Tech Talk for Monday May 27th 2019
Investing for the remainder of 2019: Opportunities and Pitfalls
The Bottom Line
Most developed equity markets in the world reached an intermediate peak on or about May 1st. Last week they continued moving slightly lower.
Observations
Technical action by individual S&P 500 stocks remained bearish last week. Number of stocks breaking intermediate resistance totaled 17 while number of stocks breaking support totaled 37 (including eight energy stocks) The Up/Down ratio dropped last week for the fourth consecutive week to (248/157=) 1.58 from 1.86.
Medium term technical indicators for U.S. equity markets (e.g. Percent of stocks trading above their 50 day moving average, Bullish Percent Index) continued to move lower last week. They are intermediate neutral and trending down. See charts near the end of this report
Medium term technical indicators in Canada also moved slightly lower last week. They remain intermediate neutral. 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 again last week.
Short term technical indicators for Canadian markets and sectors also moved lower last week.
Short term political concerns in the U.S. remain elevated. Issues include tariff wars between the U.S. and China and anti-Trump hearings initiated by the Democrat controlled House of Representatives. Release of the Mueller report continues to elevate political rhetoric.
Frequency of S&P 500 and TSX Composite first quarter earnings reports continue to wind down. Another eight S&P 500 companies are scheduled to report this week. To date, 97% of S&P 500 companies have reported quarterly results.
Forecasts for S&P 500 sales and earnings in the first quarter last week was virtually unchanged last week. Estimates beyond the first quarter moved slightly lower again. According to FactSet, first quarter earnings are expected to decline 0.4% and revenues are expected to increase 5.3%. Second quarter earnings are expected to drop 2.1% (versus a drop of 1.9% last week) and second quarter revenues are expected to increase 4.2%. Eighty companies have issued negative second quarter guidance (versus 72 last week) and 25 companies have issued positive guidance (versus 18 last week). Third quarter earnings are expected to increase 0.3% (versus 0.5% last week) and revenues are expected to increase 4.2% (versus 4.3% last week). Fourth quarter earnings are expected to increase7.2% (versus 7.3% last week) and fourth quarter revenues are expected to increase 4.6% (versus 4.7% last week). For all of 2019, earnings are expected to increase 3.2% and revenues are expected to increase 4.7%.
Economic News This Week
Bank of Canada statement on interest rates to be released on Wednesday at 10:00 AM EDT is expected to maintain the overnight lending rate to major banks at 1.75%.
Revised First Quarter U.S. GDP annualized growth estimate to be released at 8:30 AM EDT on Thursday is expected to slip to 3.1% from the previous estimate at 3.2%.
Weekly Jobless Claims to be released at 8:30 AM EDT on Thursday is expected to from 211,000 last week.
April Personal Spending to be released at 8:30 AM EDT on Friday is expected to increase 0.2% versus a gain of 0.9% in March. April Personal Income is expected to increase 0.3% versus a gain of 0.1% in March.
March Canadian GDP to be released at 8:30 AM EDT on Friday is expected to increase 0.2% versus a decline of 0.1% in February.
May Chicago PMI to be released at 9:45 AM EDT on Friday is expected to increase to 53.8 from 52.6 in April.
Michigan May Consumer Sentiment Index to be released at 10:00 AM EDT on Friday is expected to slip to 102.0 from 102.4 in April
Selected Earnings News This Week
Trader's Corner
Equity Indices and related ETFs
Daily Seasonal/Technical Equity Trends for May 24th 2019
Green: Increase from previous day
Red: Decrease from previous day
Commodities
Daily Seasonal/Technical Commodities Trends for May 24th 2019
Green: Increase from previous day
Red: Decrease from previous day
Sectors
Daily Seasonal/Technical Sector Trends for May 24th 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
StockTwits released on Friday @EquityClock
Technical action by S&P 500 stocks to 10:00: Bullish. Intermediate breakouts: $AIV $HCP $TSS $AVB. No breakdowns
Editor's Note: After 10:00 AM EDT, intermediate breakouts included MHK and NI. No breakdowns.
U.S. REIT iShares $IYR moved above $88.23 to an all-time high extending an intermediate uptrend.
US Durable Goods down 12.2% (NSA) in April, slightly weaker than the average decline for the month of 11.7%. $MACRO #Economy #Manufacturing
Healthcare Leaders Income ETF $HHL.CA moved above $7.57 completing a base building pattern.
Saputo $SAP.CA, a TSX 60 stock moved below $44.64 completing a double top pattern.
Josef Schachter on Market Call on Friday
Market Overview
https://www.bnnbloomberg.ca/video/josef-schachter-s-market-outlook~1691079
Past Picks
https://www.bnnbloomberg.ca/video/josef-schachter-s-market-outlook~1691079
Top Picks
https://www.bnnbloomberg.ca/video/josef-schachter-s-top-picks~1691160
S&P 500 Momentum Barometers
Percent of S&P 500 stocks trading above their 50 day moving average dropped last week to 43.40 from 48.60. Percent remains intermediate neutral and trending down.
Bullish Percent Index for S&P 500 stocks dropped last week to 56.40 from 59.60. The Index remains intermediate neutral and trending down.
TSX Momentum Barometers
Percent of TSX stocks trading above their 50 day moving average dropped last week to 43.46 from 50.42. Percent remains intermediate neutral and trending down.
Bullish Percent Index for TSX stocks increased last week to 59.09 from 58.26. The Index remains intermediate neutral and trending down.
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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