Tech Talk for Monday December 7th 2020

U.S. equity index futures were lower this morning. S&P 500 futures were down 11 points in pre-opening trade.

QUALCOMM added $0.78 to $158.40 after JP Morgan raised its target price from $160 to $158.40.

Hershey gained $1.84 to $152.71 after JP Morgan increased its target price from $142 to $160.

Boeing (BA $232.71) is expected to open higher after UBS upgraded the stock from Neutral to Buy.

McDonalds (MCD $210.74) is expected to open lower after Stephens downgraded the stock from Overweight to Equal Weight.

EquityClock's Daily Comment

Following is a link:

http://www.equityclock.com/2020/12/05/stock-market-outlook-for-december-7-2020/

Note seasonality charts on U.S. Non-farm Payrolls and Canadian Employment.

The Bottom Line

Most major equity indices around the world were slightly higher last week. Greatest influences remain growing evidence of a second wave of the coronavirus (negative) and possible approval of a vaccine (positive)

Observations

The Dow Jones Industrial Average and S&P 500 Index are following their historic trend after a U.S. Presidential Election. Indeed, the strongest 12 week period during the four year U.S. Presidential Cycle has occurred from U.S. Presidential Election Day to Inauguration Day on January 20th.

Results of the recent U.S. President and Congressional elections suggest that history by U.S. equity indices between Election Day and Inauguration Day is repeating. Biden became President, control of the Senate remained Republican with a smaller majority and control of the House of Representatives remained Democrat with a smaller majority. Net result is political gridlock for the next two years, a scenario that historically has been mildly bullish for U.S. equity markets.

A caveat to this observation! The run off Georgia senate elections for two seats on January 5th could have a significant impact on U.S. equity prices. After recent elections the Republicans controlled 50 seats and the Democrats controlled 48 seats. Both Georgia seats previously were held by Republicans. However, recent polls suggest that the battle between the Republican and Democrat candidates is extremely tight with the Democrats leading in one of the two seats. If Democrats win both seats, the Republicans will control 50 seats, the Democrats will control 50 seats and Vice President Kamala Harris will have the power to break voting ties in the Senate. Effectively, the Democrats will gain control over the Senate and will be able to pursue a "progressive" agenda including higher personal and corporate taxes, higher regulation and higher government control over the economy. U.S. equity markets will respond accordingly to the downside. Meanwhile, look for higher than average volatility in U.S. equity markets between now and January 5th as various polls on the Georgian senate seats are released. The proverbial "Santa Claus rally" from mid-December to the first week in January may not happen this year.

Medium term technical indicator for U.S. equity markets (e.g. Percent of S&P 500 stocks trading above their 50 day moving average) moved slightly higher again last week. It remained extremely intermediate overbought. See Barometer chart at the end of this report.

Medium term technical indicator for Canadian equity markets were unchanged last week. It remained intermediate overbought. See Barometer chart at the end of this report.

Short term short term momentum indicators for U.S. markets/commodities/sectors (20 day moving averages, short term momentum indicators) moved higher again last week.

Short term momentum indicators for Canadian markets/sectors once again remained unchanged at elevated levels last week

Year-over-year 2020 consensus earnings declines by S&P 500 companies ebbed again from our last report two weeks ago. According to www.FactSet.com, fourth quarter earnings are expected to drop 10.1% (versus previous decline of 10.6%) and revenues are expected to increase 0.2% (versus previous decline of 0.2%). Earnings for all of 2020 are expected to fall 13.8% (versus previous decline of 14.2%) and revenues are expected to decline 1.8% (versus previous decline of 2.0%.

Consensus estimates for earnings and revenues by S&P 500 companies turn positive on a year-over-year basis in the first quarter of 2021. According to www.FactSet.com earnings in the first quarter of 2021 are expected to increase 15.1% (versus previous estimate two weeks ago at 14.2%) and revenues are expected to increase 3.5% (versus previous estimate at 3.4%). Earnings in the second quarter are expected to increase 44.6% (versus previous increase of 44.0%) and revenues are expected to increase 13.6% (versus previous increase of 13.5%. Earnings for all of 2021 are expected to increase 21.7% (versus previous increase of 21.9%) and revenues are expected to increase 7.7%.

Economic News This Week

Second estimate of third quarter U.S. Non-farm Productivity to be released at 8:30 AM EST on Tuesday is expected to remain the same at 4.9%.

Bank of Canada statement on interest rates is released at 10:00 AM EST on Wednesday. Bank rate is expected to remain unchanged at 0.25%.

November U.S. Consumer Price Index to be released at 8:30 AM EST on Thursday is expected to increase 0.1% versus a gain of 0.2% in October. Excluding food and energy, November Consumer Price Index is expected to increase 0.1% versus a gain of 0.2% in October.

November U.S. Producer Price Index to be released at 8:30 AM EST on Friday is expected to increase 0.1% versus a gain of 0.3% in October. Excluding food and energy, November Producer Price Index is expected to increase 0.2% versus a gain of 0.1% in October.

December Michigan Sentiment Index to be released at 10:00 AM EST on Friday is expected to slip to 76.0 from 76.9 in November.

Earnings News This Week

Trader's Corner

Equity Indices and Related ETFs

Daily Seasonal/Technical Equity Trends for December 4th 2020

Green: Increase from previous day

Red: Decrease from previous day

Commodities

Daily Seasonal/Technical Commodities Trends for December 4th 2020

Green: Increase from previous day

Red: Decrease from previous day

Sectors

Daily Seasonal/Technical Sector Trends for December 3rd 2020

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

Changes in Seasonal Ratings

Gasoline changed from Neutral to Positive and Natural Gas changed from Neutral to Negative.

Following are the charts from www.EquityClock.com

Technical Note for Friday December 4th

Simon Properties (SPG), an S&P 100 stock moved above $91.96 resuming an intermediate uptrend.

Fiserv (FISV), a NASDAQ 100 stock moved above $117.53 extending an intermediate uptrend.

Texas Instruments (TXN), a NASDAQ 100 stock moved above $164.63 to an all-time high extending an intermediate uptrend.

Booking Holdings (BKNG), an S&P 100 stock moved above $2,128.02 extending an intermediate uptrend

Pharmaceutical ETF (PPH) moved above $65.99 extending an intermediate uptrend.

Uranium equity ETF (URA) moved above $12.59 and $12.89 resuming an intermediate uptrend. Units responded to strength in Cameco (CCO.TO CCJ)

Xcel Energy (XEL), an S&P 100 stock moved below $65.69 setting an intermediate downtrend.

S&P 500 Momentum Barometer

The Barometer added 1.80 on Friday and gained 0.41 last week to 82.57. The Barometer remains above 80.00, an extremely intermediate overbought level.

TSX Momentum Barometer

The Barometer added 0.93 on Friday and was unchanged last week to 73.83. The Barometer remains intermediate overbought.

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