Stocks Close Out Strong 1st Quarter; Expect Volatility In April

On the last day of the month (March) and quarter (Q1), the S&P 500 Index (INDEXSP:.INX) is crawling to a close.

The NASDAQ Composite (INDEXNASDAQ:.IXIC) is at its highs, but diverging meaningfully from the Dow Jones Industrial Average (INDEXDJX:.DJI) and S&P 500.

Stock market breadth is running slightly positive (about 3/2) with Utilities, Real Estate, and Materials outperforming. That said, none of the 11 sectors are up much of anything on the day… and Energy, Financials and Healthcare are all lower as of this writing.

S&P 500 Futures Chart

Sign up for our FREE newsletter
and receive our best trading ideas and research

The S&P 500 is heading into a tough area next month, but the bounce has held (thus far) and not turned back lower.  Note that the near-term downtrend from early March is still in place…

s&p 500 futures chart price trends - March 31, 2017. Chart source: Bloomberg Finance


A Look At Sectors, Yields, and Key Market Indicators

2 year treasury yields are dropping off pretty dramatically and this is causing some steepening in the yield curve. We’re not seeing much movement in the US Dollar Index today (fractionally negative).

Overall, the Energy Sector (NYSEARCA:XLE) is backing off after a sharp rally over the past week.

At current levels the S&P 500 would turn in just fractional gains for the month. But it’s notable that the index is up 5.75% for quarter. March could be chalked up as a sideways/consolidation period with lower treasury yields and a pullback in financials providing as headwinds. The Tech Sector continued to be a bright spot – it was the best performing sector for March, up 2.8% (and +12.47% for the Quarter).

A look ahead…

Overall, April is shaping up to be a volatile month given weakening market breadth and momentum. It’s also notable that the Tech sector has gotten very stretched. Until we have more clarity on which sectors can/will lead, expect bouts of volatility.

For now, the near-term downtrend from early March in the S&P 500 and Dow Jones remains in place. It should pay to be patient and selective.

Get more of my ideas and daily trading insights over at Newton Advisor. Thanks for reading and have a nice weekend!


Twitter:  @MarkNewtonCMT

Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.