Tech Talk for Monday December 3rd 2018

U.S. equity index futures were higher this morning. S&P 500 futures were up 39 points in pre-opening trade. Strength is related to an agreement between China and the U.S. to postpone trade tariff escalation for the next 90 day. The Shanghai Composite Index jumped 67 points to 2,655.

Caterpillar gained $5.93 to $141.60 after Bank of America/Merrill upgraded the stock to Buy from Neutral.

Costco slipped $0.27 to $231.01 after Citigroup downgraded the stock to Neutral from Buy.

Nike added $1.87 to $76.99 after Citigroup upgraded the stock to Top Pick for 2019

AT&T gained $0.66 to $31.90 after JP Morgan Securities upgraded the stock to Overweight from Neutral. The stock also was added to JP Morgan Securities Focus List.

EquityClock's Daily Market Comment

Following is a link:

http://www.equityclock.com/2018/11/30/stock-market-outlook-for-december-3-2018/

Note seasonality chart on Canadian GDP.

WALL STREET RAW RADIO

WITH YOUR HOST, MARK LEIBOVIT

SATURDAY, DEC 1, 2018

SPECIAL GUESTS: DON VIALOUX, HARRY BOXER, HENRY WEINGARTEN AND SINCLAIR NOE

https://tinyurl.com/ycl76qmt

Excerpts from Don Vialoux comments on Wall Street Raw

• U.S. and Canadian equity markets traditionally reach a seasonal low between mid-October and the end of October. This year the low was set on October 29 in both markets with S&P 500 at 2604, the Dow Jones Industrial Average at 24,110 and TSX Composite at 14,340. Despite volatility in the month of November, the Dow Jones Industrial Average has gained 5.9%, the S&P 500 Index has advanced 6.0% and the TSX Composite is added 3.7%.
• Since 1929, strongest period for U.S. equities has been between the mid-term U.S. election and the end of the second quarter in a pre-election year. Average return per period was 16.4% by the S&P 500 Index
• Short term technical action by North American equity indices turned positive early last week (MACD, RSI, Stochastics) and most moved back above their 20 day moving average.
• Trade negotiations between China and the U.S. this weekend are key. If negotiations are favourable, North American equity markets will soar. Early technical signs by Chinese equity indices and related ETFs are encouraging. China iShares (FXI) moved above a short term base building pattern last Wednesday

• Tax related transactions tend to impact equity markets at this time of year, particularly Canadian equity markets. The TSX Composite is down slightly more than 6% this year, prompting tax loss selling pressures prior to mid-December in sectors such as gold and energy.
• The traditional Santa Claus rally runs from December 15th to the first week in January ( to January 4th this year). The trade has been profitable in 21 of the past 28 periods for the S&P 500 Index (Average gain: 1.6% per period) and 24 of the past 28 periods for the TSX Composite (Average gain: 2.4%). Chances are high that Santa Claus will come to North American equity markets once again this year.

Don Vialoux on "Wolf on Bay Street" on Hi Fi 640 Radio

Host is Wolfgang Klein. The interview was taped on Thursday and broadcast on Saturday at 7:00 AM EST. Following is a link:

https://globalnews.ca/toronto/program/the-wolfgang-klein-show

Listen to last third of the link for Mr. Vialoux comments

The Bottom Line

Favourable seasonal influences from late October to the first week in January for major U.S. equity indices resurfaced 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. 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 resurfaced last week. The TSX Composite Index has closely followed its seasonal pattern this year. Performance of the TSX Composite Index normally is negative from the third week in July to mid-October followed by start of period of seasonal strength. This year, the seasonal upturn began on October 29th. The Index has gained 3.8% from its October 29th low.

Preferred strategy is to add to seasonally favoured equity securities in a wide variety of markets 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: 97% of companies have reported to date. Most companies beat consensus earnings per share (78%) and sales (61%) estimates. Another nine S&P 500 companies are scheduled to release results this week.

Technical action by individual S&P 500 stocks was positive last week. Number of stocks breaking intermediate resistance totaled 68 while number of stocks breaking support totaled 6. The Up/Down ratio increase last week to (174/296 =) 0.59 from 0.34.

U.S. and Canadian economic focuses this week are November employment reports to be released on Friday.

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 higher last week. See charts near the end of this report

Medium term technical indicators in Canada moved higher 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 higher last week.

Short term technical indicators for Canadian markets and sectors moved higher last week.

Short term political concerns remain elevated. Issues include heightened tariff wars between the U.S. and China and the Mueller investigation. News on the China trade issue could come as early as today when U.S. and China negotiators meet at the G20 meeting.

Longer term outlook for earnings and sales by S&P 500 companies remains positive, although analysts have reduced expectations slightly for next year. According to FactSet, consensus calls for a 25.9% increase in earnings on a year-over-year basis and a 9.3% increase in sales in the third quarter. Consensus calls for a 13.6% increase in earnings and 6.7% increase in sales in the fourth quarter. Consensus calls for a 20.6% increase in earnings and a 9.0% increase in sales for 2018. Consensus calls for a 4.9% 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 for 2019 calls for an 8.6% increase in earnings (down from 8.8% last week) 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".

Economic News This Week

October Construction Spending to be released at 10:00 AM EST on Monday is expected to increase 0.4% versus no change in September.

November ISM Manufacturing Index to be released at 10:00 AM EST on Monday is expected to slip to 57.6 from 57.7 in October.

November ADP Employment Report to be released at 8:15 AM EST on Wednesday is expected to show a drop to 189,000 from 227,000 in October.

November ISM Non-manufacturing Index to be released at 10:00 AM EST on Wednesday is expected to slip to 59.1 from 60.3 in October

Bank of Canada statement to be released at 10:00 AM EST on Wednesday is expected to include an increase in the overnight lending rate to 2.00% from 1.75%.

Federal Reserve Chairman Jerome Powell testifies at 10:00 AM EST on Wednesday before the Congressional Joint Economic Committee

Beige Book is to be released at 2:00 PM EST on Wednesday.

OPEC meeting is scheduled to start on Thursday.

Canadian October New Home Starts are to be released at 8:15 AM EST on Thursday.

October Canadian Trade Balance to be released at 8:30 AM EST on Thursday is expected to increase to $1.00 billion versus a deficit of $420 million in September.

Weekly Jobless Claims to be released at 8:30 AM EST on Thursday are expected to drop to 225,000 from 234,000 last week.

October Factory Orders to be released at 10:00 AM EST on Thursday are expected to drop 0.2% versus a gain of 0.7% in September.

November Non-farm Payrolls to be released at 8:30 AM EST on Friday are expected to drop to 209,000 from 250,000 in October. November Unemployment Rate is expected to increase to remain unchanged at 3.7% set in October. November Hourly Earnings are expected to increase 0.3% versus a gain of 0.2% in October.

November Canadian Employment to be released at 8:30 AM EST on Friday is expected to increase 15,000 versus a gain of 11,200 in October. November Unemployment Rate is expected to slip to 5.7% from 5.8% in October

December Michigan Consumer Sentiment Index to be released at 10:00 AM EST on Friday is expected to slip to 97.0 from 97.5 in November.

October Wholesale Inventories to be released at 10:00 AM EST on Friday are expected to increase 0.3% versus a gain of 0.7% in September.

Earnings Reports This Week

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 November 30th 2018

Green: Increase from previous day

Red: Decrease from previous day

Sectors

Daily Seasonal/Technical Sector Trends for November 30th 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

Technical action by S&P 500 stocks to 10:00: Quiet. Intermediate breakout: $DLTR No breakdowns.

Technical action by S&P 500 stocks from 10:00 AM to 2:00 PM: Bullish. Intermediate breakouts: $UA $ABT $REGN $CHRW $DAL $UNP $XYL, $TXN $WRK $PPG $T $NI. Breakdown: $LH.

Technical action by S&P 500 stocks: 2:00 -3:30. Breakouts: $SLG $ABBV $SYK $CMI $CCI $ED $IBM $NTRS $CAT

Editor's Note: Breakouts after 3:30 PM EST included INTC, SNA, BIIB and PEP.

Editor's Note: $INTC completed a reverse Head & Shoulders pattern on a move above $49.29.

Nice gain for Seasonal Advantage Portfolio in November, "fueled" by areas of the market that are benefiting from lower oil prices $JETS $IYT

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

Canada Industrial Product Prices up 0.2% in October, diverging from the 0.2% average decline for the month. $MACRO $CDNecon #CAD

Canada GDP up 3.9% (NSA) In September, slightly weaker than the 4.8% average increase for the month. $MACRO #CDNecon #CAD

S&P 500 Momentum Barometers

Percent of S&P 500 stocks trading above their 50 day moving average increased last week to 56.80 from 30.00. Percent changed from Intermediate Oversold to slightly Intermediate Overbought on a move above 60%, but has resumed an uptrend.

Bullish Percent Index for S&P 500 stocks increased last week to 49.80 from 40.00. The Index remains Intermediate Neutral and trending higher.

TSX Momentum Barometers

Percent of TSX stocks trading above their 50 day moving average increase last week to 40.08 from 29.63. Percent changed to Intermediate Neutral from Intermediate Oversold on a move above 40% and has resumed an uptrend.

Bullish Percent Index for TSX stocks increased last week to 43.09 from 40.65. The Index remains Intermediate Neutral and is trending higher.

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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