Tech Talk for Monday June 4th 2018
U.S. equity index futures were higher this morning. S&P 500 futures were up 10 points in pre-opening trade.
Apple gained $1.33 to an all-time high of $191.57 prior to start of its annual developer's convention.
Merck added $1.09 to $61.65 after announcing positive results for Keytruda in melanoma trials.
Amazon gained $6.46 to $1,648.00 after SunTrust raised its target price to $2,000 from $1,900.
Under Armour added $0.20 to $21.56 after Stifel Nicolaus raised its target price to $27 from $20.
EquityClock's Daily Market Comment
Following is a link:
http://www.equityclock.com/2018/06/01/stock-market-outlook-for-june-4-2018/
Note seasonality charts on the Technology sector, Health Care sector, Non-farm Payrolls, Hourly Earnings and Construction Spending.
WALL STREET RAW RADIO
WITH HOST, MARK LEIBOVIT – SATURDAY, JUNE 2:
GUESTS INCLUDE: DON VIALOUX, HARRY BOXER, HENRY WEINGARTEN AND SINCLAIR NOE
The Bottom Line
First quarter results released to date by a wide variety of U.S. and Canadian companies were spectacular. S&P 500 companies reported a year-over year gain of 24.6%. Despite results, responses by U.S. equity markets remained muted. The S&P 500 Index and Dow Jones Industrial Average were slightly lower than levels set eleven weeks ago. Short and intermediate term technical indicators remain overbought and some are showing early signs of peaking.
Ditto for response to results from key Canadian companies. Canadian bank stocks moved lower during the past two weeks following release of fiscal second quarter results despite exceeding consensus earnings estimates.
U.S. equity markets have a history of reaching a seasonal peak at this time of year. The first week in May historically is the week when U.S. equity indices, commodities and sectors change their seasonality from Positive to Neutral/Negative. Subsequently seasonal influences regularly turn Negative in the third week in July and bottom in mid-October.
Seasonal influences are particularly relevant in 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.
Seasonal influences for a wide variety of equity markets have a history of peaking in early May, moving sideways to mid-July and moving down to mid-October including Chinese, Japanese, emerging markets and most European equity markets.
Seasonal influences for Canadian equity markets follow a similar pattern. They normally peak near the beginning of June, turn neutral until mid-July and turn negative until mid-October. History is about to repeat. Short and intermediate technical indicators for the Canadian equity market already are overbought and are showing early signs of peaking. 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
April Factory Orders to be released at 10:00 AM EDT on Monday are expected to drop 0.4% versus a gain of 1.6% in March.
May Non-Manufacturing ISM to be released at 10:00 AM EDT on Tuesday is expected to increase to 57.8 from 56.8 in April.
U.S. April Trade Deficit to be released at 8:30 AM EDT on Wednesday is expected to increase to $50.0 billion from $49.0 billion in March
April Canadian Merchandise Trade Deficit to be released at 8:30 AM EDT on Wednesday is expected to slip to $2.5 billion from $2.5 billion.
Weekly Jobless Claims to be released at 8:30 AM EDT on Thursday are expected to increase to 225,000 from 221,000 last week.
May Canadian Housing Starts to be released at 8:15 AM EDT on Friday are expected to increase to 220,000 units from 215,280 units in April
May Canadian Employment to be released at 8:30 AM EDT on Friday is expected to increase 25,000 versus a drop of 1,100 in April.
Earnings News This Week
Tuesday: Hewlett Packard Enterprises, Navistar
Wednesday: Signet Jewelers
Thursday: Avago Tech, Canada Goose
Observations
Technical action by individual S&P 500 stocks was neutral last week. Number of stocks breaking intermediate resistance totaled 31 while number of stocks breaking support totaled 42. Notably, technology stocks were on the list of breakouts while consumer discretionary and financials were on the list of breakdowns. The Up/Down ratio slipped last week to (219/215=) 1.02 from 1.06.
Earnings news this week is quiet on both sides of the border
Medium term technical indicators in the U.S. (Percent of stocks trading above their 50 day moving average, Bullish Percent Index) remained at or near overbought levels last week and showed early signs of rolling over.
Medium term technical indicators in Canada remained in upward trends last week and intermediate overbought, but show early signs of rolling over
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 rolling over from overbought levels
The outlook for S&P 500 earnings and sales remains positive: According to FactSet, 99% of companies have reported first quarter results. Another 4 companies are scheduled to report this week. To date, 77% beat consensus earnings estimates and 77% beat consensus sales estimates. Earnings and sales estimates rose slightly again last week. First quarter 2018 earnings are expected to increase 24.6% on an 8.5% increase in sales. Second quarter 2018 earnings are expected to increase 18.9% on an 8.6% increase in sales. Third quarter earnings are expected to increase 21.1% on a 7.5% increase in sales. Fourth quarter earnings are expected to increase 16.9% on a 5.8% increase in sales. For all of 2018, earnings are expected to increase 19.6% on a 7.6% increase in sales (versus 7.3% last week).
Short term political concerns were elevated last week. Steel and aluminum tariffs imposed by the U.S. and retaliated by participating nations ramped up tensions. NAFTA negotiations now appear virtually dead until after the U.S. mid-term election. Other issues include North Korean negotiations, rising trade war fears (particularly against China), 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.
Equity Indices and Related ETFs
Daily Seasonal/Technical Equity Trends for June 1st 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 gained 13.29 points (0.49%) last week. Intermediate trend remains down. Short term momentum indicators are trending down. The Index moved back above its 20 day moving average on Friday. Short term momentum indicators are trending down.
Percent of S&P 500 stocks trading above their 50 day moving average slipped last week to 61.20 from 61.80. It returned to intermediate overbought on Friday and shows early signs of rolling over.
Percent of S&P 500 stocks trading above their 200 day moving average slipped last week to 58.40 from 60.52. Percent has slipped to neutral from overbought and shows signs of rolling over.
Bullish Percent Index for S&P 500 stocks slipped last week to 58.20 from 58.60, but remained above its 20 day moving average. The Index shows early signs of rolling over.
Bullish Percent Index for TSX stocks increased last week to 62.90 from 61.45 and moved back above its 20 day moving average. The Index remains intermediate overbought.
TSX Composite Index slipped 32.13 points (0.20%) last week. Intermediate trend remains up (Score: 2). Strength relative to the S&P 500 Index changed on Friday to Negative from Neutral.(Score: -2 The Index remains above its 20 day moving average (Score: 1). Short term momentum indicators are trending down (Score: -1). Technical score slipped last week to 0 from 2.
Percent of TSX stocks trading above their 50 day moving average slipped last week to 70.42 from 71.49. Percent remains intermediate overbought and showing signs of rolling over.
Percent of TSX stocks trading above their 200 day moving average slipped last week to 54.17 from 54.55. Percent remains intermediate neutral and showing early signs of rolling over.
The Dow Jones Industrial Average slipped 117.88 points (0.48%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index changed last week to Negative from Neutral. The Average recovered back above its 20 day moving average on Friday. Short term momentum indicators are trending down. Technical score changed last week to -4 from -2.
Bullish Percent Index for Dow Jones Industrial stocks increased last week to 66.67 from 63.33 and remained above its 20 day moving average. The Index remains intermediate overbought.
Bullish Percent Index for NASDAQ Composite Index increased last week to 61.77 from 60.86 and remained above its 20 day moving average. The Index remains intermediate overbought.
NASDAQ Composite Index gained 120.48 points (1.62%) last week thanks mainly to exceptional strength by the FAANG stocks on Friday. 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 turned back up on Friday. Technical score remained last week at 6.
Russell 2000 Index added 21.05 points (1.29%) 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 trending up. Technical score remained last week at 6.
Dow Jones Transportation Average slipped 6.09 points (0.06%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index remains Positive. The Average remains above its 20 day moving average. Short term momentum indicators have turned down. Technical score slipped last week to 2 from 4.
Australia All Ordinaries Composite Index dropped 37.00 points (0.60%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index remained Negative. The Index remained below its 20 day moving average. Short term momentum indicators are trending down. Technical score remained last week at -4.
Nikkei Average dropped 279.44 points (1.24%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index remains Negative. The Average remained below its 20 day moving average. Short term momentum indicators are trending down. Technical score remained last week at -4.
Europe iShares dropped $0.26 (0.55%) last week. Intermediate trend changed to down from neutral on a move below 45.52. 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 dropped 66.16 points (2.11%) last week. Intermediate downtrend was confirmed on a move below 3041.62. Strength relative to the S&P 500 Index changed to Negative from Neutral last week. The Index remains below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -6 from -4.
Emerging Markets iShares slipped $0.10 (0.22%) last week. Intermediate trend remains up. 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 -2.
Currencies
U.S. Dollar Index added 0.04 (0.04%) last week. Intermediate trend remains up. The Index remains above its 20 day moving average. Short term momentum indicators have just turned down.
The Euro slipped 0.05 (0.04%) last week. Intermediate trend remains down. The Euro remains below its 20 day moving average. Short term momentum indicators have just turned up.
Canadian Dollar added 0.10 (0.13%) last week. Intermediate trend remains down. The Canuck Buck remains below its 20 day moving average. Short term momentum indicators are trending down.
Japanese Yen added 0.01 (0.01%) last week. Intermediate trend remains up. The Yen remained above its 20 day moving average. Short term momentum indicators are trending up.
British Pound added 0.35 (0.26%) last week. Intermediate trend remains down. The Pound moved above its 20 day moving average on Friday. Short term momentum indicators turned up on Friday.
Commodities and Related ETFs
Daily Seasonal/Technical Commodities Trends for June 1st 2018
Green: Increase from previous day
Red: Decrease from previous day
CRB Index dropped 1.63 points (0.80%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to Negative from Neutral. The Index remained below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -2 from 0.
Gasoline dropped $0.03 per gallon (1.39%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to Negative from Neutral on Friday. Gas remained below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -2 from 2.
Crude Oil dropped another $2.07 per barrel (3.05%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remained Negative. Crude remains below its 20 day moving average. Short term momentum indicators are trending down. Technical score remains last week at -2.
Natural Gas was unchanged (0.0%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Positive. "Natty" remained above its 20 day moving average. Short term momentum indicators have turned down. Technical score slipped last week to 4 from 6.
S&P Energy Index added 13.60 points (2.4%) last week. Intermediate trend remains up. 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. Technical score remained last week at -2.
Philadelphia Oil Services Index dropped 0.77 points (0.49%) last week. Intermediate trend remains up. 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. Technical score remained last week at -2.
Gold slipped $4.40 per ounce (0.34%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index remained Negative. Gold moved back below its 20 day moving average on Friday. Short term momentum indicators are trending up. Technical score remained last week at -2.
Silver slipped $0.11 per ounce (0.66%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains Neutral. Silver moved below its 20 day last week last week. Short term momentum indicators are trending up. Technical score slipped last week to -2 from 0.
AMEX Gold Bug Index dropped $1.05 (0.58%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remained Neutral. The Index dropped back below its 20 day moving average on Friday. Short term momentum indicators are trending up. Technical score slipped last week to 2 from 4.
Platinum added $5.40 per ounce (0.60%) last week. Trend remains down. Relative strength changed to Neutral from Negative. Moved below its 20 day MA. Momentum: up.
Palladium gained $19.80 per ounce (2.03%) last week. Trend remains down. Relative strength remains Neutral. PALL remained above its 20 day MA. Momentum turned up on Friday.
Copper added 2.1 cents per lb (0.68%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remained Neutral. Copper moved back above its 20 day moving average on Friday. Short term momentum indicators turned positive on Friday. Technical score increased last week to 0 from -1.
BMO Base Metals ETF gained $0.13 (1.13%) 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 have just turned up. Technical score increased last week to -4 from -6.
Lumber slipped 5.70 (0.95%) last week. Trend remains up. Relative strength remains Neutral. Lumber moved below its 20 day MA. Short term momentum remains down.
Grain ETN dropped $0.97 (3.49%) last week. Trend remains up. Relative strength remained Neutral. Units moved below their 20 day moving average. Momentum turned down.
Agriculture ETF slipped $0.25 (0.40%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed last week to Negative from Neutral. 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 dropped 3.6 basis points (1.23%) last week. Intermediate trend remains up. Yield remained below its 20 day moving average. Short term momentum indicators have turned higher.
Price of the long term Treasury ETF added $0.68 (0.57%) last week. Intermediate trend changed to up from down on a move above $121.81. Units moved above their 20 day moving average.
Volatility
The VIX Index added 0.33 (2.51%) last week.
Sectors
Daily Seasonal/Technical Sector Trends for June 1st 2018
Green: Increase from previous day
Red: Decrease from previous day
StockTwits Released on Friday @EquityClock
Technical action by S&P 500 stocks to 10:00: Bullish. Intermediate breakouts: $UNM $ACN $GOOGL $F $KMI. Breakdowns: $ULTA $NEM
Editor's Note: After 10:00, breakouts included HCP, WY, GOOG, V, VNO, CME, ISRG, NSC, MA, TDG and AAPL
Apple closed at an all-time high.
Amazon $AMZN, one of the FAANG stock moved above $1638.10 extending an intermediate uptrend.
Loblaw Companies $L.CA, a TSX 60 stock moved above $67.35 completing a base building pattern.
Visa $V, a Dow Jones Industrial Average stock moved above $132.29 to an all-time high extending an intermediate uptrend.
#Construction Spending up 6.7% (NSA) in April, less than the 7.4% average increase for the month #Economy $MACRO #Construction Season.
Tahoe Resources $THO.CA moved above $7.05 completing a base building pattern.
Technology sector breaks to new high as stocks rally following employment report. equityclock.com/2018/06/01/… $XLK $SPX $SPY $ES_F
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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