Tech Talk for Monday July 29th 2019

U.S. equity index futures were mixed this morning. S&P 500 futures were up 1 point in pre-opening trade.

Mylan jumped $3.37to $21.80 after the company announced a deal to merge with Pfizer's Upjohn division.

Cooper Tire (CTB $30.47) is expected to open lower after lower than consensus second quarter revenues and earnings. The company also lowered guidance.

Goldman Sachs is expected to open higher after Oppenheimer raised its target price to $321 from $316.

Chipotle advanced $15.14 to $795.00 after Goldman Sachs initiated coverage with a Conviction Buy rating. Target is $1000.

EquityClock's Daily Market Comment

Following is a link:

http://www.equityclock.com/2019/07/26/stock-market-outlook-for-july-29-2019/

Note seasonality chart on the U.S. Dollar Index

The Bottom Line

Strange, but true. Most equity markets in the developed world moved sideways last week and remained below highs set earlier this month. Meanwhile, markets in emerging markets moved lower (e.g. India, Chile, South Africa). Notable exceptions were U.S. equity indices: The S&P 500 Index and the NASDAQ Composite Index closed at all-time highs. A closer look revealed that two heavy weight stocks, Microsoft and Alphabet were the main reason for the all-time highs. Gains by these two stocks accounted for 44 points of the 49 point gain recorded by the S&P 500 Index last week. With the exception of these two indices, most equity indices (including the Dow Jones Industrial Average) remained below highs set earlier this month and are intermediate overbought. Equity markets have a history of entering into a period of increased volatility at this time of year with a downward bias into mid-October. Potential events triggering seasonal weakness this year include lower year-over-year second quarter earnings reported by major corporations, negative earnings guidance for third quarter earnings (e.g. Of report by S&P 500 companies released to date, 28 companies lowered third quarter guidance while only 10 raised guidance), growing efforts by the Democrats to impeach Donald Trump, growing Middle East tensions and unsettled trade negotiations.

Observations

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

Medium term technical indicators in Canada moved slightly higher last week. Percent of TSX stocks trading above their 50 day moving average remain intermediate overbought. See charts near the end of this report.

Most short term technical indicators for U.S. markets and sectors (20 day moving averages, short term momentum indicators) moved higher last week

Short term technical indicators for Canadian markets and sectors also moved higher last week.

Frequency of quarterly U.S. reports peaks this week. Another 168 S&P 500 companies and 7 Dow Jones Industrial Average companies are scheduled to release results. Frequency of reports by major Canadian companies continues to ramp up.

Forecasts for S&P 500 earnings moved slightly lower again last week. According to FactSet, 44% of S&P 500 companies have reported to date: Second quarter earnings are expected to drop 2.6% on a year-over-year basis (versus 2.7% last week) and second quarter revenues are expected to increase 4.0% (versus 3.8% last week). Third quarter earnings are expected to drop 1.9% (versus a drop of 1.4% last week) and revenues are expected to increase 3.2%. Fourth quarter earnings are expected to increase 4.9% (versus 5.4% last week) and fourth quarter revenues are expected to increase 4.0%. For all of 2019, earnings are expected to increase 1.7% (versus 2.3% last week) and revenues are expected to increase 4.4%. First quarter 2020 earnings are expected to increase 9.2% (versus 9.5% last week) and revenues are expected to increase 5.9 %. Second quarter 2020 earnings are expected to increase 12.6% (versus 12.0% last week) and revenue are expected to increase 6.6% (versus 6.7% last week).

Strength in the U.S. Dollar Index from 91.0 in the second quarter last year to 97.0 in the second quarter this year is dampening second quarter results by S&P 500 companies. According to FactSet, companies with more than 50% of revenues from international operations are expected to report a 2.4% drop in revenues and a 13.6% drop in earnings based on results received to date

Canadian companies with international operations will realize a benefit from currency conversion, particularly companies that sell products in U.S. Dollars (think commodities). The Canadian Dollar dropped from an average of U.S. 0.78 cents in the second quarter last year to U.S. 0.75 in the second quarter this year.

Economic News This Week

June Personal Spending to be released at 8:30 AM EDT on Tuesday is expected to increase 0.3% versus a gain of 0.4% in May. June Personal Income is expected to increase 0.4% versus a gain of 0.5% in May.

July ADP Private Employment Report to be released at 8:15 AM EDT on Wednesday is expected to see an increase to 150,000 from 102,000 in June.

May Canadian GDP to be released at 8:30 AM EDT on Wednesday is expected to increase 0.1%versus a gain of 0.3% in April.

July Chicago PMI to be released at 9:45 AM EDT on Wednesday is expected to increase to 50.0 from 49.7 in June.

FOMC statement on the economy is released at 2:00 PM EDT on Wednesday. Consensus calls for a reduction in the Fed Fund Rate to 2.25% from 2.50%. Press conference is offered at 2:30 PM EDT.

Weekly Jobless Claims to be released at 8:30 AM EDT on Thursday are expected to increase to 213,000 from 206,000 last week.

June Construction Spending to be released at 10:00 AM EDT on Thursday is expected to increase 0.4% versus a decline of 0.8% in May.

July Manufacturing ISM to be released at 10:00 AM EDT on Thursday is expected to increase to 52.7 from 51.7 in June.

July Non-farm Payrolls to be released at 8:30 AM EDT on Friday are expected to drop to 165,000 from 224,000 in June. July Unemployment Rate is expected to slip to 3.6% from 3.7% in June. July Hourly Earnings are expected to increase 0.2% versus a gain of 0.2% in June.

June U.S. Trade Deficit to be released at 8:30 AM EDT on Friday is expected to slip to $54.60 billion from $55.50 billion in May.

June Canadian Trade Balance to be reported at 8:30 AM EDT on Friday is expected to post a deficit of $400 million versus a surplus of 760,000 million in May.

June Factory Orders to be released at10:00 AM EDT on Friday are expected to increase 0.8% versus a decline of 0.7% in May.

July Michigan Consumer Sentiment to be released at 10:00 AM EDT on Friday is expected to remain unchanged from June at 98.4 in June.

Selected Earnings News This Week

Trader's Corner

Equity Indices and related ETFs

Daily Seasonal/Technical Equity Trends for July 26th 2019

Green: Increase from previous day

Red: Decrease from previous day

Commodities

Daily Seasonal/Technical Commodities Trends for July 26th 2019

Green: Increase from previous day

Red: Decrease from previous day

Sectors

Daily Seasonal/Technical Sector Trends for July 26th 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

StockTwit released on Friday @EquityClock

S&P/TSX Information/Technology iShares $XIT.CA moved above $27.10 to an all-time high extending an intermediate uptrend.

George Weston $WN.CA, a TSX 60 stock moved above $103.66 extending an intermediate uptrend.

Editor's Note: Much of the gain in WN is attributed to the gain by Loblaw Companies

S&P 500 Momentum Barometers

Percent of S&P 500 stocks trading above their 50 day moving average increased last week to 78.20 from 76.00. Percent remains intermediate overbought and showing early signs of rolling over.

Bullish Percent Index for S&P 500 stocks slipped last week to 72.40 from 73.20. The Index remains intermediate overbought and showing early signs of rolling over.

TSX Momentum Barometers

Percent of TSX stocks trading above their 50 day moving average increased last week to 61.64 from 59.05. Percent is intermediate overbought.

Bullish Percent Index for TSX stocks increased last week to 65.27 from 64.85. 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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