraft and other transportation.
  • Ex-transportation orders gained a modest 0.4%.
  • Nondefense capital goods orders ex-aircraft, or core business orders, climbed 1.3%, its third straight gain, and the most since last July.
  • The increase was led by computer and electronic products, particularly communications equipment orders which jumped 9.0%, the most since January 2015.
  • On a smoothed y/y basis, however, durable goods orders eased to 4.2%, the least since May 2017, consistent with slower manufacturing output growth.
  • Core orders edged up modestly to 4.2% y/y, but remain in a longer-term downtrend, indicating softer capex demand.

This week’s HCM Optimized Trend Indicator (OTI) stock of the week is SAP SE (SAP). Yahoo Finance says “SAP SE operates as an enterprise application software, and analytics and business intelligence company worldwide. The company operates through three segments: Applications, Technology & Services; SAP Business Network; and Customer Experience. It offers SAP HANA, which enables businesses to process and analyze live data; SAP Data Hub, a solution for businesses to manage data from various sources; and SAP Cloud platform that offers an enterprise platform-as-a-service.” This stock was up more than 12% yesterday after a good earnings call and we’re sure that OTI users will be thrilled to see that the most recent signal was a buy in the first week of March 2019. As you can see below, the OTI has been quite successful with both buy and sell signals, even going back all the way to 2014. We believe this chart speaks for itself, so look below and check it out. Way to go OTI!


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