Tech Talk for Monday January 15th 2018
Although U.S. equity markets are closed today, index futures in electronic trading are higher. S&P 500 futures are up 4 points in pre-opening trade.
Strength in index futures is related to continuing weakness in the U.S. Dollar and related strength in other major currencies. Weakness in the U.S. Dollar Index also has triggered strength in commodity prices. Gold is up $6.90 to $1,341.80 per ounce, Silver is up $0.20 to $17.34 and copper is up $0.05 to $3.27.
Market Watch summarized a Credit Suisse report favouring the oil services industry. Headline reads, "Oil services stocks are about to stage a big rebound". Following is a link:
'Tis the season for oil services stocks to move higher into early May!
Combining Seasonal and Technical Analysis Using StockCharts
Thanks to Greg Schnell and StockCharts for the opportunity to give this presentation on Saturday to all StockCharts subscribers. Greg's comments fit nicely with the presentation on seasonality. Following is a link:
http://stockcharts.com/webinars/scc-outlook.html
WALL STREET RAW RADIO
WITH MARK LEIBOVIT – DECEMBER 13, 2018 – A VERY SPECIAL SHOW WITH TWO OUTSTANDING GUEST
GUESTS INCLUDE DON VIALOUX (EQUITYCLOCK.COM), JEFFREY FRIEDLAND (JEFFREYFRIEDLAND.COM AUTHOR OF THE BOOK – ‘MARIJUANA- THE MOST MISUNDERSTOOD PLANT’), HENRY WEINGARTEN (AFUND.COM), SINCLAIR NOE (EATTHEBANKERS.COM) AND BILL KOENIG (WATCH.ORG AND AUTHOR OF ‘EYE TO EYE’ – FACING THE CONSEQUENCES OF DIVIDING ISRAEL).
The Bottom Line
Once again, several broadly based U.S. equity indices as well as the TSX Composite Index reached all-time highs last week, typical of the strong Santa Claus rally period. Traditional seasonally strong sectors (e.g. Consumer Discretionary, Industrials, Technology and Materials) lead the market higher. However, medium term technical indicators for the S&P 500 Index, NASDAQ Composite Index, Dow Jones Industrial Average as well as TSX Composite Index remain overbought and seasonal influences turn neutral for most equity markets and sectors from the second week in January into February. Preferred strategy is to take at least partial trading profits on strength this week in seasonally attractive equities and Exchange Traded Funds with the end of the "Santa Claus rally". Significant intermediate upside moves for most equity markets and economically sensitive sectors (other than commodity sensitive sectors) is expected to resume in February.
The exceptions are Energy, Oil Services and Precious Metals sectors. They have recovered strongly since mid-December when they entered into their period of seasonal strength lasting until at least the end of February. A break down by the U.S. Dollar Index on Friday to a three year low adds to their prospects. Look for continuing outperformance by these sectors. Buy on weakness.
Economic News This Week
January Empire State Survey to be released at 8:30 AM EST on Tuesday is expected to increase of 18.6 from 18.0 in February.
December Industrial Production to be released at 9:15 AM EST on Wednesday is expected to increase 0.4% versus a gain of 0.2% in November. December Capacity Utilization is expected to increase to 77.3% from 77.1% in November.
Bank of Canada at 10:00 AM EST on Wednesday is expected to increase the overnight lending rate by 0.25%.
Federal Reserve Beige Book is scheduled to be released at 2:00 PM EST on Wednesday.
December Housing Starts to be released at 8:30 AM EST on Thursday are expected to slip to 1,270 million units from 1,297 million units in November.
China's annualized real GDP growth in the fourth quarter to be released overnight on Thursday is expected to increase to 6.8% from 6.7% in the third quarter.
Weekly Initial Jobless Claims to be released at 8:30 AM EST on Thursday are expected to drop to 250,000 from 261,000 last week
January Philly Fed Index to be released at 8:30 AM EST on Thursday is expected to drop to 25.0 from 26.1 in December
January Consumer Sentiment Index to be released at 10:00 AM EST on Friday is expected to increase to 97.0 from 95.9 in December
Earnings Reports Next Week
Observations
U.S. equity markets are closed today for the Martin Luther King holiday.
The Santa Claus rally from mid-December to mid- January (December 15th to January 12th this year) once again was exceptionally profitable for investors. The TSX Composite Index gained 1.7% and the S&P 500 Index gained 4.1%.
Technical action by individual S&P 500 stocks remained bullish last week, typical during the Santa Claus rally period. Number of stocks breaking resistance totaled 66 while number of stocks breaking support totaled 10. Number of stocks trading in an uptrend increased to 334 from 315, number of stocks trading in a neutral trend decreased to 50 from 54 and number of stocks in a downtrend decreased to 116 from 131. The Up/Down ratio increased last week to (334/116=) 2.88 from 2.40.
U.S. economic news this week focuses on Industrial Production to be released on Wednesday
Canadian economic news this week focuses on a likely 0.25% increase in the Bank of Canada's overnight lending rate.
Fourth quarter earnings reports starts to flow quickly this week. 5 percent of S&P 500 companies have reported quarterly results to date. Focus this week remains on reports by major U.S. banks. Twenty eight S&P 500 companies are scheduled to report (including four Dow Jones Industrial stocks)
Medium term technical indicators (Percent of stocks trading above their 50 day moving average, Bullish Percent Index) remain at intermediate overbought levels, but have yet to show technical signs of rolling over.
Short term technical indicators for equity markets and most sectors (short term momentum, above/below 20 day moving average) generally are overbought.
Seasonal influences on a wide variety of equity indices and sectors tend to reach a short term peak by mid-January. Beyond mid- January, U.S. equity indices have a history of entering into a flat period lasting into February. See charts below.
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The outlook for S&P earnings and sales remains positive. According to FactSet, fourth quarter earnings are expected to increase 10.2% on a year-over-year basis (down from 10.5% last week due to one-time write offs in the financial services sector) on a 6.8% increase in sales (up from 6.7% last week). Estimates beyond the fourth quarter of 2017 have been revised higher mainly due to changes in U.S. corporate tax laws. First quarter 2018 earnings are expected to increase 14.1% (up from 12.0% last week) on a 7.1% increase in sales (up from 6.8%). Second quarter 2018 earnings are expected to increase 13.9% (up from 12.3%) on a 7.0% increase in revenues (up from 6.8%). Third quarter earnings are expected to increase 15.2% (up from 13.4%) on a 5.8% increase in revenues (up from 5.6%). Fourth quarter 2018 earnings are expected to increase 15.1% (up from 13.0%) on a 4.5% increase in revenues (up from 4.4%). For all of 2018, earnings are expected to increase 14.7% (up from 13.1%) on a 5.9% increase in sales (up from 5.7%).
Short term political uncertainties remain, including North Korean "sabre rattling", struggling NAFTA negotiations 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 13% 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 5% from foreign currency translation alone following a 10% fall in the U.S. Dollar Index. The U.S. Dollar Index averaged 100 in the fourth quarter of 2016 and 101 in the first quarter of 2017. Weakness again last week to below the 91 level likely will encourage analysts to raise their 2018 earnings and revenue estimates.
Equity Indices and related ETFs
Daily Seasonal/Technical Equity Trends for January 12th 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 gained another 43.09 points (1.57%) last week. Intermediate trend remains up. The Index remains above its 20 day moving average. Short term momentum indicators are trending up.
Percent of S&P 500 stocks trading above their 50 day moving average slipped last week to 81.00 from 82.80. Percent remains intermediate overbought.
Percent of S&P 500 stocks trading above their 200 day moving average increased last week to 80.00 from 79.80. Percent remains intermediate overbought.
Bullish Percent Index for S&P 500 stocks slipped last week to 82.00 from 82.40 last week, but remained above its 20 day moving average. The Index remains intermediate overbought.
Bullish Percent Index for TSX stocks increased last week to 70.00 from 67.34 and remained above its 20 day moving average. The Index remains intermediate overbought.
TSX Composite Index dropped 41.26 points (0.25%) last week. Intermediate trend remains up (Score: 2). Strength relative to the S&P 500 Index remains Negative (Score: -2). The Index remains above its 20 day moving average (Score: 1). Short term momentum indicators are trending down (Score: -1). Technical score dropped last week to 0 from 2.
Percent of TSX stock trading above their 50 day moving average dropped last week to 53.94 from 59.58. Percent remains intermediate overbought and trending down.
Percent of TSX stocks trading above their 200 day moving average dropped last week to 62.24 from 69.58. Percent remains intermediate overbought and trending down.
Dow Jones Industrial Average gained 507.32 points (2.00%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed back to Positive from Neutral. The Average remained above its 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to 6 from 4.
Bullish Percent Index for Dow Jones Industrial Average remained unchanged last week at 93.33, matching its 20 day moving average. The Index remains intermediate overbought
Bullish Percent Index for NASDAQ Composite stocks increased last week to 67.57 from 66.05 and remained above its 20 day moving average. The Index remains intermediate overbought.
NASDAQ Composite Index gained another 124.50 points (1.74%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remained Neutral. The Index remained above its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 4.
Russell 2000 Index gained 31.96 points (2.05%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Negative. The Index remained above its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 2.
Dow Jones Transportation Average gained another 461.64 points (4.23%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Positive. The Average remains above its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 6.
Australia All Ordinaries Composite Index dropped 51.40 points (0.83%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Negative. The Index remains above its 20 day moving average. Short term momentum indicators have turned down. Technical score slipped last week to 0 from 2.
Nikkei Average dropped 60.71 points (0.56%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to Neutral from Positive. The Average remained above its 20 day moving average. Short term momentum indicators have rolled over. Technical score dropped last week to 2 from 6.
Europe iShares gained 0.77 (1.58%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remained Positive. Units remained above its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 6.
Shanghai Composite Index gained 47.19 points (1.39%) last week. Intermediate trend remains Neutral. Strength relative to the S&P 500 Index returned last week to Neutral after briefly changing to Positive. The Index remains above its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 2.
Emerging Markets iShares gained $0.38 (0.77%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Positive. Units remained above their 20 day moving average. Short term momentum indicators continued to trend up. Technical score remained last week at 6.
Currencies
The U.S. Dollar Index dropped 0.93 (1.01%) last week. Intermediate downtrend was confirmed on a move below 90.99 on Friday to a three year low. The Index remained below its 20 day moving average. Short term momentum indicators are trending down.
The Euro gained 1.70 (1.41%) last week. Intermediate uptrend was confirmed on Friday on a move above 120.68. The Euro remains above its 20 day moving average. Short term momentum indicators are trending up.
Canadian Dollar slipped 0.28 (0.35%) last week. Intermediate trend remains neutral. The Canuck Buck remained above its 20 day moving average. Short term momentum indicators are trending down.
Japanese Yen gained 1.59 (1.80%) last week. Intermediate trend remains up. The Yen moved back above its 20 day moving average. Short term momentum indicators are trending up.
British Pound gained 1.59 (1.17%) last week. Intermediate trend resumed an uptrend on Friday on a move above 136.58. The Pound remained above its 20 day moving average. Short term momentum indicators are trending up.
Commodities and Related ETFs
Daily Seasonal/Technical Commodities Trends for January 12th 2018
Green: Increase from previous day
Red: Decrease from previous day
* Excludes adjustment from rollover of futures contracts
The CRB Index gained another 2.61 points (1.35%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Positive. The Index remains above its 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to 6 from 4.
Gasoline added 6.3 cents per gallon (3.53%) last week. Intermediate trend changed to up from neutral on a move above$1.849. Strength relative to the S&P 500 Index remains Positive. Gas remains above its 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to 6 from 2.
Crude Oil gained another $2.86 per barrel (4.65%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Positive. Crude remains above its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 6.
Natural Gas gained $0.40 (14.29%) last week. Intermediate trend changed to Neutral from Down. Strength relative to the S&P 500 Index changed to Positive from Neutral. "Natty" remained above its 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to 4 from -2.
S&P Energy Index gained 17.61 points (3.18%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Positive. The Index remains above its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 6.
Oil Services ETF gained another 7.06 points (4.49%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remained Positive. The Index remains above its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 6.
Gold gained $12.60 per ounce (0.95%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Positive. Gold remained above its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 6.
Silver slipped $0.14 per ounce (0.81%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index changed to Neutral from Positive. Silver remains above its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -2 from 2.
AMEX Gold Bug Index gained 3.21 points (1.62%) last week. Intermediate trend remains Neutral. Strength relative to the S&P 500 Index remains Positive. The Index remains above its 20 day moving average. Short term momentum indicators turned back up on Friday. Technical score remained last week at 4
Platinum gained another $21.00 per ounce (2.15%) last week. Trend remains Neutral. Relative strength relative remains Positive. PLAT remains above its 20 day MA. Momentum: Up
Palladium gained $23.15 per ounce (2.14%) last week. Trend remains up. Relative strength remains Positive. PALL remains above its 20 day MA. Momentum turned back up.
Copper slipped $0.01 per lb. (0.31%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to Negative from Neutral. Copper closed at its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -1 from 2.
BMO Base Metals ETF added $0.42 (3.29%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Positive. Units remained above their 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 6.
Lumber gained 7.00 (1.52%) last week. Intermediate uptrend confirmed on a move above $461.90. Relate strength: Positive. Trades above its 20 day MA. Momentum: Up
Grain ETN lost $0.31 (1.26%) last week. Downtrend confirmed on Friday on move below $24.17. Relative strength: Negative. Trades below its 20 day MA. Momentum: down.
Agriculture ETF gained $0.70 (1.10%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Positive. Units remain above their 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 6.
Interest Rates
Yield on 10 year Treasuries increased 7.6 basis points 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 Bond ETF dropped $1.19 (0.95%) last week. Intermediate trend remains up. Units dropped below their 20 day moving average.
Volatility
The VIX Index gained 0.94 (10.20%) last week. The Index moved back above its 20 day moving average.
Sectors
Daily Seasonal/Technical Sector Trends for January 12th 2018
Green: Increase from previous day
Red: Decrease from previous day
StockTwits Released on Friday @EquityClock
Technical action by S&P 500 stocks to 10:15: Bullish. Breakouts: $CCL $TJX $KR $CHK $CI $
GD $ITW $MMM $HPQ $MSI $ECL $AES $HII. Breakdowns: $AFL $ED $SBAC.
Editor's Note: After 10:15 AM EST, breakouts included TRIP, MCK, OMC, DISCK, DISCA and VIAB
Canadian lumber stocks surge to 3 year highs extending intermediate uptrends. $IFP.CA $WFT.CA $CFP.CA
MMM $MMM, a Dow Jones Industrial stock moved above $244.23 to an all-time high.
Laurentian Bank $LB.CA moved below $54.29 extending an intermediate downtrend.
Intertape Polymer $ITP.CA moved above $21.86 extending an intermediate uptrend.
Grain prices $JJG breaks to a new intermediate low led by $CORN.
US Consumer Price Index down by 0.1% (NSA) in December, better than average decline of 0.2%. #CPI #Inflation $MACRO
US #Retail Trade higher by 13.1% (NSA) in December, below average increase for last month of year of 17.4%. $XRT#Economy $MACRO
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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