Tech Talk for Monday February 12th 2018
U.S. equity index futures were higher this morning. S&P 500 futures were up 28 points in pre-opening trade.
Cisco added $0.97 to $40.50 after RBC Capital raised its target price to $44 from $40.
CAE (CAE $21.94 Cdn) is expected to open higher after RBC Capital upgraded the stock to Outperform from Sector Perform.
Restaurant Brands International (QSR $71.09 Cdn) is expected to open higher after reporting higher than consensus quarterly earnings.
VF Corp gained $1.83 to $81.15 after Stifel Nicolaus raised its target price to $91 from $78.
EquityClock's Daily Market Comment
Following is a link:
http://www.equityclock.com/2018/02/11/stock-market-outlook-for-february-12-2018/
Note seasonality chart on Crude Oil.
WALL STREET RAW RADIO
WITH HOST, MARK LEIBOVIT – FEBRUARY 10, 2018:
GUESTS INCLUDE HENRY WEINGARTEN, HARRY BOXER AND SINCLAIR NOE
The Bottom Line
Good corporate news was bad news for North American equity markets last week. Fourth quarter earnings and revenues reports continued to exceed expectations. Analysts once again significantly raised their estimates for 2018. However, "sell on news" dominated short term technical action. Key moving averages were broken (Most frequently, the 50 day moving average of broadly based equity indices and major sectors). Automated selling took over from there. Volatility spiked. North American equity markets already are deeply oversold prior to start of their strongest period of seasonal strength from the end of February to the end of April.
Pay attention to equity markets outside of North America. They were hit harder than North American equity markets last week. The Shanghai Composite was notable with a drop of 9.60%.
Weakness in U.S. equity markets last week were related to extension of a Head & Shoulders/Double Top pattern by the long term Treasury ETF (TLT).
The TSX Composite Index reached a short term peak six weeks ago. The Index closed on Friday at a level not seen since November 2016. A horrible employment report released on Friday did not help. Much of the unexpected increase in January unemployment (particularly in Ontario) was directly related to the Provincial government's substantial increase in minimum wages effective January 1st. Concerns about NAFTA negotiations, changing real estate purchase laws and rising interest rates also are issues. The Index already has reached an intermediate oversold level, but has yet to show technical signs of bottoming.
Now is the time to watch closely for sectors and markets that show positive strength relative to the S&P 500 Index. They likely will be top candidates for purchase during the next month when technical bottoming is likely. Short and intermediate technical indicators for most markets and sectors are deeply oversold and have yet to show signs of bottoming.
Economic News This Week
U.S. Treasury Budget is released at 2:00 PM EST on Monday.
January Consumer Price Index to be released at 8:30 AM EST on Wednesday is expected to increase 0.3% versus a gain of 0.15 in December. Excluding food and energy, January CPI is expected to increase 0.2% versus a gain of 0.3% in December
January Retail Sales to be released at 8:30 AM EST on Wednesday are expected to increase 0.3 versus a gain of 0.4% in December. Excluding auto sales, January Retail Sales are expected to increase 0.5% versus a gain of 0.4% in December.
December Business Inventories to be released at 10:00 AM EST on Wednesday are expected to increase 0.2% versus a gain of 0.4% in November.
Weekly Jobless Claims to be releases at 8:30 AM EST on Thursday are expected to increase to 229,000 from 221,000 last week.
February Philly Fed Index to be released at 8:30 AM EST on Thursday is expected to slip to 21.5 from 22.1 in January.
January Producer Price Index to be released at 8:30 AM EST on Thursday is expected to increase 0.4% versus a decline of 0.1% in December. Excluding food and energy, January Producer Price Index is expected to increase 0.2% versus a decline of 0.1% in December.
February Empire State Survey to be released at 8:30 AM EST on Thursday is expected to slip to 17.5 from 17.7 in January.
January Industrial Production to be released at 9:15 AM EST on Thursday is expected to increase 0.2% versus a gain of 0.9% in December. January Capacity Utilization is expected to increase to 78.0% from 77.9% in December.
January Housing Starts to be released at 8:30 AM EST on Friday are expected to increase to 1,230, 000 units from 1,192, 000 units in December
February Consumer Sentiment to be released at 10:00 AM EST on Friday is expected to slip to 95.5 from 95.7 in January.
Earning News This Week
Technical action by individual S&P 500 stocks turned bearish last week. Number of stocks breaking resistance totaled 3 while number of stocks breaking support totaled 183. Number of stocks trading in an uptrend decreased to 210 from 319, number of stocks trading in a neutral trend increased to 102 from 55 and number of stocks in a downtrend increased to 188 from 126 The Up/Down ratio plunged last week to (210/188=) 1.12 from 2.53
U.S. economic news this week focuses on inflation. CPI and PPI are expected to record significant monthly and year-over-year gains.
Canadian economic news this week is quiet.
Fourth quarter earnings reports by S&P 500 companies have passed their peak. Another 59 companies are scheduled to report this week (including 2 Dow Jones Industrial stocks). Canadian fourth quarter reports will ramp up.
Medium term technical indicators in the U.S. (Percent of stocks trading above their 50 day moving average, Bullish Percent Index) moved significantly lower last week, but have yet to show signs of bottoming. . Medium term technical indicators in Canada continue to move lower and are deeply oversold, but have yet to show signs of bottoming
Short term technical indicators for U.S. and Canadian equity markets and most sectors (short term momentum, above/below 20 day moving average) continued to trend down and have yet to show signs of bottoming.
Seasonal influences on a wide variety of U.S. and Canadian equity indices and economic sensitive sectors tend to be choppy in mid-February followed by renewed strength starting near the end of February. See charts below.
Fourth quarter reports released by S&P 500 companies to date have been encouraging. According to FactSet, 68% of S&P 500 stocks have reported to date. 74% reported higher than consensus earnings and 79% reported higher than consensus revenues.
The outlook for S&P 500 earnings and sales remains positive: According to FactSet, fourth quarter adjusted earnings (excluding one-time write downs related to the tax bill) are expected to increase 14.0% (Up from 13.4% last week) on a 8.0% increase in sales (up from 7.5% last week). Estimates beyond the fourth quarter of 2017 were revised higher again mainly due to changes in U.S. corporate tax laws. First quarter 2018 earnings are expected to increase 16.9% on a 7.4% increase in sales (Up from 7.1%). Second quarter 2018 earnings are expected to increase 18.7% (up from 16.0%) on a 7.8% increase in revenues (up from 7.2%). Third quarter earnings are expected to increase 20.3% (up from 18.3%) on a 6.5% increase in revenues. Fourth quarter 2018 earnings are expected to increase 17.3% (up from 14.2%) on a 5.0% increase in revenues (up from 4.8%). For all of 2018, earnings are expected to increase 18.5% (up from 16.8%) on a 6.5% increase in sales (up from 6.4%).
Short term political uncertainties remain, including North Korean "sabre rattling", struggling NAFTA negotiations, possibly another shut-down of the U.S. government and increased scrutiny by special council on Russia's influence on the Presidential election
Earnings and revenue prospects beyond the fourth quarter report season are exceptional for U.S. based companies with international exposure. Consensus for S&P 500 earnings on a year-over-year are expected to exceed 18% 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 6.5% from foreign currency translation alone following a 13% 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 February 9th 2018
Green: Increase from previous day
Red: Decrease from previous day
Calculating Technical Scores
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 plunged 142.58 points (5.15%) last week. Intermediate trend changed to down from up after two intermediate support levels were broken. The Index remained below its 20 day moving average and dropped below its 50 day moving average. Short term momentum indicators are trending down and are oversold, but have yet to show signs of bottoming.
Percent of S&P 500 stocks trading above their 50 day moving average plunged last week to 18.20 from 60.40. Percent is trending down and is oversold, but has yet to show signs of bottoming.
Percent of S&P 500 stocks trading above their 200 day moving average plunged last week to 60.20 from 76.00. Percent remains intermediate overbought and trending down, but has yet to show signs of bottoming.
Bullish Percent Index for S&P 500 stocks plunged last week to 40.40 from 77.80 and remained below its 20 day moving average. The Index has dropped to Neutral, but has yet to show signs of bottoming.
Bullish Percent Index for TSX stocks plunged last week to 56.00 from 66.40 and remained below its 20 day moving average. Percent remains intermediate overbought and trending down, but has yet to show signs of bottoming.
TSX Composite Index dropped 571.50 points (3.37%) last week. Intermediate trend remained down (Score: -2). Strength relative to the S&P 500 Index changed to Neutral from Negative (Score: 0). The Index remained below its 20 day moving average (Score: -1). Short term momentum indicators are trending down and oversold, but have yet to show signs of bottoming. Technical score increased last week to -4 from -6.
Percent of TSX stocks trading above their 50 day moving average plunged last week to 13.11 from 23.46. Percent has declined to a deeply oversold level, but has yet to show signs of bottoming
Percent of TSX stocks trading above their 200 day moving average dropped last week to 38.11 from 47.33. Percent continues to trend down and has yet to show signs of bottoming.
Dow Jones Industrial Average plunged 1,101.06 points (5.21%) last week. Intermediate trend changed to neutral from up following a move below intermediate support. Strength relative to the S&P 500 Index remains Neutral. The Average remained below its 20 day moving average. Short term momentum indicators are trending down and are oversold, but have yet to show signs of bottoming. Technical score dropped last week to -2 from 0.
Bullish Percent Index for Dow Jones Industrial stocks plunged last week to 43.33 from 83.33 and remained below its 20 day moving average. Percent has dropped from overweight to neutral, but has yet to show signs of bottoming.
Bullish Percent Index for NASDAQ Composite stocks plunged last week to 50.42 from 65.89 and remained below its 20 day moving average. The Index dropped from overweight to neutral, but has yet to show signs of bottoming
NASDAQ Composite Index plunged 366.47 points (5.07%) last week. Intermediate trend changed to down from up when the Index moved below two intermediate support levels. Strength relative to the S&P 500 Index changed to Neutral from Positive. The Index remained below its 20 day moving average and moved below its 50 day moving average. Short term momentum indicators are trending down and are oversold, but have yet to show signs of bottoming. Technical score dropped last week to -4 from 2.
Russell 2000 Index plunged 69.43 points (4.49%) last week. Intermediate trend changed to down following breaks below two intermediate support levels. Strength relative to the S&P 500 Index changed to Neutral from Negative. The Index remained below its 20 day moving average. Shor term momentum indicators are trending down. Technical score dropped to -4 from -2
Dow Jones Transportation Average plunged 540.57 points (5.15%) last week. Intermediate trend changed to neutral from up on a move below intermediate support. 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 dropped last week to -4 from -2.
Australia All Ordinaries Composite Index dropped 292.30 points (4.70%) last week. Intermediate trend changed to neutral from up following a break below 5,994.40. Strength relative to the S&P 500 Index remained Positive. The Index remained below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to 0 from 6.
Nikkei Average plunged 1,891.91 points (8.13%) last week. Intermediate trend changed to neutral from up on a move below 22,000. Strength relative to the S&P 500 Index remains Negative. The Average remained below its 20 day moving average. Short term momentum indicators are trending down and are oversold, but have yet to show signs of bottoming. Technical score dropped last week to -4 from -2.
Europe iShares dropped $2.28 (5.30%) last week. Intermediate trend changed to down after breaking two intermediate support levels. Strength relative to the S&P 500 Index remained Neutral. Units remained below their 20 day moving average. Short term momentum indicators are trending down and are oversold, but have yet to show signs of bottoming.
Shanghai Composite Index plunged332.23 points (9.60%) last week. Intermediate trend changed to down from up. Strength relative to the S&P 500 Index changed to Negative from Neutral . The Index remained below its 20 day moving average. Short term momentum indicators are trending down and are oversold, but have yet to show signs of bottoming. Technical score dropped last week to -6 from 0.
Emerging Markets iShares dropped $2.63 (5.36%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Negative. Units remained below their 20 day moving average. Short term momentum indicators are trending down and are oversold, but have yet to show signs of bottoming. Technical score remained last week at -2.
Currencies
U.S. Dollar Index gained 1.29 (1.45%) last week. Intermediate trend remains down. The Index moved above its 20 day moving average. Short term momentum indicators are trending up.
The Euro dropped 2.20 (1.77%) last week. Intermediate trend remains up. The Euro dropped below its 20 day moving average. Short term momentum indicators are trending down.
Canadian Dollar dropped U.S.1.08 cents (1.34%) last week. Intermediate trend remained neutral. The Canuck Buck moved below its 20 day moving average. Short term momentum indicators are trending down.
Japanese Yen gained 1.11 (1.22%) last week. Intermediate trend remains up. The Yen remained above its 20 day moving average. Short term momentum indicators are trending up.
British Pound dropped 2.92 (2.07%) last week. Intermediate trend remains up. The Pound dropped below its 20 day moving average. Short term momentum indicators are trending down.
Commodities and Related ETFs
Daily Seasonal/Technical Commodities Trends for February 9th 2018
Green: Increase from previous day
Red: Decrease from previous day
* Excludes adjustment from rollover of futures contracts
The CRB Index dropped 8.93 points (4.52%) last week mainly in response to strength in the U.S. Dollar Index and weakness in the Shanghai Composite Index. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Positive. The Index dropped below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to 2 from 4.
Gasoline dropped 10.5 cents per gallon (5.61%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to Negative from Neutral. Gas moved below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -2 from 3.
Crude Oil dropped $4.30 per barrel (6.57%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to Neutral from Positive. Crude dropped below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to 0 from 4.
Natural Gas dropped $0.27 per MBtu (9.47%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remained Negative. "Natty" remained below its 20 day moving average. Short term momentum indicators are trending down. Technical score remained last week at -2.
S&P Energy Index dropped 45.39 points (8.465) last week. Intermediate trend changed to down from up on moves below two intermediate support levels. Strength relative to the S&P 500 Index remains Negative. The Index remains below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -6 from -2.
Philadelphia Oil Services Index dropped 15.89 points (10.44%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Negative. The Index remains below its 20 day moving average. Short term momentum indicators are trending down. Technical score remained last week at -2.
Gold dropped $18.30 per ounce (1.37%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Positive. Gold dropped below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to 2 from 4.
Silver dropped $0.57 (3.41%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remained Neutral. Silver remained below its 20 day moving average. Short term momentum indicators are trending down. Technical score remained last week at 0.
AMEX Gold Bug Index dropped 13.38 points (7.17%) last week. Intermediate trend changed to down from neutral on a move below 173.71 on Friday. The Index remained below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -6 from 0.
Platinum dropped $37.90 (3.79%) last week. Trend remains up. Relative strength remained Positive. PLAT remains below its 20 day MA. Momentum remains down.
Palladium dropped $81.60 (7.81%) last week. Trend changed to neutral from up. Relative strength remained negative. PALL remains below its 20 day MA. Momentum: down
Copper dropped 15.7 cents per lb. (4.92%) last week. Trend changed to down on a move below $3.108 per lb. Strength relative to the S&P 500 Index remained neutral. Copper remained below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -4 from -2.
BMO Base Metal ETF dropped $0.24 (2.00%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remained Negative. Units remained below their 20 day moving average. Short term momentum indicators are trending down. Technical score remained last week at -2.
Lumber slipped $0.70 (0.14%) last week. Trend remains up. Relative strength remains Positive. Remains above its 20 day moving average. Short term momentum indicators are trending down.
Grain ETN added $0.14 (0.55%) last week. Trend remains up. Relative strength remains Positive. Trades above its 20 day moving average. Momentum remains up.
Agriculture ETF dropped $2.85 (4.53%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to Neutral from Negative. Units remain below their 20 day moving average. Short term momentum indicators are trending down. Technical score increased last week to 0 from -2.
Interest Rates
Yield on 10 year Treasuries slipped 2.3 basis points (0.81%) last week. Intermediate trend remains up. Yield remains above its 20 day moving average. Short term momentum indicators are trending up.
Price of the long term Treasury ETF dropped $1.64 (1.37%) last week. Intermediate trend remains down. Price remains below its 20 day moving average. Short term momentum indicators are trending down.
Volatility
The VIX Index jumped 11.69 (68.20%) last week, reaching a high at 50.30.
Sectors
Daily Seasonal/Technical Sector Trends for February 9th 2018
Green: Increase from previous day
Red: Decrease from previous day
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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