Tech Talk for Monday January 21st 2019

WITH YOUR HOST, MARK LEIBOVIT

SATURDAY, JANUARY 19, 1019

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

https://tinyurl.com/yb5328r9

Excerpts from Don Vialoux' comments on Wall Street Raw

The bear market rally in North American equity markets continued last week. The current rally has lasted four weeks. During this time the TSX Composite Index added 11.1%, the S&P 500 Index and the Dow Jones Industrial Average advanced 13.5% and the NASDAQ Composite posted a 15.8% gain. Gains likely are not over yet! Using history as our guide, the bear market rally started on December 24th from an extremely oversold level can last another four weeks implying additional potential trading profits.

One of the reasons for additional gains during the next few weeks is progress toward a trade agreement between the U.S. and China. A Wall Street Journal article released on Thursday implied that the U.S. and China are moving toward a friendly agreement that will benefit both countries. Equity prices responded accordingly with Chinese ETFs as well as commodity and commodity sensitive stock prices moving nicely higher on Thursday. Traditionally, Chinese equity prices are quiet between now and Chinese New Year, but appear to be heating up earlier than usual. CAF, a closed end Chinese fund, completed a reverse Head and Shoulders pattern on Friday. This year the Chinese New Year starts on February 5th and is called the Year of the Pig. After start of the New Year, the Shanghai Composite Index enters its strongest season for the year from the end of January to mid-April.

Notably stronger last week were emerging markets Exchange Traded Funds such as EEM and FM. They also are responding to anticipation of improving trade relationships between the U.S. and China. On the charts, Emerging market ETFs completed classic double bottom patterns last week. They have just entered their period of seasonal strength from mid-January to the end of April. Canadian equivalents include ZEM and XEM trading on the TSX.

Another reason for additional gains in North American equity markets during the next few weeks is continuation of encouraging responses to fourth quarter earnings reports by major U.S. companies. For the most part, stock prices moved higher last week when earnings and revenues reported by major companies slightly exceeded consensus. Look for more of the same next week when the reporting focus changes from the financial sector to the technology sector. Major reporting companies reporting next week include IBM, Texas Instruments and Intel. Other Dow Jones Industrial reporting companies reporting next week include Johnson & Johnson, Travelers, United Technologies and Starbucks.

The Bottom Line

U.S. and Canadian equity markets extended their tradable bear market rally last week Traders with a time horizon of two months or less can take advantage of a recovery from oversold levels by owning equities that have favourable seasonality and positive strength relative to North American equity indices. Focus is on commodity sensitive securities that are responsive to a flat-to-lower U.S. Dollar Index including precious metals, base metals, agriculture and energy related equities and Exchange Traded Funds.

Observations

U.S. markets are closed today for the Martin Luther King holiday.

Technical action by individual S&P 500 stocks was quiet last week. Number of stocks breaking intermediate resistance totaled 30 while number of stocks breaking support totaled 5. The Ratio of stocks in an intermediate uptrend/ stocks in an intermediate downtrend increased last week to (109/354 =) 0.31 from 0.26.

Fourth quarter earnings reports by major U.S. companies continue to pour in this week. See separate report below.

Medium term technical indicators for U.S. equity markets (e.g. Percent of stocks trading above their 50 day moving average, Bullish Percent Index) continued moving higher last week. See charts near the end of this report

Medium term technical indicators in Canada also continued moving 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) are overbought.

Short term technical indicators for Canadian markets and sectors also are overbought.

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.

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 with release of fourth quarter results.

Seasonal influences in the first and second quarters of a U.S. Pre-Presidential Election Year are favourable. 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.

Technical evidence of strength in equity markets outside of North America expanded on Friday. Encouraging breakouts by Russian and Turkey ETFs!

Economic News This Week

December Existing Home Sales to be released on Tuesday at 10:00 AM EST on Tuesday are expected to slip to 5.28 million units from 5.32 million units in November.

Canadian November Retail Sales to be released at 8:30 AM EST on Wednesday are expected to increase 0.4% versus a gain of 0.3% in October. Excluding auto sales, November Retail Sales are expected to increase 0.2% versus no change in October.

Weekly Initial Jobless Claims to be released at 8:30 AM EST on Thursday are expected to increase to 218,000 from 213,000 last week.

December Durable Goods Orders to be released at 8:30 AM EST on Friday are expected to increase 2.3% versus a drop of 4.3% in November. Excluding Transportation Orders, December Durable Goods Orders are expected to increase 0.3% versus a gain of 0.4% in November.

Earnings News This Week

Trader's Corner

Equity Indices and related ETFs

Daily Seasonal/Technical Equity Trends for January 19th 2019

Green: Increase from previous day

Red: Decrease from previous day

Commodities

Daily Seasonal/Technical Commodities Trends for January 18th 2019

Green: Increase from previous day

Red: Decrease from previous day

Sectors

Daily Seasonal/Technical Sector Trends for January 18th 2019

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

Another Canadian bank stock breakout! Royal Bank $RY.CA, a TSX 60 stock moved above $98.74 extending an intermediate uptrend.

'Tis the season for Royal Bank $RY.CA and other Canadian bank stocks to move higher to May!

Editor's Note: National Bank also moved above intermediate resistance at $60.89:

Open Text $OTEX $OTEX.CA, a TSX 60 stock moved above $34.93 U.S. and $46.18 Cdn completing a double bottom pattern

‘Tis the season for Open Text $OTEX $OTEX.CA to move higher to the end of February!

Technical action by S&P 500 stocks to 10:00: Bullish. Intermediate breakouts: $TSN $BK $MSCI $KSU $SEE. No breakdowns.

Editor's Note: After 10:00 AM EST, breakouts included WAT, DE, TEL, LEG, SPGI, WCG, TJX and GRMN.

The following breakout stocks have a positive seasonal profile until May: $TSN $MSCI $KSU $SEE

US Industrial Production showed strong performance in 2018, up by 3.6%, better than 1.4% average increase. $MACRO #Economy #Manufacturing

Closed end Chinese Fund $CAF moved above $19.50 completing a reverse Head & Shoulders pattern

iShares Cdn. Technology ETF $XIT.CA moved above $19.12 completing a base building pattern

Reason for breakout by $XIT.CA was breakout by Continental Software $CSU.CA (a TSX 60 stock) above $942.04

Canada Consumer Price Index (CPI) down 0.1% in December, stronger than the 0.2% decline that is average. $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 72.80 from 40.00. Percent has changed to intermediate overbought from intermediate neutral, but continues to trend higher.

Bullish Percent Index for S&P 500 stocks increased last week to 47.80 from 40.00. The Index remains intermediate neutral, but continues to trend higher.

TSX Momentum Barometers

Percent of TSX stocks trading above their 50 day moving average increased last week to 79.32 from 60.91. Percent remains intermediate overbought, but continues to trend higher.

Bullish Percent Index for TSX stocks increased last week to 43.33 from 40.41. The Index remains intermediate neutral, but continues to trend higher.

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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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