Tech Talk for Monday May 14th 2018

U.S. equity index futures were higher this morning. S&P 500 futures were up 4 points in pre-opening trade.

Aurora Cannabis (ACB $8.07) made a share exchange takeover offer for MedReleaf (LEAF $24.90) valued at $3.2 billion.

Xerox fell $1.47 to $28.70 after dropping its merger plans with Fujifilm. JP Morgan downgraded the stock to Neutral from Overweight.

Lululemon added $0.63 to $98.54 after JP Morgan raised its target price to $111 from $107.

Consumer Staples SPDRs (XLP $49.56) are expected to open lower after Credit Suisse downgraded the sector to Underweight.

EquityClock's Daily Market Comment

Following is a link:

http://www.equityclock.com/2018/05/11/stock-market-outlook-for-may-14-2018/

Note seasonality chart on Canadian Employment

WALL STREET RAW RADIO – SATURDAY, MAY 12, 2018

WITH HOST, MARK LEIBOVIT. GUESTS INCLUDE: DON VIALOUX, HARRY BOXER, SINCLAIR NOE AND MARK SKOUSEN

https://tinyurl.com/ycsfxmuo

The Bottom Line

First quarter results by a wide variety of U.S. companies have been spectacular. Last week, analysts increased their consensus first quarter earnings estimate for S&P 500 companies from a year-over year gain of 24.2% to a gain of 24.9% and boosted consensus estimates for the remainder of the year. Despite results, responses by equity markets were muted. The S&P 500 Index and Dow Jones Industrial Average managed to recover to break-even levels set eight weeks ago. Their short term momentum indicators have returned to overbought levels, but have yet to show signs of peaking.

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. This year, seasonal influences have varied slightly mainly due to unusual strength in the energy sector triggered by non-recurring geopolitical events.

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 at this time of year including Chinese, Japanese and most European equity markets.

Seasonal influences for Canadian equity markets follow a similar pattern. They normally peak near the end of May, 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, but have yet to show signs of peaking.

Economic News This Week

May Empire State Manufacturing Survey to be released at 8:30 AM EDT on Tuesday is expected to slip to 15.5 from 15.8 in April

March Business Inventories to be released at 10:00 AM EDT on Tuesday are expected to increase 0.3% versus a gain of 0.6% in February.

April Retail Sales to be released at 8:30 AM EDT on Tuesday are expected to increase 0.3% versus a gain of 0.6% in March. Excluding auto sales, April Retail Sales are expected to increase 0.5% versus a gain of 0.2% in March.

April Housing Starts to be released at 8:30 AM EDT on Wednesday are expected to slip to 1,307,000 from 1,319,000 in March.

April Industrial Production to be released at 9:15 AM EDT on Wednesday is expected to increase 0.6% versus a gain of 0.5% in March. April Capacity Utilization is expected to increase to 78.4 from 78.0 in March.

Weekly Jobless Claims to be released at 8:30 AM EDT on Thursday are expected to increase to 217,000 from 211,000 last week.

May Philly Fed Index to be released at 8:30 AM EDT on Thursday is expected to slip to 22.0 from 23.2 in April.

April Leading Economic Indicators to be released at 10:00 AM EDT on Thursday are expected to increase 0.3% versus a gain of 0.3% in March.

Canadian March Retail Sales to be released at 8:30 AM EDT on Friday are expected to increase 0.1% versus a gain of 0.4% in February. Excluding auto sales, Canadian March Retail Sales are expected to increase 0.3% versus no change in February.

Canadian April Consumer Price Index to be released at 8:30 AM EDT on Friday is expected to increase 0.3% versus a gain of 0.3% in March. On a year-over-year basis, April CPI is expected to increase 2.2% versus a gain of 2.3% in March.

Earnings News This Week

Observations

Technical action by individual S&P 500 stocks was bulish last week. Number of stocks breaking resistance totaled 58 while number of stocks breaking support totaled 14. Notably, technology and financial stocks were on the list of breakouts and utilities were on the list of breakdowns. The energy sector was by far the strongest sector with a gain o 4%. The Up/Down ratio was up last week to (210/225=) 0.93 from 0.77.

Earnings focus this week is on first quarter results released by U.S. retail merchandisers.

Economic news this week on both sides of the border will focus on retail sales.

Medium term technical indicators in the U.S. (Percent of stocks trading above their 50 day moving average, Bullish Percent Index) showed signs of rolling over last week

Medium term technical indicators in Canada remained in upward trends last week, but are overbought.

Short term technical indicators for U.S. and Canadian equity markets, commodities and most sectors (20 day moving averages, short term momentum) continued to trend up last week. Many are overbought.

Seasonal influences in U.S. equity markets normally turn neutral early in May and negative in mid-July, particularly in mid-term U.S. election years. Seasonal influences in Canadian equity markets frequently remain neutral/positive to early June. Thereafter, they turn negative. See charts below:

The outlook for S&P 500 earnings and sales remains positive: According to FactSet, estimates for 2018 were raised again last week following encouraging results released to date: 91% of companies have reported. 78% beat consensus earnings estimates and 77% beat consensus sales estimates. Another 10 S&P 500 companies and 3 Dow Jones Industrial Average company (Home Depot, Wal-Mart, Cisco) are scheduled to report this week. First quarter 2018 earnings are expected to increase 24.9% (up from 24.2% last week) on an 8.2% increase in sales. Second quarter 2018 earnings are expected to increase 18.8% on an 8.3% increase in sales. Third quarter earnings are expected to increase 20.9% on a 7.1% increase in sales. Fourth quarter earnings are expected to increase 16.5% on a 5.7% increase in sales. For all of 2018, earnings are expected to increase 19.2% on a 7.2% increase in sales.

Short term political uncertainties remain NAFTA 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, Mid-term election political rhetoric normally starts to ramp up in May culminating in October.

Earnings and revenue prospects for 2018 are expected to be exceptional for U.S. based companies with international exposure. 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, U.S. based company with 50% or more of earnings and revenues from international operations saw first quarter earnings increase by 29.6% (versus 24.9% for all companies and first quarter sales increase by 13.1% (versus an 8.2% for all companies). The U.S. Dollar Index averaged 100 in the fourth quarter of 2016 and 101 in the first quarter of 2017. Strong gains from international operations due to currency translation are anticipated during the next three quarters.

Equity Indices and Related ETFs

Daily Seasonal/Technical Equity Trends for May 11th 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 gained 64.30 points (2.41%) last week. Intermediate trend remains down. However the Index moved above its intermediate downtrend and moved above short term resistance at 2717. The Index remained above its 20 day moving average. Short term momentum indicators are trending up.

Percent of S&P 500 stocks trading above their 50 day moving average increased last week to 62.20 from 47.20. Percent changed to intermediate overbought from intermediate neutral, but has yet to show signs of peaking.

Percent of S&P 500 stocks trading above their 200 day moving average increased last week to 62.20 from 55.00. Percent changed to intermediate overbought from intermediate neutral, but has yet to show signs of peaking.

Bullish Percent Index for S&P 500 stocks increased last week to 54.40 from 48.60 and moved back above its 20 day moving average. The Index remains intermediate neutral and continues to trend up.

Bullish Percent Index for TSX Composite stocks increased last week to 62.40 from 60.00. The Index remains intermediate overbought, but continues to trend up.

TSX Composite Index gained 253.92 points (1.61%) last week. Intermediate trend changed to up from neutral on a move above 15,791.15 (Score: 2). Strength relative to the S&P 500 Index remains 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 4.

Percent of TSX stocks trading above their 50 day moving average increased last week to 69.26 from 67.62. Percent remains intermediate overbought, but continues to trend higher.

Percent of TSX stocks trading above their 200 day moving average increased last week to 55.33 from 53.69. Percent remains intermediate neutral and continues to trend higher.

Dow Jones Industrial Average gained 586.66 points (2.34%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains Negative. The Average moved above its 20 day moving average last week. Short term momentum indicators have turned up. Technical score increased last week to -2 from -6.

Bullish Percent Index for Dow Jones Industrial stocks increased last week to 56.67 from 53.33 and moved above its 20 day moving average. The Index remains intermediate neutral.

Bullish Percent Index for NASDAQ Composite stocks increased last week to 57.38 from 54.71 and moved above its 20 day moving average. The Index remains intermediate neutral.

NASDAQ Composite Index gained 193.26 points (2.68%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remained Positive. The Index remained above its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 6.

Russell 2000 Index added 41.19 points (2.63%) last week. Intermediate trend changed to neutral from down on a move above 1609.05. 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 increase last week to 4 from 2.

Dow Jones Transportation Average gained 343.34 points (3.31%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index remains Neutral. The Average moved back above its 20 day moving average last week. Short term momentum indicators are trending up. Technical score increase last week to 2 from -2.

Australia All Ordinaries Composite Index gained 61 points (0.99%) last week. Intermediate trend remains neutral. 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 4.

Nikkei Average added 285.70 points (1.27%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index changed last week to Neutral from Positive. The Average remains above its 20 day moving average. Short term momentum indicators turned down. Technical score dropped last week to 0 from 4.

Europe iShares added 0.61 (1.28%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index changed to Negative from Neutral. Units remained above their 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to 0 from -2

Shanghai Composite Index added 72.23 points (2.34%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index changed to Neutral from Negative. The Index moved above its 20 day moving average last week. Short term momentum indicators are trending up. Technical score increased last week to 0 from -4.

Emerging Markets iShares added $0.97 (2.09%) last week. Intermediate trend remains up Strength relative to the S&P 500 Index remains Negative. Units moved above their 20 day moving average last week. Short term momentum indicators are trending up. Technical score increased last week to 2 from -2.

Currencies

The U.S. Dollar Index was unchanged last week. Intermediate trend remains up. The Index remains above its 20 day moving average. Short term momentum indicators turned down on Friday.

The Euro slipped 0.13 (0.11%) last week. Intermediate trend remains down. The Euro remains below its 20 day moving average. Short term momentum indicators turned up on Friday.

Canadian Dollar added 0.45 cents U.S. (0.58%) last week. Intermediate trend remains down. The Canuck Buck moved back above its 20 day moving average late last week. Short term momentum indicators are trending up.

Japanese Yen slipped 0.17 (0.19%) last week. Intermediate trend remains up. The Yen remained below its 20 day moving average. Short term momentum indicators turned up late last week.

British Pound added 0.03 (0.02%) last week. Intermediate trend remains down. The Pound remains below its 20 day moving average. Short term momentum indicators are showing early signs of bottoming.

Commodities and Related ETFs

Daily Seasonal/Technical Commodities Trends for May 11th 2018

Green: Increase from previous day

Red: Decrease from previous day

* Excludes adjustment from rollover of futures contracts

The CRB Index gained 1.27 points (0.62%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed on Friday to Neutral from Positive. The Index remains above its 20 day moving average. Short term momentum indicators are trending up. Technical score slipped last week to 4 from 6.

Gasoline added 8.00 cents per gallon (3.79%) 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 turned back up. Technical score increased last week to 6 from 4.

Crude Oil added $0.98 per barrel (3.79%) 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 are trending up. Technical score remained last week at 6.

Natural Gas gained $0.10 per MBtu (3.69%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Neutral. "Natty" moved back above its 20 day moving average. Short term momentum indicators have turned back up. Technical score increased last week to 4 from 0.

S&P Energy Index gained 20.44 points (3.75%) 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 turned back up. Technical score increased last week to 6 from 4.

Philadelphia Oil Services Index gained another 5.75 points (3.69%) 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 turned back up. Technical score increased last week to 6 from 4.

Gold gained $6.00 per ounce (0.46%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index remains Negative. Gold remains below its 20 day moving average. Short term momentum indicators turned up. Technical score increased last week to -2 from -4.

Silver gained $0.23 per ounce (1.39%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remained Negative. Silver moved back above its 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to -2 from -4.

AMEX Gold Bug Index added 0.85 (0.47%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remained Neutral. The Index remained above its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 4.

Platinum added $15.60 per ounce (1.71%) last week. Trend remains down. Relative strength remains Negative. PLAT moved above its 20 day MA. Momentum turned up.

Palladium gained $27.95 per ounce (2.92%) last week. Trend remains down. Relative strength remains Negative. PALL moved back above its 20 day MA. Momentum turned up.

Copper added 2.6 cents per lb. (0.84%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index changed to Negative from Neutral. Copper moved above its 20 day moving average. Short term momentum indicators are trending up. Technical score slipped last week to -2 from 0.

BMO Base Metal ETF gained $0.32 (2.76%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains Neutral. Units remained above their 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 0.

Lumber gained another $26.20 (4.54%) last week. Trend remains up. Relative strength remains Positive. Remains above its 20 day moving average. Momentum remains up.

Grain ETN dropped $1.00 (3.65%) last week. Trend remains up. Relative strength turned Negative on Friday. Fell below its 20 day MA on Friday. Momentum turned down.

Agriculture ETF gained $0.77 (0.92%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to Negative from Neutral. Units moved above their 20 day moving average. Short term momentum indicators turned up. Technical score increased last week to 2 from 0.

Interest Rates

Yield on 10 year Treasuries increased 2.7 basis points (0.92%) last week. Intermediate trend remains up. Yield remains above its 20 day moving average. Strength relative to the S&P 500 Index turned up.

Price of the long term Treasury Bond increased 0.24 (0.20%) last week. Units moved above their 20 day moving average.

Volatility

The VIX Index dropped 2.08(14.12%) last week. Intermediate trend remains down. The Index remains below its 20 day moving average.

Sectors

Daily Seasonal/Technical Sector Trends for May 11th 2018

Green: Increase from previous day

Red: Decrease from previous day

StockTwits Released on Friday @EquityClock

Technical action by S&P 500 stocks to 10:15: Bullish. Intermediate breakouts: $FISV $APH $PGR $AAP $STI. Breakdowns: $DLTR $SYMC

Editor's note: After 10:15 AM EDT, breakouts included ALGN, MAR FB, GLW. Breakdown: NWS.

Base metals stocks breaking up: $TECK $TECK.B.CA $RIO $VALE $PICK

Lithium ETN $LIT moved above $34.14 completing a base building pattern.

Thomson Reuters $TRI.CA, a TSX 60 stock moved below $$48.83 extending an intermediate downtrend.

Facebook $FB, one of the FAANG stocks moved above resistance at $186.10.

Year-to-date change in employment in Canada the weakest since the last recession. equityclock.com/2018/05/11/… #Employment #CDNecon $STUDY

Industrial Alliance $IAG.CA moved below $51.10 extending an intermediate downtrend.

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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