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Investment Strategy Published by Raymond James & Associates
Please read domestic and foreign disclosure/risk information beginning on page 26 and Analyst Certification on page 27.
2018 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved.
International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800-248-8863
Andrew Adams, CFA, CMT, (727) 567-4807, [email protected] April 18, 2018
Charts of the Week _________________________________________________________________________________________________________________________________
Investment Strategy: "Charts of the Week" While it hasnt always felt like it, the month of April has actually been rather good to stock investors. The S&P 500 has now bounced almost 6% from its April 2nd retest low, and yesterday it repaired some of its technical damage by getting back above both its 50- and 100-day moving averages and the 2697-2700 zone that has proved important on a few occasions going back to December. It is now back above all of its key moving averages for the first time since mid-March, and with each passing day, we think the odds increase even more that the February and April lows will not be tested again. Of course, that still does not necessarily mean the index is going straight back up to new highs. The S&P 500 is now back in the 2700-2800 range that saw quite a bit of trading in February and March, which means there are a few areas that could end up acting as resistance, even if only temporarily (see page 7). The larger trading range remains in place in the major averages, too, though as we have stressed lately, we do think anyone who raised some cash in anticipation of the February correction or during it should be looking to put that cash back to work as long as the recent lows continue to hold.
Trading ranges in the major averages can last for several months (see page 8), but that does not mean all areas of the market have to move sideways. Remember, the stock market is a market of stocks, and we are finally starting to see more individual companies behaving well from a technical perspective. Even better, pretty much all of the S&P 500 sectors have enjoyed strength recently, which is what we want to see rather than improvement in just a few isolated areas. Consequently, we have highlighted some of best individual stock ideas from our buy-rated coverage universe in todays report for your consideration.
And with that, here are the Charts of the Week

Raymond James Investment Strategy
International Headquarters:The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800-248-8863 2
S&P 500 Last 5 Sessions (5-minute chart)
Source: Stockcharts.com

The Market Matrix The recent strength has removed any trace of oversold readings, so much so that the S&P 500 and NASDAQ are about as extended above their 10-day moving averages as they ever get. Overall, though, the indices remain in neutral territory thanks to the sideways action of the last two months.
THE MARKET MATRIX S&P 500 NASDAQ Composite Russell 2000
Price % Above/Below 10-Day Moving Average 2.02% 2.79% 2.34%
Relative Strength Index (RSI) (Overbought = ~70; Neutral = ~50; Oversold = ~30)
62.07 61.17 65.27
Overall Near-Term Opinion Neutral Neutral Neutral
White = Neutral; Yellow = Slightly Overbought; Red = Very Overbought; Dark Green = Slightly Oversold; Bright Green = Very Oversold
Note: Overbought/Oversold levels may vary for each index based on historical volatility
Source: TC2000; Raymond James research; as of 4/17/18

The Breadth Box Very nice improvement in the breadth readings this time, coming off of the strengthening we saw last week. Theyre not quite back up to levels of last years rally, but the improvement is a good sign.
THE BREADTH BOX This Week
(4/17) Last Week
(4/10) 4 Weeks Ago
(3/20) Current Percent of 5-Year Range*
NYSE % of Stocks Above 50-DMA 67.06% 48.47% 37.63% 72%
NASDAQ % of Stocks Above 50-DMA 57.06% 44.34% 50.51% 66%
NYSE % of Stocks Above 200-DMA 57.83% 53.17% 54.30% 64%
NASDAQ % of Stocks Above 200-DMA 55.15% 50.65% 55.74% 69%
U.S. Stocks New Highs New Lows (5-Day Total) 399 -95 -219 73%
NYSE Bullish Percent Index 55.46% 51.35% 58.34% 58%
NASDAQ Bullish Percent Index 56.89% 53.86% 62.17% 67%
S&P 500 Average % Below 52-Week High 13.3% 14.0% 12.3%
Russell 3000 Average % Below 52-Week High 18.7% 19.5% 17.9%
* 100% would be the highest point of the last 5 years, 0% would be the lowest point in the last 5 years, and 50% is the mid-point of the 5-year range
Source: Stockcharts.com; Bloomberg; Raymond James research

S&P 500 Timing Chart The lower bands can often represent attractive entry points.

S&P 500 Has Bottomed for Good? The near-term bottoming pattern in the S&P 500 we pointed out last week appears to have completed thanks to a breakout above 2675. It wasnt the cleanest of breakouts, but it will do the job. Now, ideally, the index stays above the 2660-2675 zone and distances itself further from the recent lows.

No Clear Path to New Highs, Though While the stock market has done about as well as we had hoped recently, plenty of possible resistance levels above the current level of the S&P 500 remains. 2710 is the first such level and the index did have some trouble holding above there yesterday into the close. If it can eclipse 2710, the next most likely resistance zone is 2740-2750 and then around 2780-2790. Additionally, the declining line connecting the January and March highs could come into play, though its exact level will decrease a bit each day. Right now its sitting in that 2740-2750 range.

Markets Dont Go Straight Up (Except for Last Year) While the consolidation of the last two months has been a clear departure from the straight-up action of 2017, its important to remember that sometimes the stock market does go sideways. Since the 2009 low, there have actually been three separate consolidations of six months or longer where the S&P 500 did not hit a new reaction high. The 2010 one lasted about six months, the 2011-2012 range was about ten months, and then the 2015-2016 consolidation took the market sideways for a full 14 months. There is no telling how long these periods will last, but they do occur, even during secular bull markets.

Growth Back to Outperforming Value While value stocks enjoyed a brief period of outperformance over growth stocks last month, that relationship has now resumed its long-term trend of growth doing better. The preference for growth so far this month is consistent with the stock market getting back to a state of normalcy and may indicate that investors are returning to some of the growth-oriented areas they liked so much last year.

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andrew adams, cfa, cmt, (727) 567-4807, · pdf fileinvestment strategy ... andrew adams, cfa,...

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