Tech Talk for Monday March 25th 2019
U.S. equity index futures were lower this morning. S&P 500 futures were down 3 points in pre-opening trade. Index futures are responding partially to a 3% drop by the Nikkei Average and a 2% drop by the Hang Sang Index and Shanghai Composite Index.
Biogen (BIIB $216.71) is expected to open higher after setting a new $5 billion share buyback program.
Viacom added $1.29 to 26.63 after reaching an agreement with DirectTV to continue streaming its channels.
JM Smucker (SJM $114.30) is expected to open higher after JP Morgan raised its target price to $118 from $114
Cisco (CSCO $52.74) is expected to open higher after KeyBanc Capital raised its target price to $58 from $55.
EquityClock's Daily Market Comment
Following is a link:
http://www.equityclock.com/2019/03/22/stock-market-outlook-for-march-25-2019/
Note seasonality charts on Existing Home Sales and Canadian Retail Sales.
WALL STREET RAW RADIO
SATURDAY, MARCH 23, 2019
WITH YOUR HOST, MARK LEIBOVIT.
SPECIAL GUESTS: DON VIALOUX, HARRY BOXER, SINCLAIR NOE AND RALPH CASE
Excerpts from Don Vialoux' comments on Wall Street Raw
U.S. equity indices were mixed/lower last week. The NASDAQ moved slightly higher while the S&P 500 Index, the Dow Jones Industrial Average, Russell 2000 Index and TSX Composite Index moved lower. News from the FOMC meeting released on Wednesday was encouraging. The Fed signalled that an increase in the Fed Fund rate this year is unlikely. Equity prices initially moved higher on Thursday, but faded on Friday. Interest rates on Treasuries moved lower on the Fed's news. Nice breakout on Friday by long term Treasuries iShares (TLT) to a 30 month high. However, lower long term interest rates will tighten interest rate spreads. U.S. financial stocks responded by moving sharply lower.
Star equity performer last week was Apple (APPL), up 2.6%. The gain in Apple added about 115 points to the Dow Jones Industrial Average even though the Average was down 346 points during the week. Apple is scheduled to announce the introduction of new products on Monday.
Cannabis stocks were mixed last week. The sector was helped by news in the Canadian Federal Government budget released on Tuesday. The budget included a provision for taxation of edibles based on THC content rather than weight. The provision improves potential profit margins when edibles enter the Canadian market this fall.
Volatility in North American equity markets is expected to increase during the next three weeks. Events that could have an influence include response to the Mueller report, completion of a trade agreement with China and anticipation of weak first quarter earnings reports relative to the same period last year.
The Bottom Line
The bear market rally in U.S. and Canadian equity markets probably ended last week. North American equity markets remain intermediate overbought and short and intermediate technical indicators moved lower last week.
Observations
Technical action by individual S&P 500 stocks recovered last week. Number of stocks breaking intermediate resistance totaled 71 while number of stocks breaking support totaled 36. The Up/Down ratio increased to (262/136=) 1.93 from 1.70.
Medium term technical indicators for U.S. equity markets (e.g. Percent of stocks trading above their 50 day moving average, Bullish Percent Index) dropped last week, but remain overbought. See charts near the end of this report
Medium term technical indicators in Canada also moved lower again last week, but remain overbought. 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) moved lower last week, particularly on Friday.
Short term technical indicators for Canadian markets and sectors also moved lower last week.
Short term political concerns remain elevated. Issues include heightened tariff wars between the U.S. and China, anti-Trump hearings initiated by the Democrat controlled House of Representatives and expected response to the Mueller report (The report was released after the close on Friday)
Prospects for S&P 500 earnings were reduced again last week. According to FactSet, first quarter earnings are expected to decline 3.7% on a year-over-year basis (up from a decline of 3.6% last week) but revenues are expected to increase 4.9%. Consensus by S&P 500 companies with 50% or more of sales realized outside of the U.S. calls for a year-over-year decline of 11.2% in earnings and only a 0.7% increase in sales. Second quarter earnings are expected to increase 0.1% and second quarter revenues are expected to increase 4.6%. Third quarter earnings are expected to increase 1.7% (down from 1.8%) and revenues are expected to increase 4.4%. Fourth quarter earnings are expected to increase 8.1% and fourth quarter revenues are expected to increase 4.8%. For all of 2019, earnings are expected to increase 3.8% and revenues are expected to increase 4.9%.
Seasonal influences in the first and second quarters of a U.S. Pre-Presidential Election Year are favourable. Gains this year already have exceeded average gains in the first and second quarters.
Economic News This Week
February Housing Starts to be released at 8:30 AM EDT on Tuesday are expected to slip to 1.218 million units from 1.230 million units in January.
January Trade Deficit to be released at 8:30 AM EDT on Wednesday is expected to drop to $57.50 billion from $59.80 billion in December.
January Canadian Trade Deficit to be released at 8:30 AM EDT on Wednesday is expected to slip to $3.85 billion from $4.59 billion in December
Next estimate of Fourth Quarter GDP to be released at 8:30 AM EDT on Thursday is expected to fall to 2.4% from the previous estimate at 2.6%.
Initial Jobless Claims to be released at 8:30 AM EDT are expected to increase to 225,000 from 221,000 last week.
February Personal Income to be released at 8:30 AM EDT on Friday is expected to increase 0.3% versus a decline of 0.1% in January. February Personal Spending is expected to increase 0.3% versus a decline of 0.5% in January.
Canadian January GDP to be released at 8:30 AM EDT on Friday is expected to increase 0.1% versus a decline of 0.1% in December.
March Chicago PMI to be released at 9:45 AM EDT on Friday is expected to drop to 61.2 from 64.7 in February.
March Michigan Consumer Sentiment Index to be released at 10:00 AM EDT on Friday is expected to remain 97.8 set in February.
February New Home Sales to be released at 10:00 AM EDT on Friday are expected to increase to 619,000 from 607,000 in January.
Earnings News This Week
Eight S&P 500 companies are scheduled to release quarterly results this week. Following is a list of highlighted companies.
Trader's Corner.
Equity Indices and related ETFs
Daily Seasonal/Technical Equity Trends for March 22nd 2019
Green: Increase from previous day
Red: Decrease from previous day
Commodities
Daily Seasonal/Technical Commodities Trends for March 22nd 2019
Green: Increase from previous day
Red: Decrease from previous day
Sectors
Daily Seasonal/Technical Sector Trends for March 22nd 2019
Green: Increase from previous day
Red: Decrease from previous day
Updates
As noted above, technical deterioration of markets, commodities and sectors on Friday was significant. It's time to take more profits in previously supported seasonal trades that have moved below their 20 day moving average. They include the TSX 60 Index (958.21) originally recommended on January 14th at 895.14 and its related ETF: XIU ($24.08) recommended on January 25th at $23.19. Others include HBM $9.07 recommended on January 15th at 7.22 and XLE $65.47 recommended on February 14th at 65.07.
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
Hap Sneddon on BNN Bloomberg's Market Call on Friday
Following are links:
Market Outlook
https://www.bnnbloomberg.ca/video/hap-sneddon-s-market-outlook~1642439
Top Picks
https://www.bnnbloomberg.ca/video/hap-sneddon-s-top-picks~1642468
Past Picks
https://www.bnnbloomberg.ca/video/hap-sneddon-s-past-picks~1642466
StockTwits released on Friday @EquityClock
Canada CPI up 0.7% in February, stronger than 0.5% increase that has been average for the month over past 20 years. $MACRO #CDNecon #CAD
Canada #Retail Sales 5.2% better than average in January. Netting it off with December, an average trend is revealed. $MACRO #CDNecon #CAD
Technical action by S&P 500 stocks to 10:00: Bearish. Breakouts: $BBY $REG $HSY. Breakdowns: $NKE $CTAS $PH 11 financial stocks.
S&P Financial breakdowns to 10:00: $BAC $BK $ETFC $JPM $MET $MTB $PRU $SCHW $FRC $PNX $AMG
Editor's Note: After 10:00 AM EDT, additional financial breakdowns included COF, BLK and C.
Long term U.S. Treasuries iShares $TLT moved above $123.32 extending an intermediate uptrend.
Financial SPDRs $XLF moved below support at $25.55
Brazil iShares $EWZ moved below $40.74 extending an intermediate downtrend
Equal Weight Canadian Bank ETF $ZEB.CA moved below $28.52 completing a double top pattern
JP Morgan $JPM, a Dow Jones Industrial stock moved below $101.99 and $100.06 setting an intermediate downtrend.
VIX Index spikes $VIX
McDonalds $MCD, a Dow Jones Industrial stock moved above $188.51 to an all-time high extending an intermediate uptrend.
Keith Richards Blog
Topic is pain and loss management
Following is a link:
https://www.valuetrend.ca/pain-and-loss-management/
http://www.equityclock.com/about/seasonal-advantage-portfolio/
S&P 500 Momentum Barometers
Percent of S&P 500 stocks trading above their 50 day moving average plunged last week to 62.80 from 81.40. Percent remains intermediate overbought and trending down.
Bullish Percent Index for S&P 500 stocks slipped last week to 67.80 from 68.80. The Index remains intermediate overbought and trending down.
TSX Momentum Barometers
Percent of TSX stocks trading above their 50 day moving average dropped last week to 67.08 from 69.33. Percent remains intermediate overbought and trending down.
Bullish Percent Index for TSX stocks increased last week to 57.56 from 55.04. The Index remains intermediate neutral and showing early signs of rolling over.
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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