Tech Talk for Monday July 30th 2018
U.S. equity index futures were mixed this morning. S&P 500 futures were unchanged in pre-opening trade.
Caterpillar gained $4.82 to $147.38 after reporting higher than consensus second quarter earnings. The company also raided its target price.
AT&T added $0.39 to $31.47 after Bank of America raised its rating on the stock to Buy from Hold.
Twitter (TWTR $34.30) is expected to open lower after SunTrust lowered its target price to $30 from $33.
Tyson Food dropped $2.95 to 60.61 after the company reported lower than consensus second quarter earnings.
EquityClock's Daily Market Comment
Following is a link:
http://www.equityclock.com/2018/07/27/stock-market-outlook-for-july-30-2018/
Note seasonality chart on the Technology sector.
WALL STREET RAW RADIO – SATURDAY, JULY 28, 2018
WITH YOUR HOST, MARK LEIBOVIT
AND GUESTS: DON VIALOUX, HENRY WEINGARTEN, AND SINCLAIR NOE
Seasonal Advantage Portfolio Introduction
Following is a link:
https://www.youtube.com/watch?v=ElsfLfSC9RM&feature=youtu.be
The Bottom Line
The proverbial "Summer Rally" in North American equity markets came to an end last week. U.S. and Canadian equity markets have a history of moving higher from late June to mid-July prior to release of encouraging second quarter corporate results. The summer rally this year has been helped by anticipation of strong second quarter corporate results (21.3% year-over-year gain by S&P 500 companies and a 24% increase by TSX 60 companies led by the energy sector). Seasonal influences normally turn Negative from the third week in July to mid-October. More signs of a seasonal peak appeared last week. Unless a company announced "blow out" results, many S&P 500 stocks moved lower following release of results. Traders took profits on news, particularly when a company lowered its third quarter guidance (e.g. Facebook, Exxon Mobil, Twitter, Intel). Last week, broadly based equity indices including the NASDAQ Composite Index, Russell 2000 Index moved lower. The TSX Composite Index moved lower for the second week in a row.
Seasonal influences are particularly relevant during U.S. Mid-term election years. Volatility in equity markets increases from late April to mid-October due to concerns about a possible change in political control in Congress. These concerns are very real this year. Republicans control the House by 16 votes and the Senate by one vote. On average during a Mid-term election year, the controlling party loses 24 House seats to the opposition party. Anticipation of a possible change, regardless of the final result, is a major reason for a correction in North American equity markets between mid-July and October.
Ditto for Canadian equities! Seasonal influences for Canadian equity markets follow a similar pattern to the U.S. They normally recover from late June to until mid-July in anticipation of encouraging second quarter corporate results and turn negative until mid-October.
Weakness in North American equity markets is related to increased volatility triggered by a non-recurring unusual event. The possible event this year is progression to a full-fledged trade war. On Friday, the VIX Index popped 7.33%.
Economic News This Week
June Personal Income to be released at 8:30 AM EDT on Tuesday is expected to increase 0.4% versus a gain of 0.4% in May. June Personal Spending is expected to increase 0.4% versus a gain of 0.2% in May.
Canadian real GDP in May to be released at 8:30 AM EDT on Tuesday is expected to increase 0.4% versus a gain of 0.1% in April
June Construction Spending to be released at 10:00 AM EDT on Wednesday is expected to increase 0.3% versus a gain of 0.4% in May.
July Manufacturing ISM to be released at10:00 AM EDT on Wednesday is expected to slip to 59.2 from 60.2 in June.
FOMC Decision on the Fed Fund Rate to be released at 2:00 PM EDT on Wednesday is expected to remain unchanged at 2.00%.
Initial Weekly Claims to be released at 8:30 AM EDT on Thursday are expected to increase to 220,000 from 217,000 last week.
June Factory Orders to be released at 10:00 AM EDT on Thursday are expected to increase 1.0% versus a gain of 0.4% in May.
July Non-farm Payrolls to be released at 8:30 AM EDT on Friday are expected to dip to 193,000 from 213,000 in June. July Unemployment Rate is expected to dip to 3.9% from 4.0% in June. July Hourly Earnings are expected to increase 0.3% versus a gain of 0.2% in June.
U.S. June Trade Deficit to be released at 8:30 AM EDT on Friday is expected to increase to $46.0 billion from $43.1 billion in May.
June Canadian Merchandise Trade to be released at 8:30 AM EDT on Friday is expected to post a deficit of $2.3 billion versus a deficit of $2.8 billion in May.
July Non-Manufacturing ISM to be released at 10:00 AM EDT on Friday is expected to dip to 58.5 from 59.1 in June.
Earnings News This Week
Observations
Technical action by individual S&P 500 stocks was mixed last week. Number of stocks breaking intermediate resistance totaled 61 while number of stocks breaking support totaled 41. The Up/Down ratio increased last week to (284/117=) 1.60 from 1.52.
Frequency of reports will peak this week: Another 140 S&P 500 companies (and five Dow Jones Industrial companies) are scheduled to release second quarter results this week. The flow of second quarter reports by Canadian companies will ramp up. A focus is on Apple's report on Tuesday.
U.S. economic focuses this week are on the FOMC announcement on the Fed Fund rate on Wednesday and the July Employment report on Friday.
Canadian economic focuses this week are on the GDP report on Tuesday and the Merchandise Trade report on Friday.
The U.S. Dollar Index, up 0.26 last week, continued to show short term momentum signs of rolling over after entering its seasonal period of weakness at the beginning of July. The CRB Index continued to move higher.
Medium term technical indicators for U.S. equity markets (e.g. Percent of stocks trading above their 50 day moving average, Bullish Percent Index) remain intermediate overbought and are showing signs of rolling over.
Medium term technical indicators in Canada continued to move lower last week from overbought levels.
Short term technical indicators for U.S. markets and sectors (20 day moving averages, short term momentum) generally recorded significant deterioration on Friday.
Short term technical indicators for Canadian markets and sectors continued to trend lower last week.
The outlook for S&P 500 earnings and sales remains positive: According to FactSet , 53% of S&P 500 stocks have reported second quarter results to date: 83% have reported higher than consensus earnings and 77% have reported higher than consensus sales. Second quarter 2018 earnings are expected to increase 21.3% (up from 20.8% last week) and sales are expected to increase a 9.3% (up from 9.0% increase last week). Third quarter earnings are expected to increase 21.2% on a 7.7% increase in sales. Fourth quarter earnings are expected to increase 18.0% on a 6.0% increase in sales (up from 5.7% increase last week). First quarter 2019 earnings are expected to increase 7.3% (up from 7.1% last week) on a 5.8% increase in sales (up from 5.5% last week). Second quarter 2019 earnings are expected to increase 10.2% on a 4.8% increase in sales.
Short term political concerns remain elevated. Issues include proposed U.S. tariffs against Chinese goods valued at $500 billion, stalled NAFTA negotiations, and the ramp up of U.S. mid-term election political rhetoric.
Equity Indices and Related ETFs
Daily Seasonal/Technical Equity Trends for July 27th 2018
Green: Increase from previous day
Red: Decrease from previous day
Commodities and Related ETFs
Daily Seasonal/Technical Commodities Trends for July 27th 2018
Green: Increase from previous day
Red: Decrease from previous day
Sectors
Daily Seasonal/Technical Sector Trends for July 27th 2018
Green: Increase from previous day
Red: Decrease from previous day
Changes Last Week
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
StockTwits Released on Friday
Intel $INTC, a Dow Jones Industrial stock moved below $48.50 completing a Head & Shoulders pattern.
Tech action by S&P 500 stocks to 10:00: Bullish. Breakouts: CMG, BKNG, AJG, AFL CB, CINF, MET, AGN, ZBH, ALK, SIVB. Breakdowns: EQT, EW, INTC, JNPR.
Editor's Note: After 10:00 AM EDT, breakouts included GS, BLL, MOS, AEP, XEL, BHGE, NOV, KIM and UNP. Breakdowns included EA, NWSA, CBS, COG, NFX and ABC.
Aecon Group $ARE.CA moved above $15.74 setting an intermediate uptrend.
Constellation Software $CSU.CA, a TSX 60 stock moved below $1007.77 setting an intermediate downtrend.
Celestica $CLS.CA moved below $15.39 completing a double top pattern.
S&P 500 Momentum Barometer
The Barometer dropped 5.40 to 67.80 on Friday. It remains intermediate overbought and showing early signs of rolling over.
TSX Momentum Barometer
The Barometer slipped 1.26 to 53.97 on Friday. Last week it dropped from intermediate overbought to intermediate neutral and is trending down.
Jeff Parent on BNNBloomberg's Market Call Tonight: July 27th
Following are links:
Market Outlook: https://www.bnnbloomberg.ca/market-call-tonight/jeff-parent-s-market-outlook~1449344
Past Picks: https://www.bnnbloomberg.ca/market-call-tonight/jeff-parent-s-past-picks~1449371
Top Picks: https://www.bnnbloomberg.ca/market-call-tonight/jeff-parent-s-top-picks~1449408
Schachter Energy Report
Josef's July report was released late last week. Highlights included:
. Internals of the overall Stock Market continue to deteriorate-The trade war is escalating
. Natural Gas bull market around the corner
. Crude oil inventory decline ending-Upcoming inventory build should drive WTI below U.S. $60 per barrel.
Full report is available by subscription at www.schachterenergyreport.ca
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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