Tech Talk for Monday June 22nd 2020

U. S. equity index futures were higher this morning. S&P 500 futures were up 26 points in pre-opening trade.

Sherwin Williams added $0.33 to $585.00 after the company raised its second quarter sales outlook.

Gap Stores gained $0.57 to $11.23 after Wells Fargo upgraded its recommendation on the stock from Underweight to Overweight. Target was increased from $8.00 to $19.

KLA Tencor slipped $1.10 to $192.00 after Stifel Nicolaus raise its rating from Hold to Buy.

Foot Locker slipped $0.29 to $27.80 after B.Riley downgraded the stock from Buy to Neutral.

EquityClock's Daily Market Comment

Following is a link:

http://www.equityclock.com/2020/06/20/stock-market-outlook-for-june-22-2020/

Note seasonality chart on Canadian Retail Trade.

The Bottom Line

Equity indices around the world mostly moved slightly higher last week. Most indice reached a short term peak on or about June 9th and continue to show extreme intermediate overbought technical signs. Concern about a second wave of the coronavirus and possibility of FDA approval of a vaccine by early November continue to influence equity prices on the upside and downside. The VIX Index remains elevated, typical for North American equity markets between May and October.

Observations

The VIX Index (better known as the Fear Index) remained elevated last week

Medium term technical indicators for U.S. equity markets (e.g. Percent of S&P 500 stocks trading above their 50 day moving average) remained extremely intermediate overbought and extended a downtrend on Friday. See Barometer chart at the end of this report.

Medium term technical indicators for Canadian equity markets also remained extremely intermediate overbought and have started to trend down. See Barometer chart at the end of this report.

Most short term short term momentum indicators for U.S. markets and sectors (20 day moving averages, short term momentum indicators) recovered slightly last week. Notably stronger were commodity and commodity sensitive equities despite strength in the U.S. Dollar Index

Short term momentum indicators for Canadian markets and sectors also recovered slightly last week.

Year-over-year consensus earnings for S&P 500 companies moved slightly lower again last week. According to FactSet, second quarter 2020 earnings are expected to fall 43.8% (versus a drop of 43.5% last week) and revenues are expected to drop 11.2%. Third quarter earnings are expected to fall 25.1% (versus 25.1% last week) and revenues are expected to decrease 5.5%. Fourth quarter earnings are expected to decrease 12.7% (versus 12.6% last week) and revenues are expected to decline 1.4% (versus a drop of 1.3% last week). Earnings for all of 2020 are expected to decrease 21.6% (versus a decline of 21.4% last week) and revenues are expected to decrease 3.9% (versus a drop of 4.0% last week).

Consensus estimates for earnings and revenues by S&P 500 companies turn positive on a year-over-year basis in the first quarter of 2021. According to FactSet, earnings in the first quarter are expected to increase 12.7% and revenues are expected to increase 2.9%. Earnings for all of 2021 are expected to increase 28.7% (versus an increase of 28.6% last week) and revenues are expected to increase 8.5%.

Economic News This Week

May U.S. Existing Home Sales to be released at 10:00 AM EDT on Monday are expected to slip to 4.10 million from 4.33 million units in April.

May U.S. New Home Sales to be released at 10:00 AM EDT on Tuesday are expected to increase to 639,000 from 623,000 in April.

May Durable Goods Orders to be released at 8:30 AM EDT on Thursday are expected to increase 10.5% versus a drop of 17.1% in April. Excluding Transportation Orders, May Durable Goods Orders are expected to increase 2.1% versus a drop of 7.7% in April.

Next estimate of first quarter annualized U.S. GDP to be released at 8:30 AM EDT on Thursday are expected to drop 5.0% versus a gain of 2.1% in the fourth quarter of 2019.

May Personal Income to be released at 8:30 AM EDT on Friday is expected to drop 6.0 versus a gain of 10.5% in April. May Personal Spending is expected to increase 9.0% versus a drop of 13.6% in April.

June Michigan Consumer Sentiment Index to be released at 10:00 AM EDT on Friday is expected to increase to 79.0 from 78.9 in May.

Selected Earnings News This Week

Five S&P 500 companies (including one Dow Jones Industrial company: Nike) are expected to report quarterly results this week.

Trader's Corner

Equity Indices and related ETFs

Daily Seasonal/Technical Equity Trends for June 19th 2020

Green: Increase from previous day

Red: Decrease from previous day

Commodities

Seasonal/Technical Commodities Trends for June 19th 2020

Green: Increase from previous day

Red: Decrease from previous day

Sectors

Daily Seasonal/Technical Sector Trends for June 19th 2020

Green: Increase from previous day

Red: Decrease from previous day

The Canadian Technician

Greg Schnell noted in a comment on Friday that "Last week's ripcord yank stalled momentum". Following is a link:

https://stockcharts.com/articles/canada/2020/06/last-weeks-ripcord-yank-stalle-87.html

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

Technical Notes

Activision (ATVI), a NASDAQ 100 stock moved above $75.97 extending an intermediate uptrend.

Incyte, a NASDAQ 100 stock moved above $104.81 extending an intermediate uptrend.

First Trust Biotech ETF (FBT) moved above $167.61 to an all-time high extending an intermediate uptrend. VanEck Biotech ETF moved above $164.69 to an all-time high extending an intermediate uptrend. NASDAQ Biotech iShares moved above $136.07 to an all-time high extending an intermediate uptrend. ETFs responded to a Piper Jaffray report predicting that the FDA could approve a vaccine for COVID 19 before the U.S. Presidential election in November. Following is a link to a report released by Market Watch on Friday:

https://www.marketwatch.com/story/heres-why-the-fda-may-approve-a-covid-19-vaccine-before-the-november-elections-according-to-jefferies-biotech-research-team-2020-06-19?mod=home-page

'Tis the season for strength in the Biotech sector to mid-September!

Seattle Genetics (SGEN), a NASDAQ 100 stock moved above $168.10 to an all-time high extending an intermediate uptrend.

S&P 500 Momentum Barometer

The Barometer dropped 7.41 to 77.96 on Friday and 3.00 last week. It remains extremely intermediate overbought and is trending lower.

TSX Momentum Barometer

The Barometer slipped 0.57 to 75.45 on Friday and 0.09 last week. It remains extremely intermediate overbought and shows early signs of trending lower.

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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