Tech Talk for Monday April 2nd 2018
U.S. equity index futures were lower this morning. S&P 500 futures were down 12 points in pre-opening trade. Index futures are responding to news that China has imposed a tariff on 128 U.S. products.
Commodity prices moved higher on U.S. Dollar Index weakness. Gold gained $11.20 per ounce, silver added $0.33 per ounce and crude oil gained $0.34 per barrel.
Tesla dropped $8.63 to $257.50 on news that it is recall 123,000 S cars for a steering issue.
Humana added $19.17 to $288.00 on rumors that the company is negotiating with Wal-Mart including its possible acquisition.
Darden Restaurants gained $1.24 to $86.49 after RBC Capital Markets upgraded the stock to Outperform from Sector Perform
ADP added $1.12 to $114.60 after RBC Capital upgraded the stock to Outperform from Sector Perform.
WALL STREET RAW RADIO
WITH HOST, MARK LEIBOVIT – SATURDAY, MARCH 31, 2018:
GUESTS INCLUDE: DON VIALOUX, HARRY BOXER, HENRY WEINGARTEN, SINCLAIR NOE AND ARCH CRAWFORD
The Bottom Line
Encouraging technical action by North American equity markets was spotted on Thursday. Short term momentum indicators for a wide variety of indices and sectors turned upward from oversold levels. Timing is opportune. Seasonal influences on North American equity markets are positive in April. The month of April historically has been the second strongest month in the year, second only to December.
This is the time of year when favourable seasonal influences are triggered by encouraging corporate news released with first quarter reports at annual meetings. Chief executive officers love to give good news to shareholders at annual meetings. Responses to first quarter earnings reports released late last week by the first 7 S&P 500 companies were encouraging. Look for more of the same this week. First quarter earnings by S&P 500 companies are expected to increase 18.5%. Look for news on dividend increases and share buybacks.
The energy sector continues to show encouraging seasonal strength. Natural gas prices were notably stronger last week. Seasonal strength for the sector is from mid-March to mid-June. Inventories announced on Thursday were well below their five year average setting the stage for a significant recovery into spring. A move above the $2.81 U.S. per MBtu level will attract technical buying on both sides of the border. Preferred strategy is to own "gassy" stocks and related ETFs
Prospects beyond the end of April become increasingly murky. Negative political influences on North American equity markets during a U.S. mid-term election year are strongest between May and October. This year, investors will focus on the possibility of a change in control in the House of Representatives and Senate. The Republicans currently have a slim majority in both legislative bodies.
Economic News This Week
March Manufacturing ISM to be released at 10:00 AM EDT on Monday is expected to dip to 60.0 from 60.8 in February.
February Construction Spending to be released at 10:00 AM EDT on Monday is expected to increase 0.5% versus no change in January.
March ADP Employment Report to be released at 8:14 AM EDT on Wednesday is expected to show an increase in employment by 180,000 versus a gain of 235,000 in February.
March Service ISM to be released at 10:00 AM EDT on Wednesday is expected to dip to 59.0 from 59.5 in February
February U.S. Trade Deficit to be released at 8:30 AM EDT in Thursday expected to increase to $56.8 billion from $56.6 billion in January.
Weekly Jobless Claims to be released at 8:30 AM EDT on Thursday are expected to increase to 226,000 from 215,000 last week.
Canadian March Merchandise Deficit to be released at 8:30 AM EDT on Thursday is expected to increase to $2.2 billion from $1.9 billion in February.
March Non-farm Payrolls to be released at 8:30 AM EDT on Friday is expected to drop to 167,000 from 313,000 in February. March Unemployment Rate is expected to slip to 4.0% from 4.1% in February. March Average Hourly Earnings is expected to increase 0.2% versus a gain of 0.1% in February.
Canadian March Employment to be released at 8:30 AM EDT on Friday is expected to increase 20,000 versus a gain of 15,400 in February. March Unemployment Rate is expected to remain unchanged from February at 5.8%.
Earnings News This Week
Observations
Technical action by individual S&P 500 stocks turned bearish last week. Number of stocks breaking resistance totaled 10 while number of stocks breaking support totaled 19. Most of the intermediate breakouts occurred on Thursday. The Up/Down ratio dropped last week to (188/255=) 0.74 from 0.80.
Economic news this week will focus on the March ISM reports and the U.S. and Canadian employment reports.
Medium term technical indicators in the U.S. (Percent of stocks trading above their 50 day moving average, Bullish Percent Index) increased last week but remain intermediate Oversold. They are showing early signs of bottoming.
Medium term technical indicators in Canada also moved higher last week
Short term technical indicators for U.S. and Canadian equity markets, commodities and most sectors (20 day moving averages, short term momentum) showed early signs of bottoming on Thursday.
Normal seasonal influences reappeared late last week. Seasonal influences on a wide variety of U.S. and Canadian equity indices and economic sensitive sectors tend to show strength starting near the beginning of March and continuing to early May. See charts below.
The outlook for S&P 500 earnings and sales remains positive: According to FactSet, estimates for 2018 were slightly higher last week. First quarter 2018 earnings are expected to increase 17.3% (up from 17.2% last week) on a 7.3% increase in sales (up from 7.2% last week). Responses to the seven reports released last week were encouraging. Four more companies are scheduled to report this week. Second quarter 2018 earnings are expected to increase 19.1% on a 7.7% increase in sales. Third quarter earnings are expected to increase 20.9% on a 6.4% increase in sales. Fourth quarter 2018 earnings are expected to increase 17.1% on a 5.6% increase in revenues. For all of 2018, earnings are expected to increase 18.5% (up from 18.4%) on a 6.7% increase in sales (up from 6.6%.
Short term political uncertainties remain, including North Korea threats, struggling NAFTA negotiations, rising trade war fears (particularly against China) and increased scrutiny by special council on Russia's influence on the Presidential election. However, NAFTA, trade and North Korean fears abated slightly last week
Earnings and revenue prospects for 2018 are exceptional for U.S. based companies with international exposure. Consensus for S&P 500 earnings on a year-over-year are expected to increase 18.5% in 2018. Earnings will benefit significantly from weakness in the U.S. Dollar on a year-over-year basis when revenues and earnings from international operations are translated into U.S. Dollars. For example, a U.S. based company with 50% of its earnings and revenues coming from international operations will see earnings and revenues increase by 7.0% from foreign currency translation alone following the current 14.0% fall in the U.S. Dollar Index from its high at 103.82 in January 2017. The U.S. Dollar Index averaged 100 in the fourth quarter of 2016 and 101 in the first quarter of 2017.
Equity Indices and Related ETFs
Daily Seasonal/Technical Equity Trends for March 29th 2018
Green: Increase from previous day
Red: Decrease from previous day
Technical scores are calculated as follows:
Intermediate Uptrend based on at least 20 trading days: Score 2
(Higher highs and higher lows)
Intermediate Neutral trend: Score 0
(Not up or down)
Intermediate Downtrend: Score -2
(Lower highs and lower lows)
Outperformance relative to the S&P 500 Index: Score: 2
Neutral Performance relative to the S&P 500 Index: 0
Underperformance relative to the S&P 500 Index: Score -2
Above 20 day moving average: Score 1
At 20 day moving average: Score: 0
Below 20 day moving average: -1
Up trending momentum indicators (Daily Stochastics, RSI and MACD): 1
Mixed momentum indicators: 0
Down trending momentum indicators: -1
Technical scores range from -6 to +6. Technical buy signals based on the above guidelines start when a security advances to at least 0.0, but preferably 2.0 or higher. Technical sell/short signals start when a security descends to 0, but preferably -2.0 or lower.
Long positions require maintaining a technical score of -2.0 or higher. Conversely, a short position requires maintaining a technical score of +2.0 or lower.
S&P 500 Index added 53.27 points (2.06%) last week. Intermediate trend remains down. The Index remained below its 20 day moving average. Short term momentum indicators are trending down. Note the bounce from near its 200 day moving average, an encouraging technical sign.
Percent of S&P 500 stocks trading above their 50 day moving average increased last week to 31.60 from 15.60. Percent shows early technical signs of recovering from an intermediate oversold level.
Percent of S&P 500 stocks trading above their 200 day moving average increased last week to 58.40 from 51.00. Percent remains intermediate overbought.
Bullish Percent Index for S&P 500 stocks dropped last week to 41.20 from 44.60 and remained below its 20 day moving average. The Index is intermediate neutral and trending down.
Bullish Percent Index for TSX stocks slipped last week to 55.60 from 56.00 and remained below its 20 day moving average. The Index remains intermediate overbought and trending down.
TSX Composite Index gained 143.55 points (0.94%) last week with all of the gain coming on Thursday. Intermediate trend remains neutral (Score: 0). Strength relative to the S&P 500 Index remains Positive (Score: 2). The Index remains below its 20 day moving average (Score: -1). Short term momentum indicators turned up on Thursday (Score: 1). Technical score increased last week to 2 from 0.
Percent of TSX stocks trading above their 50 day moving average increased last week to 41.39 from 34.84. Percent changed from intermediate oversold to intermediate neutral and is trending higher.
Percent of TSX stocks trading above their 200 day moving average increased last week to 44.67 from 43.03. Percent remains intermediate neutral.
Dow Jones Industrial Average gained 609.98 points (2.59%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index changed to Positive from Negative. The Average remains below its 20 day moving average. Nice bounce from near its 200 day moving average, an bullish long term technical signal Short term momentum indicators are trending down. Technical score increased last week to 0 from -4.
Bullish Percent Index for Dow Jones Industrial stocks was unchanged last week at 36.67 and remained below its 20 day moving average. The Index remains intermediate oversold and trending down.
Bullish Percent Index for NASDAQ Composite stocks dropped last week to 54.32 from 58.74 and remained below its 20 day moving average. The Index remains intermediate overbought and trending down.
NASDAQ Composite Index gained 70.77 points (1.01%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to Negative from Neutral. The Index remains below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to-2 from 0.
Russell 2000 Index added 19.35 points (1.28%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remained Positive. The Index remains below its 20 day moving average. Short term momentum indicators are trending down. Technical score remained last week at -2.
Dow Jones Transportation Average added 233.24 points (2.29%) last week with almost of the gain recorded on Thursday. Strength relative to the S&P 500 Index remained Positive. The Average remains below its 20 day moving average. Nice bounce on Thursday from near its 200 day moving average. Short term momentum indicators turned up on Thursday. Technical score increased last week to 2 from 0.
Australia All Ordinaries Composite Index dropped 60.10 points (1.01%) last week. Intermediate trend changed on Thursday from Neutral to Down when the Index dropped below 5,887.30. Strength relative to the S&P 500 Index changed on Thursday to Neutral from Positive. The Index remains below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -4 from 0.
Nikkei Average added 541.22 points (2.63%) last week. Intermediate trend changed to down from neutral on a move below 20,917. Strength relative to the S&P 500 Index changed to Neutral from Positive. The Average remains below its 20 day moving average. Short term momentum indicators have turned up. Technical score slipped last week to -2 from 0.
Europe iShares added $1.10 (2.42%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains Positive. Units remain below their 20 day moving average. Short term momentum indicators have turned up. Technical score increased last week to 0 from -2.
Shanghai Composite Index added 7.77 points (0.25%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index changed to Neutral from Positive. The Index remains below its 20 day moving average. Short term momentum indicators are trending down. Technical score slipped last week to -4 from -2.
Emerging Markets iShares added 1.39 (2.96%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Positive. Units remain below their 20 day moving average. Short term momentum indicators turned higher on Thursday. Technical score remained increased last week to 4 from 2.
Currencies
U.S. Dollar Index added 0.78 (0.88%) last week. Intermediate trend remains neutral. The Index moved above its 20 day moving average. Short term momentum indicators are trending up.
The Euro slipped 0.48 (0.39%) last week. Intermediate trend changed to neutral from down. The Euro dropped back below its 20 day moving average. Short term momentum indicators are trending down.
Canadian Dollar added 0.08 U.S. cents (0.10%) last week. Intermediate trend remains down. The Canuck Buck moved above its 20 day moving average. Short term momentum indicators are trending up.
Japanese Yen dropped 1.54 (1.61%) last week. Intermediate trend remains up. The Yen dropped below its 20 day moving average. Short term momentum indicators are trending down.
British Pound dropped 1.08 (0.76%) last week. Intermediate trend remains up. The Pound remains above its 20 day moving average. Short term momentum indicators have turned down.
Commodities and Related ETFs
Daily Seasonal/Technical Commodities Trends for March 29th 2018
Green: Increase from previous day
Red: Decrease from previous day
* Excludes adjustment from rollover of futures contracts
CRB Index slipped 0.90 points (0.44%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Positive. The Index moved back above its 20 day moving average on Thursday. Short term momentum indicators are trending up. Technical score remained last week at 6.
Gasoline slipped $0.02 per gallon (0.98%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Positive. Gas remains above its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 6.
Crude Oil slipped $0.94 per barrel (1.43%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Positive. Crude remains above its 20 day moving average. Short term momentum indicators turned down. Technical score slipped last week to 4 from 6.
Natural Gas added $0.10 per MBtu (3.80%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index turned Positive from Neutral. "Natty" moved above its 20 day moving average. Short term momentum indicators have turned up. Technical score increased last week to 2 from -4.
S&P Energy Index added 4.98 points (1.01%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains Positive. The Index moved above its 20 day moving average on Thursday. Short term momentum indicators are trending up. Technical score increased last week to 2 from 0.
Philadelphia Oil Services Index dropped 1.09 points (0.80%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Positive. The Index remains below its 20 day moving average. Short term momentum indicators are trending down. Technical score slipped last week to 2 from 4.
Gold dropped $22.60 per ounce (1.67%) last week reflecting U.S. Dollar Index strength. Gold remains above its 20 day moving average. Strength relative to the S&P 500 Index remains Positive. Short term momentum indicators have turned down. Technical score slipped last week to 0 from 2.
Silver dropped $0.31 per ounce (1.87%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains Positive. Silver dropped below its 20 day moving average. Short term momentum indicators have turned down. Technical score dropped last week to -2 from 2.
AMEX Gold Bug Index dropped 1.45 points (0.82%) last week. Intermediate trend changed to up from down on a move above 179.53. Strength relative to the S&P 500 Index remains Positive. The Index moved back above its 20 day moving average on Thursday. Short term momentum indicators are trending up. Technical score increased last week to 6 from 2.
Platinum dropped $15.80 per ounce (1.67%) last week. Trend remains down. Relative strength changed to Neutral. PLAT remains below its 20 day MA. Momentum: down
Palladium dropped $27.75 per ounce (1.83%) last week. Trend changed to down from Neutral on Thursday. Relative Strength changed to Neutral from Positive. PALL remains below its 20 day moving average. Short term momentum remains down. Technical score dropped to -4 from 0
Copper added 3.3 cents per lb (1.10%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains Neutral. Copper remains below its 20 day moving average. Short term momentum indicators have turned up. Technical score increased last week to -2 from -4.
BMO Base Metal ETF slipped $0.07 (0.62%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index changed to Negative from Neutral. Units remain below their 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -6 from -4.
Lumber gained $28.10 (5.76%) last week. Trend remains up. Relative strength remains Positive. Lumber moved above its 20 day MA. Short term momentum remains up. Score increased to 6
Grain ETN added $0.34 (1.31%) last week. Trend remains up. Relative strength remains Neutral. Units remained below their 20 day MA. Short term momentum turned up on Thursday.
Agriculture ETF gained$1.93 (3.22%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to Positive from Neutral. Units remain below their 20 day moving average. Short term momentum indicators have turned up. Technical score increased last week to 4 from -2.
Interest Rates
Yield on 10 year Treasuries dropped 8.9 basis points (3.14%) last week. Intermediate trend changed to down from up on a move below 2.795%. Yield remained below its 20 day moving average. Short term momentum indicators are trending down.
Conversely, price of the long term Treasury ETF added $1.73 (1.44%) last week. Intermediate trend remains up. Units remained above their 20 day moving average. Short term momentum indicators are trending higher .
Volatility
The VIX Index dropped 4.89 (19.66%) last week. Intermediate trend remains up. The Index remained above its 20 day moving average.
Sectors
Daily Seasonal/Technical Sector Trends for March 29th 2018
Green: Increase from previous day
Red: Decrease from previous day
StockTwits released on Thursday @EquityClock
Technical action by S&P 500 stocks to 10:15: Bullish. Intermediate breakouts: $PVH $AES $DTE $ES $CL. No break downs:
Editor's Note: After 10:15 AM EDT, intermediate breakouts included CLX and PEG. No breakdowns.
Palladium ETN $PALL moved below $91.30 extending an intermediate downtrend.
End of natural gas withdrawal season approaching. YTD change in storage levels continue to fall more than average.
Canada industrial product price index (PPI) up 0.1% in February, well short of the 0.6% increase that is average.
Canada Monthly GDP down 3.8% (NSA) in January, slightly worse than average decline of 3.5%.
S&P 500 Index has averaged a gain of 1.4% in April; positive in 70% of past 50 periods. equityclock.com/2018/03/29/… $SPX $SPY $ES_
Disclaimer: Seasonality and technical ratings offered in this report and at
www.equityclock.com are for information only. They should not be considered as advice to purchase or to sell mentioned securities. Data offered in this report is believed to be accurate, but is not guaranteed
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