Tech Talk for Monday January 6th 2020

U.S. equity index futures were lower this morning. Index futures are responding to increasing tensions between the U.S. and Iran. S&P 500 futures were down 17 points to 3,222 in pre-opening trade.

Gold jumped $24.50 per ounce to $1,577.00 per ounce on increasing Middle East tensions. Gold moved above $1,566.40 to a seven year high. Also, Goldman Sachs upgrade gold to Buy.

Crude Oil also responded to Middle East tensions. WTI Crude Oil advanced $0.64 to $63.69 per barrel.

Citigroup slipped $0.51 to $79.19 after Deutsche Bank lowered its rating to Hold from Buy.

Apple slipped $2.27 to $295.16 despite a target increase by Deutsche Bank to $280 from $235.

EquityClock's Daily Market Comment

Following is a link:

http://www.equityclock.com/2020/01/03/stock-market-outlook-for-january-6-2020/

Note seasonality charts on Crude Oil Days of Supply, Natural Gas Storage and Construction Spending.

The Bottom Line

The intermediate uptrend in world markets stalled on Friday on news of rising conflict in the Middle East.

Observations

Seasonal influences this year continue to follow their historic pattern. Note seasonal charts below showing that most equity markets have a history of weakening from early January to early February. Given the current intermediate overbought levels for equity markets falling fourth quarter earnings on a year-over-year basis for S&P 500 companies and rising tensions in the Middle East, history is likely to repeat in early 2020. Many individual investors have large unrealized profits in 2019 that were deferred for tax purposes until the New Year. Their profit taking is likely to cause short term weakness in equity markets into January.

Medium term technical indicators for U.S. equity markets (e.g. Percent of S&P 500 stocks trading above their 50 day moving average, Bullish Percent Index) remain intermediate overbought and show early signs of peaking.

Medium term technical indicators for Canadian equity markets also remain intermediate overbought. Percent of TSX stocks trading above their 50 day moving average show early signs of peak while Bullish Percent Index continues to move higher.

Most short term technical indicators for U.S. markets and sectors (20 day moving averages, short term momentum indicators) moved lower last week from overbought level and show signs of peaking.

Short term technical indicators for Canadian markets and sectors also moved lower last week from overbought levels and show early signs of peaking.

Consensus for earnings by S&P 500 companies was virtually unchanged from estimates offered two weeks ago. According to FactSet, fourth quarter earnings on a year-over-year basis are expected to decline 1.5% (versus previous estimate of a drop of 1.4%) and fourth quarter revenues are expected to increase 2.6%. For all of 2019, earnings are expected to increase 0.3% and revenues are expected to increase 3.8%. First quarter 2020 earnings are expected to increase 5.0% and revenues are expected to increase 4.4 %. Second quarter 2020 earnings are expected to increase 6.6% and revenues are expected to increase 4.9%. Earnings for all of 2020 are expected to increase 9.6% and revenues are expected to increase 5.4% (versus previous estimate at 5.5%).

Economic News This Week

November U.S. Trade Deficit to be released at 8:30 AM EST on Tuesday is expected to drop to $44.00 billion from $47.20 billion in October.

November Canadian Trade Deficit to be released at 8:30 AM EST on Tuesday is expected to narrow to $1.00 billion from $1.08 billion in October.

November Factory Orders to be released at 10:00 AM EST on Tuesday are expected to drop 0.8% versus a gain of 0.3% in October.

December Services ISM Index to be released at 10:00 AM EST on Tuesday is expected to increase to 54.4 from 53.9 in November.

December ADP Employment to be released at 8:15 AM EST on Wednesday is expected to increase 165,000 versus a gain of 67,000 in November.

Canadian December Housing Starts to be released at 8:15 AM EST on Thursday are expected to increase to 205,000 units from 201,300 units in November.

Weekly Initial Jobless Claims to be released at 8:30 AM EST on Thursday are expected to remain unchanged at 222,000.

December Non-farm Payrolls to be released at 8:30 AM EST on Friday are expected to drop to 165,000 from 266,000 in November. December Unemployment Rate is expected to remain unchanged from November at 3.5%. December Average Hourly Earnings are expected to increase 0.3% versus a gain of 0.2% in November.

December Canadian Employment to be released at 8:30 AM EST on Friday is expected to increase 20,000 versus a drop of 71,200 in November. December Unemployment Rate is expected to slip to 5.8% from 5.9% in November.

Earnings News This Week

Four S&P 500 companies are scheduled to report quarterly results this week, including one Dow Jones Industrial company.

Trader's Corner

Editor's Note: Many equity markets, commodities and sectors have a history of moving sideways/slightly lower from the first week in January to the first week in February, followed by strength into spring.

Equity Indices and related ETFs

Daily Seasonal/Technical Equity Trends for January 3rd 2019

Green: Increase from previous day

Red: Decrease from previous day

Commodities

Daily Seasonal/Technical Commodities Trends for January 3rd 2019

Green: Increase from previous day

Red: Decrease from previous day

Sectors

Daily Seasonal/Technical Sector Trends for January 3rd 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

Greg Schnell's latest "Market Buzz" Comment

Greg offers interesting comments on Gold, U.S. Dollar and the Fear & Greed Index. Following is a link:

https://www.youtube.com/watch?v=jPK3xGl9PO4&feature=youtu.be

Changes Last Week

StockTwits released on Friday @EquityClock

Chevron $CVX, a Dow Jones Industrial stock moved above $121.74 setting an intermediate uptrend.

Alexion Pharma $ALXN, a NASDAQ 100 stock moved below $106.13 setting an intermediate downtrend.

Lockheed Martin $LMT, an S&P 100 stock moved above $397.53 to an all-time high extending an intermediate uptrend.

Aerospace & Defense ETF $PPA moved above $78.18 to an all-time high extending an intermediate uptrend.

Crude Oil ETN $USO moved above $13.16 extending an intermediate uptrend.

CGI Group $GIB.A.CA, a TSX 60 stock moved below $108.10 completing a double top pattern.

George Weston $WN.CA, a TSX 60 stock moved below $101.59 extending an intermediate downtrend.

TSX Energy iShares $XEG.CA moved above $9.44 extending an intermediate uptrend.

Magna International $MG.CA $MGA moved below $70.08 Cdn. completing a double top pattern.

VeriSign $VRSN, a NASDAQ 100 stock moved above $198.57 resuming an intermediate uptrend.

General Electric $GE, an S&P 100 stock moved above $11.83 extending an intermediate uptrend.

Jeff Parent on BNNBloomberg's Market Call Tonight

Market Comment

https://www.bnnbloomberg.ca/video/jeff-parent-s-market-outlook~1868157

Past Picks

https://www.bnnbloomberg.ca/video/jeff-parent-s-past-picks~1868186

Top Picks

https://www.bnnbloomberg.ca/video/jeff-parent-s-top-picks~1868212

S&P 500 Momentum Barometers

Percent of S&P 500 stocks trading above their 50 day moving average dropped last week from 80.76 to 75.35. Percent remains intermediate overbought and showing early signs of a peak.

Bullish Percent Index for S&P 500 stocks increased last week from 77.80 to 78.00. The Index remains intermediate overbought.

TSX Momentum Barometers

Percent of TSX stocks trading above their 50 day moving average dropped last week from 72.56 to 66.82. Percent remains intermediate overbought and showing early signs of a peak.

Bullish Percent Index for TSX stocks increased last week from 72.29 to 74.68. The Index 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

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