Tech Talk for Monday December 24th 2018

Next report is released on Wednesday.

Pre-opening Comments for Monday December 24th

U.S. equity index futures were lower this morning. S&P 500 futures were down 15 points in pre-opening trade. Investors are responding to partial shutdown of U.S. government services over the weekend.

Volumes on equity markets are expected to be low today. U.S. equity markets close at 1:00 PM EST for the Christmas Holiday.

EquityClock's Daily Market Comment

Following is a link:

http://www.equityclock.com/2018/12/21/stock-market-outlook-for-december-24-2018/

Note seasonality charts on Durable Goods Orders, Canadian GDP and Canadian Retail Sales.

WALL STREET RAW RADIO

SATURDAY – DECEMBER 22, 2018

YOUR HOST, MARK LEIBOVIT

GUESTS INCLUDE: DON VIALOUX, HARRY BOXER AND BILL KOENIG

https://tinyurl.com/ya8c5ppc

Excerpts from Don Vialoux's comments on Wall Street Raw

Brutal week for equity markets last week: Santa Claus was replaced by the Grinch. Computer generated selling and Trump tweets on a possible shutdown of the U.S. government took their toll. The VIX Index spiked to a 10 month high. Technical indicators show that the S&P 500 Index is the most oversold since September 2015. Only 8% of S&P 500 stocks are trading above their 50 day moving average. No signs of a bottom are indicated yet. However, substantially oversold levels frequently lead to a strong recovery. From the bottom in September 2015, the S&P 500 Index managed to gain over 13% during the next two months. Prepare for technical signs of an equity market bottom.

Not all equities moved lower last week! The seasonally strong precious metals recorded nice gains again. The Gold Bug Index completed a double bottom pattern and gained about 4%. Jim Cramer noted Thursday on Mad Money that owning gold stocks in the current stock market environment makes good sense. 'Tis the season for gold and gold stocks to move higher to the end of February!

Strength in gold and gold equities was prompted by completion of a double top pattern by the U.S. Dollar Index on Thursday on a move below 95.93. Base metal prices and base metal stocks also will benefit from weakness in the U.S. Dollar Index. They are just entering their period of seasonal strength lasting to spring.

Encouraging news for the cannabis sector! Nice pop in Tilray (TLRY) last week. On Thursday, the stock gained over 10%. The company announced a partnership with Novartis to explore opportunities in the medical cannabis market. It also announced a partnership with Anheuser Busch to research cannabis beverage opportunities. Look for more cannabis companies to announce mergers and partnerships in 2019.

The Bottom Line

Favourable seasonal influences from late October to the first week in January for major U.S. equity indices are not working so far this year.

Favourable seasonal influences for Canadian equities also are not working so far this year.

Recent weakness by broadly based U.S. equity indices has returned them to Intermediate Oversold levels not seen since October 2008, depth of the last U.S. financial crisis.

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 spring. Short term technical buy signals have not appeared yet.

Observations

Trading activity on equity markets will slow this week. U.S. exchanges close at 1:00 PM EST on Monday. Most world equity markets are closed on Tuesday,Christmas Day. The Canadian market is closed on Wednesday, Boxing Day.

Technical action by individual S&P 500 stocks was strongly negative last week. Number of stocks breaking intermediate resistance totaled 0 while number of stocks breaking support totaled 174.The Ratio of stocks in an intermediate uptrend/ stocks in an intermediate downtrend plunged last week to (118/350 =) 0.34 from 0.63.

U.S. and Canadian economic and earnings news is quiet this week. Focus is on November New Home Sales.

Trading activity in equity markets is expected to be substantially lower than average this week. Most world markets are closed for Christmas on Tuesday. Canadian markets are closed on Wednesday for Boxing Day.

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 also 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 also moved lower last week.

Short term political concerns remain elevated. Issues include heightened tariff wars between the U.S. and China, 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 again. According to FactSet, consensus calls for a 12.4% increase in earnings (Down from 12.8%) and 6.3% increase in sales in the fourth quarter (Down from 6.5%. Consensus calls for a 20.3% increase in earnings and a 8.9% increase in sales for all of 2018. Consensus calls for a 3.5% increase in earnings (Down from 4.3%) and 6.5% increase in sales in the first quarter 2019 (Down from 7.0%). Consensus calls for a 4.1% increase in earnings (Down from 4.8%) and 5.2% increase in sales in the second quarter 2019 (Down from 5.7%). Consensus calls for s 4.6% increase in earnings (Down from 5.2%) and 5.1% increase in sales in the third quarter 2019 (Down from5.4%) . Consensus calls for an 11.8% increase in earnings (Down from 12.0%) and a 5.9% increase in sales in the fourth quarter 2019 (Down from 6.1%). Consensus for all of 2019 calls for a 7.9% increase in earnings (Down from 8.3%) and a 5.3% increase in sales (Down from 5.5%).

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..

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.

Economic News This Week

Weekly jobless claims to be released at 8:30 AM EST on Thursday are expected to increase to 225,000 from 214,000 last week.

November New Home Sales to be released at 10:00 AM EST on Thursday are expected to increase to 555,000 from 544,000 in October.

December Chicago Purchasers Managers Index to be released at 9:45 AM EST on Friday is expected to slip to 63.0 from 66.4 in November

Earnings News This Week

Nil

Trader's Corner

Equity Indices and related ETFs

Green: Increase from previous day

Red: Decrease from previous day

Commodities

Daily Seasonal/Technical Commodities Trends for December 21st 2018

Green: Increase from previous day

Red: Decrease from previous day

Sectors

Daily Seasonal/Technical Sector Trends for December 21st 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 @EquityClock

US Durable Goods Orders down 4.3% (NSA) in November, marginally better than the 4.5% decline that is average for the month. $MACRO #Economy

Canada #Retail Trade up 1.9% (NSA) in October, stronger than the 0.6% average increase for the month. $MACRO #CDNecon #CAD

Technical action by S&P 500 stocks to 10:00: Quietly bearish. No intermediate breakouts. Breakdowns: $UA $BK $ILMN

Editor's Note: Another 38 S&P 500 stocks broke intermediate support after 10:00 AM EST

Bank of Nova Scotia $BNS.CA, a TSX 60 stock moved below$69.01 extending an intermediate downtrend

Constellation Software $CSU.CA moved below $844/97 extending an intermediate downtrend.

Amazon $AMZN, one of the FAANG stocks moved below $1420.00 extending an intermediate downtrend

Netflix $NFLX, one of the FAANG stocks moved below $250.00 extending an intermediate downtrend

Alphabet/Google $GOOG $GOOGL, one of the FAANG stocks moved below $1002.21 extending an intermediate downtrend

Facebook $FB, one of the FAANG stocks moved below $126.85 extending an intermediate downtrend

Italy iShares $EWI moved below $24.08 extending an intermediate downtrend

Open Text $OTEX $OTEX.CA, a TSX 60 stock moved below $31.84 U.S. extending an intermediate downtrend

Shaw Communications $SJR $SJR.B.CA, a TSX 60 stock moved below $18.04 U.S. extending an intermediate downtrend

http://www.equityclock.com/about/seasonal-advantage-portfolio/

Keith Richards on BNNBloomberg

Following are links:

Market Outlook

https://www.bnnbloomberg.ca/video/keith-richards-market-outlook~1571250

Top Picks

https://www.bnnbloomberg.ca/video/keith-richards-top-picks~1571319

Past Picks

https://www.bnnbloomberg.ca/video/keith-richards-past-picks~1571278

S&P 500 Momentum Barometers

Percent of S&P 500 stocks trading above their 50 day moving average dropped last week to 8.60 from 31.00. It has dropped to the lowest level since September 2015, but has yet to show signs of bottoming.

Bullish Percent Index for S&P 500 stocks dropped last week to 17.00 from 36.80. It remains intermediate oversold, but has yet to show signs of bottoming.

TSX Momentum Barometers

Percent of TSX stocks trading above their 50 day moving average dropped last week to 18.93 from 32.23. Percent remains Intermediate Oversold, but has yet to show signs of bottoming.

Bullish Percent Index for TSX stocks dropped last week to 31.43 from 35.92. The Index remains Intermediate Oversold, but has yet to show signs of bottoming.

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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