Tech Talk for Monday May 7th 2018

U.S. equity index futures were higher this morning. S&P 500 futures were up 7 points in pre-opening trade.

Quarterly reports continue to flow in. Companies that reported this morning included EW Scripps, Tyson Foods, Sysco, Sempra Energy, PetMet and Gannett.

Shake Shack dropped $1.20 to $54.75 after JP Morgan downgraded the stock to Under Weight from Neutral.

Alibaba gained $1.11 to $190.00 after KeyBanc, Benchmark, Oppenheimer and SunTrust raised their target on the stock.

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EquityClock's Daily Market Comment

Following is a link:

http://www.equityclock.com/2018/05/04/stock-market-outlook-for-may-7-2018/

Note seasonality charts on Non-Farm Payrolls and Average Hourly Earnings.

WALL STREET RAW RADIO – SATURDAY, MAY 5, 2018

WITH HOST, MARK LEIBOVIT AND GUESTS: DON VIALOUX, HENRY WEINGARTEN AND SINCLAIR NOE:

https://tinyurl.com/yc5v3cpb

The Bottom Line

It's time to take money off the table if you own U.S. equities. First quarter results by a wide variety of U.S. companies for the most part exceeded consensus sales and earnings estimates during the past two weeks. Analysts increased their consensus first quarter earnings estimate for S&P 500 from a gain of 23.2% to a gain of 24.2% and boosted consensus estimates for the remainder of the year. Yet, unless results were spectacular (e.g. Apple), traders took profits on news.

Next week effectively is the tail end of the first quarter earnings report season for major U.S. companies. Look for more profit taking on news.

U.S. equity markets have a history of reaching a seasonal peak at this time of year. In 1991 in my CMT designation paper, I wrote about this phenomenon by coining the phrase, "Buy when it snows (in late October), Sell when it goes (in late April). The first week in May historically also is the week when many equity markets, commodities and sectors change their seasonality from Positive to Neutral/Negative.

The phrase is 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.

Economic News This Week

April Canadian Housing Starts to be released at 8:15 AM EDT on Tuesday are expected to slip to 210,000 from 225,200 in March.

April Producer Prices to be released at 8:30 AM EDT on Wednesday are expected to increase 0.3% versus a gain of 0.3% in March. Excluding food and energy, April Producer Prices are expected to increase 0.2% versus a gain of 0.3% in March.

April Consumer Prices to be released at 8:30 AM EDT on Thursday are expected to increase 0.3% versus a decline of 0.1% in March. Excluding food and energy, April Consumer Prices are expected to increase 0.2% versus a gain of 0.2% in March.

Bank of England announces its overnight lending rate at 7:00 AM EDT. Consensus by economists on a possible 0.25% increase is mixed.

Weekly Jobless Claims to be released at 8:30 AM EDT on Thursday are expected to increase to 220,000 from 211,000 last week.

April Canadian Employment to be released at 8:30 AM EDT on Friday is expected to increase 19,600 versus a gain of 32,300 in March. April Unemployment Rate is expected to remain at 5.8% set in March. April year-over-year Average Hourly Wages are expected to increase 3.6% versus a gain of 3.3% in March.

May Consumer Sentiment Index to be released at 10:00 AM EDT on Friday is expected toincrease to 99.0 from 98.8 in April.

Earnings News This Week

Observations

Technical action by individual S&P 500 stocks was bearish again last week. Number of stocks breaking resistance totaled 19 while number of stocks breaking support totaled 56. Notably, industrial and financial stocks were on the list of breakdowns. The Up/Down ratio was down last week at (193/250=) 0.77 from 0.85.

Note that strength in Apple on Friday represented 222 Dow Jones Industrial Average points out of the total gain of 332 points. Without the gain by Apple on Friday, the Average was down 1.1% for the week.

U.S. economic news this week will focus inflation (PPI and CPI).

Focus on Canadian economic news this week is on the employment report to be released on Friday.

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) turned back up on Friday. However, many are overbought and showing early signs of peaking.

Seasonal influences in U.S. equity markets normally peak this week, 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: 81% of companies have reported. 78% beat consensus earnings estimates and 77% beat consensus sales estimates. Another 44 S&P 500 companies and 1 Dow Jones Industrial Average company are scheduled to report this week. First quarter 2018 earnings are expected to increase 24.2% (up from 23.2% last week) on an 8.5% increase in sales (up from 8.4% last week). Second quarter 2018 earnings are expected to increase 18.8% on a 8.2% increase in sales. Third quarter earnings are expected to increase 21.0% on a 6.9% increase in sales. Fourth quarter earnings are expected to increase 16.9% on a 5.7% increase in sales. For all of 2018, earnings are expected to increase 19.5% (up from 19.4%) on a 7.2% increase in sales.

Short term political uncertainties remain NAFTA negotiations, rising trade war fears (particularly against China), possible 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 exceptional for U.S. based companies with international exposure. Consensus for S&P 500 earnings on a year-over-year are expected to increase 19.5% 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 5.5% from foreign currency translation alone following the current 11.0% 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 May 4th 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 slipped 6.49 points (0.24%) last week. Intermediate trend remains down. The Index moved back above its 20 day moving average on Friday. Short term momentum indicators are trending down. Note the bounce again by the Index from its 200 day moving average.

Percent of S&P 500 stocks trading above their 50 day moving average slipped last week to 47.20 from 50.40. Percent remains intermediate neutral.

Percent of S&P 500 stock trading above their 200 day moving average slipped last week to 55.00 from 58.80. Percent remains intermediate neutral.

Bullish Percent Index for S&P 500 stocks slipped last week to 48.60 from 52.60 and dropped below its 20 day moving average. The Index remains intermediate neutral, but trending down.

Bullish Percent Index for TSX stocks increased last week to 60.00 from 58.40 and remains above its 20 day moving average. The Index remains intermediate neutral and trending up.

TSX Composite Index added 60.47 points (0.39%) last week. Intermediate trend remains neutral (Score: 0). Strength relative to the S&P 500 Index remains Positive (Score: 2). The Index remained above its 20 day moving average (Score: 1). Short term momentum indicators continue to trend up (Score: 1). Technical score remained last week at 4.

Percent of TSX stocks trading above their 50 day moving average increased last week to 67.62 from 65.15. Percent remains intermediate overbought, but continues to trend higher.

Percent of TSX stocks trading above their 200 day moving average increased last week to 53.59 from 52.70. Percent remains intermediate neutral and continues to trend higher.

Dow Jones Industrial Average slipped 48.68 points (0.20%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains Negative. The Average remains below its 20 day moving average. Short term momentum indicators are trending down. Technical score remained last week at -6. Note the bounce from near its 200 day moving average.

Bullish Percent Index for Dow Jones Industrial stocks dropped last week to 53.33 from 56.67 and dropped below its 20 day moving average. The Index remains intermediate neutral and turning down.

Bullish Percent Index for NASDAQ stocks dropped last week to 54.09 from 55.87 and dropped below its 20 day moving average. The Index remains intermediate neutral and trending down.

NASDAQ Composite Index gained 89.82 points (1.26%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to Positive from Neutral on Friday. The Index moved above its 20 day moving average on Friday. Short term momentum indicators have turned back up. Technical score increased last week to 6 from 2.

Russell 2000 Index gained 9.36 points (0.60%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index changed to Positive from Neutral. The Index moved back above its 20 day moving average on Friday. Short term momentum indicators turned back up on Friday. Technical score increased last week to 2 from -2.

Dow Jones Transportation Average dropped 179.17 points (1.70%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index remains Neutral. The Average moved below its 20 day moving average. Short term momentum indicators are trending down. Technical score slipped last week to -2 from 0.

Australia All Ordinaries Composite Index gained 112.50 points (1.86%) last week. Intermediate trend changed to neutral from down on a move above 6,184.60. 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 increased last week to 4 from 2.

Nikkei Average gained 4.91 points (0.02%) last week. Intermediate trend changed to neutral from down on a move above 22,500. Strength relative to the S&P 500 Index remains Positive. The Average remains above its 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to 4 from 2.

Europe iShares slipped $0.20 (0.42%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index changed last week to Neutral from Positive. Units dropped below their 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -2 from 2.

Shanghai Composite Index added 8.80 points (0.29%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains Negative. The Index remains below its 20 day moving average. Short term momentum indicators remain up. Technical score remained last week at -4

Emerging Markets iShares slipped 0.83 (1.76%) 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 have turned down. Technical score slipped last week to -2 from 0.

Currencies

The U.S. Dollar gained another 1.07 (1.17%) last week. Intermediate trend remains up. The Dollar remains above its 20 day moving average. Short term momentum indicators continue to trend up.

The Euro dropped another 1.75 (1.44%) last week. Intermediate trend remains down. The Euro remains below its 20 day moving average. Short term momentum indicators are trending down.

The Canadian Dollar slipped US 0.15 cents (0.19%) 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 0.08 (0.08%) last week. Intermediate trend remains up. The Yen remains below its 20 day moving average. Short term momentum indicators have just turned up.

British Pound dropped 2.44 (1.77%) last week. Intermediate trend remains down. The Pound remains below its 20 day moving average. Short term momentum indicators are trending down.

Commodities and Related ETFs

Daily Seasonal/Technical Commodities Trends for May 4th 2018

Green: Increase from previous day

Red: Decrease from previous day

* Excludes adjustment from rollover of futures contracts

The CRB Index added 1.68 points (0.83%) 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 have turned back up. Technical score remained last week at 6.

Gasoline slipped $0.02 per gallon (0.99%) 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 have turned down. Technical score slipped last week to 4 from 6.

Crude Oil added $1.62 per barrel (2.38%) 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 have turned back up. Technical score remained last week at 6.

Natural Gas dropped $0.06 per MBtu (2.17%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to Neutral from Positive. "Natty" moved below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to 0 from 6.

S&P Energy Index added 0.06 (0.11%) 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 have turned down. Technical score slipped last week to 4 from 6.

Philadelphia Oil Services Index slipped $0.65 (0.42%) 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 have turned down. Technical score slipped last week to 4 from 6.

Gold dropped $8.70 per ounce (0.66%) 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 are trending down. Technical score dropped last week to -4 from -2.

Silver added $0.02 per ounce (0.12%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index changed to Negative from Neutral. Silver remains below its 20 day moving average. Short term momentum indicators turned up. Technical score slipped last week to -4 from -2.

AMEX Gold Bug Index slipped 0.65 points (0.36%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Neutral. The Index remains above its 20 day moving average. Short term momentum indicators have turned back up. Technical score increased last week to 4 from 2.

Platinum added $5.10 per ounce (0.56%) last week. Trend remains down. Relative strength remains Negative. PLAT remains below its 20 day MA. Momentum remains down.

Palladium dropped $5.75 per ounce (0.60%) last week. Trend remains down. Relative strength remains Negative. PALL remains below its 20 day MA. Momentum: Down.

Copper added 0.04 per lb (1.31%) 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 turned up. Technical score increased last week to -2 from -4.

BMO Base Metals ETF added $0.14 (1.22%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index returned to Neutral after briefly reaching Negative. Units moved back above their 20 day moving average on Friday. Short term momentum indicators turned back up. Technical score increased last week to 0 from -4.

Lumber added another $5.20 (0.91%) last week. Trend remains up. Strength relative remains up. Lumber remains above its 20 day moving average. Short term momentum remains up.

Grain ETN added $0.40 (1.48%) last week. Uptrend extended on a move above $27.75. Relative strength changed to Positive from Neutral. Units remain above their 20 day moving average. Short term momentum indicators are trending up. Technical score remained at 6.

Agriculture ETF dropped $0.60 (1.00%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Neutral. Units moved below their 20 day moving average. Short term momentum indicators are trending down. Technical score slipped last week to 0 from 4.

Interest Rates

Yield on 10 year Treasuries slipped 1.3 basis points (0.44%) last week. Intermediate trend remains up. Yield remains above its 20 day moving average. Short term momentum indicators are trending down.

Price of the long term Treasury ETF added $0.10 (0.08%) last week. Units remain below their 20 day moving average.

Volatility

The VIX Index dropped 0.68 (4.41%) last week. The Index remains below its 20 day moving average.

Sectors

Daily Seasonal/Technical Sector Trends for May 4th 2018

Green: Increase from previous day

Red: Decrease from previous day

StockTwits Released on Friday

Technical action by S&P 500 stocks to 10:15: Quiet. No breakouts. Breakdowns: $FLR $JEC

'Tis the season for Jacobs Engineering to move lower to early August! $JEC

Average Hourly Earnings up 0.9% (NSA) in April, more than double the 0.4% average increase for the month #NFP #Employment #Economy $MACRO

Non-farm Payrolls continue to trend above average, gaining 0.7% in April #Employment #NFP #Economy $MACRO

Mexico iShares $EWW moved below $49.27 and $48.76 extending an intermediate downtrend. NAFTA negotiations?

Another Canadian Gold stock breakout! Kinross Gold $K.CA moved above $5.18 Cdn completing a double bottom pattern. $FNV

Extendicare $EXE.CA moved below $8.04 on a law suit extending an intermediate downtrend.

Apple $AAPL, a Dow Jones Industrial stock moved above $183.50 to an all-time high extending an intermediate uptrend.

WTI Crude Oil at $69.72 and its related ETF $USO moved above $69.55 to a 30 month high extending an intermediate uptrend.

'Tis the season for Crude Oil and its ETF $USO to move higher to September!

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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