Tech Talk for Monday December 10th 2018
U.S. equity index futures were higher this morning. S&P 500 futures were up 6 points in pre-opening trade. Index futures moved lower overnight on news that China has summoned the U.S. Ambassador to protest detention of Huawei's Chief Financial Officer, but recovered before North American equity markets opened.
Conoco Phillips (COP $65.91) is expected to open higher after the company announced plans to spend $3.0 billion to buy back shares in 2,019. The company also announced a $6.1 billion capital expenditure program for 2019.
FedEx dropped $1.23 to $200.16 after Bank of America/Merrill downgraded the stock to Neutral from Buy. Target price was lowered to $220 from $304.
Facebook added $1.98 to $139.40 after the company increased its share buyback plans by $9 billion on top of a previously authorized $15 billion plan.
EquityClock's Daily Market Comment
Following is a link:
http://www.equityclock.com/2018/12/07/stock-market-outlook-for-december-10-2018/
Note seasonality charts on Non-farm Payrolls, Hourly Earnings, Canada Employment and Wholesale Sales
WALL STREET RAW RADIO
SATURDAY, DECEMBER 8, 2018 WITH YOUR HOST, MARK LEIBOVIT
GUESTS INCLUDE: DON VIALOUX, HARRY BOXER, HENRY WEINGARTEN AND SINCLAIR NOE
Excerpts from Don Vialoux comments on Wall Street Raw
The Dow Jones Industrial Average, S&P 500 Index and TSX Composite Index suffered a brutal drop last week when the China/ U.S. trade war escalated. The arrest of the Chief Operation Officer of Huawei in Vancouver on behalf of U.S. authorities added to investor uncertainty. However, by the end of the week, North American equity market bounced back following a successful test of their October 29th lows.
The cannabis sector received financial support on Friday. Altria reached an agreement to purchase a 45% interest in Cronos Group for $1.8 billion. Cronos jumped by more than 30% on the news. Other cannabis stocks moved higher in anticipation of other major companies entering the cannabis sector. The cannabis ETF HMMJ gained 5.5%.
Technical evidence of an earlier-than-usual seasonal move into gold appeared on Friday. The period of seasonal strength in gold normally starts next week and continues to the end of February. On Friday, spot gold prices moved above resistance at $1246 U.S. per ounce extending an intermediate uptrend. Selected Canadian gold stocks including Agnico-Eagle Gold, Barrick Gold and Kirkland Lake Gold broke to new highs. Kirkland Lake Gold broke to an all-time high. Gold and gold stocks are influenced at this time of year partially by growing demand for gold by China prior to the Chinese New Year, which in 2019 is on February 5th. The Chinese have a tradition of gifting gold on their Chinese New Year.
Last week, Crude Oil prices reached a bottom of their period of seasonal strength. Thereafter, Crude oil price normally advance until at least spring. Crude Oil prices bounced higher after OPEC announced on Friday a reduction in production by 1.2 million barrels per day. Historically, energy stocks form a base building pattern between now and the end of January followed by establishment of an intermediate uptrend into spring
The Bottom Line
Favourable seasonal influences from late October to the first week in January for major U.S. equity indices had a real test last week. This year North American equity indices including the S&P 500 Index, Dow Jones Industrial Average and TSX Composite Index bottomed on October 29th. However, most of the gains by these indices were lost last week.
Seasonality charts for the S&P 500 Index and Dow Jones Industrial Average are offered below.
Seasonal influences normally are most notable during U.S. Mid-term election years (although start of the favourable period was delayed this year to the end of October). Investors were concerned about a possible change in political control in Congress. Their concerns were partially valid. Democrats regained control of the House, but failed to gain control of the Senate. Historically, split control of Congress has been positive for U.S. markets because Congress is less likely to interfere in economic growth
Favourable seasonal influences for Canadian equities also were tested last week. The seasonal upturn for the TSX Composite also began on October 29th.
Recent weakness by broadly base North American equity indices has returned them to Intermediate Oversold levels. However, drops on Thursday and Friday triggered by the Huawei incident may not be over.
Preferred strategy is to add to seasonally favoured equity securities in a wide variety of markets when short term technical signs of a bottom surface for a seasonal trade expected to last to the first week in January.
Observations
Third quarter reports by S&P 500 companies are winding down: 99% of companies have reported to date. Most companies beat consensus earnings per share (77%) and sales (62%) estimates.
Technical action by individual S&P 500 stocks was strangely positive last week. Number of stocks breaking intermediate resistance totaled 51 while number of stocks breaking support totaled 27. Most of the breakouts occurred last Monday. Notable on the list of breakouts were Health Care and Technology stocks. The Up/Down ratio increased last week to (206/259 =) 0.80 from 0.59.
U.S. focuses this week are November PPI, CPI and Retail Sales.
Medium term technical indicators for U.S. equity markets (e.g. Percent of stocks trading above their 50 day moving average, Bullish Percent Index) moved lower last week. See charts near the end of this report
Medium term technical indicators in Canada moved lower last week. See charts near the end of this report.
Short term technical indicators for U.S. markets and sectors (20 day moving averages, short term momentum) moved lower last week.
Short term technical indicators for Canadian markets and sectors moved lower last week.
Short term political concerns remain elevated. Issues include heightened tariff wars between the U.S. and China, possible shut down of Congress related to extension of government deficit limits and the Mueller investigation.
Longer term outlook for earnings and sales by S&P 500 companies remains positive, although analysts have reduced expectations slightly for the fourth quarter. According to FactSet, consensus calls for a 13.4% increase in earnings (down from 13.6%) and 6.8% increase in sales in the fourth quarter. Consensus calls for a 20.6% increase in earnings and a 9.0% increase in sales for all of 2018. Consensus calls for a 4.8% increase in earnings and 7.0% increase in sales in the first quarter 2019. Consensus calls for a 5.4% increase in earnings and 5.7% increase in sales in the second quarter 2019. Consensus calls for s 5.5% increase in earnings and 5.4% increase in sales in the third quarter 2019. Consensus calls for an 11.8% increase in earnings and a 5.8% increase in sales in the fourth quarter 2019. Consensus for all of 2019 calls for an 8.6% increase in earnings and a 5.6% increase in sales.
Major U.S. companies are seeking places to invest their new found cash flow following changes in U.S. tax laws. Look for anticipation of news about share buybacks, increased dividends, take overs, employee bonuses and wage increases prior to release of fourth quarter results. "Santa Claus is coming to town".
Seasonal influences in the first and second quarters of a U.S. Pre-Presidential Election Year are the second and fourth strongest quarters in the U.S. Presidential Cycle. Average gain per period for the Dow Jones Industrial Average since 1929 is 5.2% in the first quarter and 4.5% in the second quarter.
Earnings News This Week
Economic News This Week
November Canadian Housing Starts to be released at 8:15 AM EST on Monday are expected to slip to 198,000 from 205,900 in October.
November Producer Price Index to be released at 8:30 AM EST on Tuesday is expected to increase 0.1% versus a gain of 0.6% in October. Excluding food and energy, November PPI is expected to increase 0.2% versus a gain of 0.5% in October.
November Consumer Price Index to be released at 8:30 AM EST on Wednesday is expected to be unchanged versus a gain of 0.3% in October. Excluding food and energy, November CPI is expected to increase 0.2% versus a gain of 0.2% in October.
Weekly Jobless Claims to be released at 8:30 AM EST on Thursday are expected to increase to 230,000 from 228,000 last week
European Central Bank releases its Monetary Policy Statement at 7:45 AM EST on Thursday.
November Retail Sales to be released at 8:30 AM EST on Friday are expected to increase 0.2% versus a gain of 0.8% in October. Excluding auto sales, November Retail Sales are expected to increase versus
November Capacity Utilization to be released at 9:15 AM EST on Friday is expected to increase to 78.5 from 78.4 in October.
November Industrial Production to be released at 9:15 AM EST on Friday is expected to increase 0.3% versus a gain of 0.1% in October.
October Business Inventories to be released at 10:00 AM EST on Friday are expected to increase 0.3% versus a gain of 0.3% in September.
Trader's Corner
Equity Indices and related ETFs
Daily Seasonal/Technical Equity Trends for December 7th 2018
Green: Increase from previous day
Red: Decrease from previous day
Commodities
Daily Seasonal/Technical Commodities Trends for December 7th 2018
Green: Increase from previous day
Red: Decrease from previous day
Sectors
Daily Seasonal/Technical Sector Trends for December 7th 2018
Green: Increase from previous day
Red: Decrease from previous day
Technical Scores
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
Changes Last Week
StockTwits Released on Friday
Technical action by S&P 500 stocks to 10:15: Quiet. Intermediate breakout: $CL. No breakdowns.
Editor's Note: After 10:15 AM EST, No additional breakouts. Breakdowns: IPGP, ULTA, VFC, K, STZ, ETFC, FDX, EMN, LYB, TXN, PRGO, DVA, BF.B, IDXX and BWA.
Barrick Gold $ABX.CA $ABX, a TSX 60 stock moved above $18.05 Cdn. extending an intermediate uptrend
Yamana Gold $YRI.CA moved above $2.97 completing a base building pattern.
'Tis the season for TSX Gold stocks and ETFs to move higher to the end of February! $XGD.CA
Editor's Note: Nice breakout by XGD in late trading on Friday!
Retail SPDRs $XRT moved below $43.76 extending an intermediate downtrend.
First major silver producer stock to breakout! Pan American Silver $PAAS moved above $13.85 completing a base building pattern. $SIL
Canada Employment increased by 0.3% (NSA) in November, positively diverging from average decline of 0.3% for the month. $MACRO #CDNecon #CAD
US Nonfarm Payrolls up 0.3% (NSA) in November, inline with average increase for the month. $MACRO #Economy #Employment
Equity benchmarks back to the October/November lows, but breakdown could present buying opportunity. equityclock.com/2018/12/07/… $SPX $SPY $ES_F
Keith Richards' Blog
Keith says, "My dad is smarter that your dad" Following is a link:
https://www.valuetrend.ca/my-dads-smarter-than-your-dad/
http://www.equityclock.com/about/seasonal-advantage-portfolio/
S&P 500 Momentum Barometers
Percent of S&P 500 stocks trading above their 50 day moving average plunged last week to 27.20 from 56.80. Percent changed to Intermediate Oversold from Intermediate Neutral on a move below 40.
Bullish Percent Index for S&P 500 stocks dropped last week to 45.20 from 49.80. The Index remains Intermediate Neutral.
TSX Momentum Barometers
Percent of TSX stocks trading above their 50 day moving average dropped last week to 33.88 from 40.08. Percent changed to Intermediate Oversold from Intermediate Neutral on a move below 40%.
Bullish Percent Index for TSX stocks dropped last week to 41.06 from 43.09. The Index remains Intermediate Neutral.
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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