Tech Talk for Monday June 25th 2018

U.S. equity index futures were lower this morning. S&P 500 futures were down 13 points in pre-opening trade. Futures are responding to rising concerns about a trade war. The U.S. Dollar Index moved lower.

Harley Davidson dropped $0.71 to $43.45 after the European Union increased its tariffs on motor cycles from 6% to 31%.

BlackBerry slipped $0.06 to $10.62 after MKM Partners lowered its target price to $12.00 from $13.50.

Intel fell $1.11 to $51.39 after Nomura downgraded the stock to Neutral from Buy.

EquityClock's Daily Market Comment

Following is a link:

http://www.equityclock.com/2018/06/22/stock-market-outlook-for-june-25-2018/

Note seasonality charts on the TSX Composite Index, Canadian CPI, Canadian Retail Trade and U.S. Household Products.

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The Bottom Line

Any strength by U.S. equity markets between now and mid-July will provide a seasonal profit taking opportunity. U.S. equity markets have a history of moving higher from late June to mid-July prior to release of encouraging second quarter corporate results (frequently called "the summer rally"). Thereafter, seasonal influences turn Negative from the third week in July to mid-October. This year, prospects for a trade war may prompt seasonal influences to turn Negative earlier than usual. Caveat emptor!

Seasonal influences are particularly relevant during U.S. Mid-term election years. Volatility in equity markets increases from late April to mid-October due to concerns about a possible change in political control in Congress. These concerns are very real this year. Republicans control the House by 16 votes and the Senate by one vote. On average during a Mid-term election year, the controlling party loses 24 House seats to the opposition party. Anticipation of a possible change, regardless of the final result, is a major reason for a correction in North American equity markets between late April and October.

Ditto for Canadian equities: take seasonal profits on strength between now and mid-July! Seasonal influences for Canadian equity markets follow a similar pattern to the U.S. They normally recover from late June to until mid-July in anticipation of encouraging second quarter corporate results and turn negative until mid-October. Short and intermediate technical indicators for the Canadian equity market remain overbought. Data shows that the TSX Composite Index has advanced in 13 of the past 20 periods from June 1st to October 12th. However, the seven drops in the past 20 periods were significant: five of the seven drops exceeded 12%. Accordingly, caution by equity investors is advised. Current technical, seasonal and fundamental considerations suggest that a 12% + correction by the TSX Composite Index this summer is higher than average.

Economic News This Week

May New Home Sales to be released at 10:00 AM EDT on Monday are expected to increase 0.6% versus a decline of 1.5% in April.

May Wholesale Inventories to be released at 8:30 AM EDT on Wednesday are expected to increase 0.3% versus no change in April.

May Durable Goods Orders to be released at 8:30 AM EDT on Wednesday are expected to drop 0.8% versus a decline of 1.6% in April. Excluding transportation orders, May Durable Goods Orders are expected to increase 0.5% versus a gain of 0.9% in April

Weekly Jobless Claims to be released at 8:30 AM EDT on Thursday are expected to increase to 220,000 from 218,000 last week.

Revised Annualized First Quarter U.S. GDP to be released at 8:30 AM EDT on Thursday is expected to remain unchanged from the previous estimate at 2.2%.

Canadian April GDP to be released at 8:30 AM EDT on Friday is expected to dip 0.1% versus a gain of 0.3% in March (weather related).

May Personal Income to be released at 8:30 AM EDT on Friday is expected to increase 0.4% versus a gain of 0.6% in April. May Personal Spending is expected to increase 0.4% versus a gain of 0.3% in April.

Earnings News This Week

Observations

Technical action by individual S&P 500 stocks was bearish last week. Number of stocks breaking intermediate resistance totaled 14 while number of stocks breaking support totaled 45. Notably, utilities stocks were on the list of breakouts while industrial and financial stocks were on the list of breakdowns. The Up/Down ratio dropped last week to (250/189=) 1.32 from 1.42.

Earnings news this week is quiet on both sides of the border. Focus is on quarterly reports by Carnival Cruise on Monday and Nike and Walgreen on Thursday.

U.S. economic focus this week is on May new home sales on Monday

The Canadian Dollar extended an intermediate downtrend. Weaker than anticipated April Retail Sales and move negative rhetoric on NAFTA by President Trump added to weakness

The U.S. Dollar Index is showing technical signs of rolling over as it enters its seasonal period of weakness at the beginning of July. Greg Schnell at www.stockcharts.com released a comment on Friday highlighting early signs of technical weakness in the Index. See his video at

https://vimeo.com/channels/gregschnell/276657934 A change in trend in the U.S. Dollar Index is particularly bullish for energy, precious metals and their related equities/ETFs.

Medium term technical indicators U.S. equity markets (Percent of stocks trading above their 50 day moving average, Bullish Percent Index) remained at overbought levels last week and trending lower.

Medium term technical indicators in Canada remained intermediate overbought and showing early signs of rolling over

Short term technical indicators for U.S. markets and sectors (20 day moving averages, short term momentum) generally moved lower last week.

Short term technical indicators for Canadian markets and sectors generally moved higher last week.

The outlook for S&P 500 earnings and sales remains positive: According to FactSet , earnings and sales estimates were unchanged last week. Six companies are scheduled to release results this week. Second quarter 2018 earnings are expected to increase 19.0% on an 8.7% increase in sales. Third quarter earnings are expected to increase 21.4% on a 7.5% increase in sales. Fourth quarter earnings are expected to increase 17.2% on a 5.8% increase in sales. For all of 2018, earnings are expected to increase 19.8% on a 7.6% increase in sales.

Short term political concerns remain elevated. Additional proposed tariff U.S. tariffs against Chinese goods valued at $200 billion heightened concerns. Additional proposed 10% tariffs on European cars also added to trade war concerns. NAFTA negotiations now appear virtually dead until after the Mexican election on July 1st and the U.S. mid-term election in November. Other issues include impact of revocation of the Iran nuclear weapons agreement and increased scrutiny by special council on Russia's influence on the Presidential election. In addition, U.S. mid-term election political rhetoric normally starts to ramp up in June culminating in October.

Seasonal influences start to change for a variety of equity markets, commodities and sectors between now and mid-July. See indicated changes in tables offered below.

Equity indices and related ETFs

Daily Seasonal/Technical Equity Trends for June 22nd 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

The S&P 500 Index dropped 24.54 points (0.88%) last week. Intermediate trend remains down. The Index dropped below its 20 day moving average. Short term momentum indicators have turned down.

Percent of S&P 500 stocks trading above their 50 day moving average dropped last week to 63.20 from 70.34. Percent remains intermediate overbought and trending down.

Percent of S&P 500 stocks trading above their 200 day moving average dropped last week to 60.40 from 63.73. Percent remains intermediate overbought and trending down.

Bullish Percent Index for S&P 500 stocks slipped last week to 63.00 from 64.00, but remained above its 20 day moving average. The Index remains intermediate overbought and showing early signs of rolling over.

Bullish Percent Index for TSX stocks increased last week to 65.46 from 64.63 and remained above its 20 day moving average. The Index remains intermediate overbought.

TSX Composite Index gained 135.72 points (0.83%) last week. Intermediate uptrend was confirmed when the Index moved above 16,421.42 to an all-time high (Score: 2). Strength relative to the S&P 500 Index changed last week from Negative to Positive (Score: 2). The Index remains above its 20 day moving average (Score: 1). Short term momentum indicators are trending up (Score: 1). Technical score increased last week to 6 from 2.

Percent of TSX stocks trading above their 20 day moving average increased last week to 68.46 from 68.33. Percent remains intermediate overbought and passed its peak.

Percent of TSX stocks trading above their 200 day moving average increased last week to 61.00 from 60.83. Percent remains intermediate overbought.

Dow Jones Industrial Average dropped 509.59 points (2.03%) last week (including 8 consecutive days prior to Friday, a 40 year record. Strength relative to the S&P 500 Index remained Negative last week. The Average moved below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -6 from -4.

Bullish Percent Index for Dow Jones Industrial stocks dropped last week to 60.00 from 66.67 and dropped below its 20 day moving average. The Index remains intermediate overbought and has started to turn lower.

Bullish Percent Index for NASDAQ Composite Index slipped last week to 63.60 from 64.47, but remained above its 20 day moving average. The Index remains intermediate overbought.

NASDAQ Composite Index dropped 53.36 points (0.69%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Positive. The Index remains above its 20 day moving average. Short term momentum indicators are turned down on Friday. Technical score dropped last week at 4 from 6..

Russell 2000 Index added 1.67 points (0.10%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Positive. The Index remained above its 20 day moving average. Short term momentum indicators turned lower on Friday. Technical score dropped last week to 4 from 6.

Dow Jones Transportation Average dropped 300.79 points (2.72%) last week. Intermediate trend remains Neutral. Strength relative to the S&P 500 Index changed to Negative from Neutral on Friday. The Average dropped below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -4 from 2.

Australia All Ordinaries Composite Index gained 116.80 points (1.88%) last week. Intermediate trend changed to up from neutral on a move above 6,245.90. Strength relative to the S&P 500 Index changed to Positive from Negative. The Index remained above its 20 day moving average. Short term momentum indicators continued to trend up. Technical score increased last week to 6 from 0.

The Nikkei Average dropped 334.92 points (1.47%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index remains Neutral. The Average dropped below its 20 day moving average on Friday. Short term momentum indicators turned down on Friday. Technical score dropped last week to -2 from 2.

Europe iShares dropped $1.62 (3.46%) last week despite the recovery on Friday. Intermediate trend remains down. Strength relative to the S&P 500 Index remains Negative. Units remain below their 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -6 from -4.

Shanghai Composite Index plunged 132.14 points (4.37%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains Negative. The Index remained below its 20 day moving average. Technical score remained last week at -6.

Emerging Markets iShares dropped $1.33 (2.94%) last week. Intermediate trend remained down. Strength relative to the S&P 500 Index remains Negative. Units remained below their 20 day moving average. Short term momentum indicators continued to trend down. Technical score remained last week at -6.

Currencies

The U.S. Dollar Index slipped 0.27 (90.29%) last week. Intermediate uptrend was confirmed on a move above 95.07. The Index remained above its 20 day moving average. Short term momentum indicators are overbought and showing early signs of rolling over.

The Euro added 0.51 (0.44%) last week. Intermediate trend remains down. The Euro remains below its 20 day moving average. Short term momentum indicators are trending down, but showing early signs of bottoming.

Canadian Dollar dropped U.S. 0.45 cents (0.59%) last week. Intermediate trend remains down. The Canuck Buck remained below its 20 day moving average. Short term momentum indicators are trending down.

Japanese Yen added 0.53 (0.59%) last week. Intermediate trend remains down. The Yen remains below its 20 day moving average. Short term momentum indicators have turned up.

The British Pound slipped 0.18 (0.14%) last week. Intermediate trend remains down. The Pound remains below its 20 day moving average. Short term momentum indicators show early signs of bottoming.

Commodities and related ETFs

Daily Seasonal/Technical Commodities Trends for June 22nd 2018

Green: Increase from previous day

Red: Decrease from previous day

The CRB Index added 1.29 points (0.66%) last week with all of the gain coming on Friday (mainly due to strength in Crude Oil prices). Intermediate trend remains neutral. Strength relative to the S&P 500 Index remains Negative, but showing early signs of bottoming. The Index remains below its 20 day moving average. Short term momentum indicators turned back up on Friday. Technical score remained last week at -2.

Gasoline added $0.03 per gallon (1.49%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Negative. Gas remains below its 20 day moving average. Short term momentum indicators remain negative, but show early signs of bottoming. Technical score remained last week at -2.

Crude Oil gained$1.69 per barrel (2.53%) last week with all of the gain recorded on Friday following release of the OPEC meeting. Intermediate trend remains up. Strength relative to the S&P 500 Index changed on Friday to Positive from Negative. Short term momentum indicators are trending up. Technical score increased last week to 6 from 0.

Natural Gas dropped $0.08 per MBtu (2.65%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Positive. "Natty" dropped to its 20 day moving average on Friday. Short term momentum indicators are trending down. Technical score dropped last week to 3 from 6.

S&P Energy Index added 8.31 points (1.52%) last week with all of the gain recorded on Friday. Strength relative to the S&P 500 Index remains Negative. The Index remains below its 20 day moving average. Short term momentum indicators are trending down. Technical score remained last week at -2.

Philadelphia Oil Services Index added 2.87 points (1.91%) last week with all of the gain recorded on Friday. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Negative. The Index remains below its 20 day moving average. Short term momentum indicators are trending down, but showing early signs of bottoming. Technical score remained last week at -2.

Gold dropped $7.80 per ounce (0.61%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains Negative. Gold remains below its 20 day moving average. Short term momentum indicators are trending down. Technical score remained last week at -6.

Silver slipped $0.02 per ounce (0.12%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Negative. Silver remains below its 20 day moving average. Short term momentum indicators are trending down. Technical score remained last week at -2.

AMEX Gold Bug Index slipped 0.95 (0.53%) last week. Intermediate trend changed to down from up on a move below 175.96. Strength relative to the S&P 500 Index remains Negative. The Index remained below its 20 day moving average. Short term momentum indicators are trending down, but showing early signs of bottoming. Technical score dropped last week to -6 from 0.

Platinum dropped $14.50 per ounce (1.63%) last week. Trend remains down.Relative strength remains Negative. PLAT remains below its 20 day MA. Momentum remains down.

Palladium dropped $35.40 per ounce (3.61%) last week. Trend remains down. Relative strength remains Negative. PALL remains below its 20 day MA. Momentum remains down.

Copper dropped 11.8 cents per lb. (3.75%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Negative. Copper remains below its 20 day moving average. Short term momentum indicators are trending down. Technical score slipped to -2 from 0.

BMO Base Metals ETF added $0.06 (0.53%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains Negative. Units remain below their 20 day moving average. Short term momentum indicators are trending down. Technical score remained last week at -6.

Lumber added 1.90 (0.34%) last week with all of the gain recorded on Friday. Relative strength remains Negative. Remains below its 20 day MA. Momentum turned up on Friday.

Grain ETN dropped $0.45 (1.84%) last week. Trend remains down. Relative strength remains Negative. Remains below its 20 day MA. Momentum remains down.

Agriculture ETF dropped $1.01 (1.58%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Negative. Units dropped below their 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -2 from 2.

Interest Rates

Yield on 10 year Treasuries slipped 2.4 basis points (0.82%) last week. Intermediate trend remains up. Yield dropped below its 20 day moving average on Friday. Short term momentum indicators have turned down.

Price of the long term Treasuries ETF added $0.15 (0.12%) last week. Intermediate trend remains up. Units remain above their 20 day moving average.

Volatility

The VIX Index added 1.80 (15.04%) last week. The Index moved back above its 20 day moving average.

Sectors

Daily Seasonal/Technical Sector Trends for June 22nd 2018

Green: Increase from previous day

Red: Decrease from previous day

StockTwits Released on Friday @EquityClock

TSX Financials ETF $XFN.CA moved above $38.28 extending an intermediate uptrend.

Commerce Bank $CM.CA, a TSX 60 stock moved above $117.24 setting an intermediate uptrend.

Technical action by S&P 500 stocks to 10:00: Quiet. Intermediate breakout: $WMB. Breakdowns: $AON $RHT

Editor's Note: After 10:00 AM EDT, intermediate breakouts included BXP, VTR and VRTX. Breakdowns included PHM and PNC.

ManuLife Financial $MFC.CA, a TSX 60 stock moved above $25.15 extending an intermediate uptrend.

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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