Tech Talk for Monday October 1st 2018

U.S. equity index futures were higher this morning. S&P 500 futures were up 15 points in pre-opening trade. Index futures are responding to a tentative new trade agreement between Canada and the U.S. reached last night that replaces the previous NAFTA agreement. In addition, President Trump signed off on a government spending bill that will avoid a potential shutdown of government services.

The Canadian Dollar gained 0.59 to 78.05 cents U.S. to a four month high on news of the trade agreement between Canada and the U.S.

Tesla added $47.08 to $311.85 after the company and Elon Musk agreed to a settlement with the SEC. The settlement includes a $40 million fine. In addition, Elon Musk must give up his position as chairman of the company, but retains his position as Chief Executive Officer.

General Electric added $1.70 to $12.99 after the company appointed Lawrence Culp as its new chairman. The company also announced a $23 million non-cash impairment charge to be made in 2018.

Chipotle dropped $6.19 to $448.33 after Oppenheimer downgraded the stock to Underperform from Perform.

EquityClock's Daily Market Comment

Following is a link:

http://www.equityclock.com/2018/09/28/stock-market-outlook-for-october-1-2018/

Note seasonality charts on the S&P 500 Index, Technology sector, Utilities sector, Canada GDP and the German DAX Index.

WALL STREET RAW RADIO

SATURDAY, SEPT 29, 2018

WITH YOUR HOST, MARK LEIBOVIT

GUESTS INCLUDE: DON VIALOUX, HENRY WEINGARTEN, HARRY BOXER AND SINCLAIR NOE

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Excerpts from Wall Street Raw by Don Vialoux

The month of October is a period of transition for North American equity markets. The Dow Jones Industrial Average, S&P 500 Index and the TSX Composite Index have a history of moving sharply lower in the first half of the month followed by an upward move from mid-October to the end of the year. This downward move in the first half of October is particularly notable during U.S. mid-term election years. Last week, both the S&P 500 index and TSX Composite Index showed early signs of following their historic pattern. All indices moved slightly lower

The Canadian Dollar popped nicely on Friday following news of higher than expected GDP growth in the month of July. However, the Canadian Dollar continues to respond mainly to news on NAFTA negotiations. Negotiations were at a stalemate last week, but likely will pick up again following the election in Quebec on Monday. Supply Management on dairy products is a hot issue in Quebec.

"Gassy" stocks on both sides of the border were strong again last week. In the U.S. Apache and Concho Resources recorded nice breakouts on the charts. Canadian "gassy" stocks were notably stronger in anticipation of news coming as early as next week that construction of an LNG processing facility will be approved. Canadian "gassy" companies in British Columbia will supply the gas for the facility. "Gassy" stocks such as Painted Pony, Birchcliff, Paramount Resources and Peyto gained more than 10%. Seasonal influences are positive to late December.

Gold and gold stocks moved lower last week. Favourable seasonal influences have passed their peak. Gold responded to higher interest rates and strength in the U.S. Dollar Index after the Federal Reserve increased its Fed Fund rate by another 0.25%. The Federal Reserve also signaled that another 0.25% increase in the Fed Fund rate in December is likely. Seasonal influences on gold and gold stocks turn negative in the month of October.

The Bottom Line

Seasonal influences for major U.S. equity indices have not followed their regular pattern this year. Seasonal influences normally turn Negative from the third week in July to mid-October. The S&P 500 and Dow Jones Industrial Average reached all-time highs. On the other hand, the NASDAQ Composite Index and Russell 2000 Index continued to struggle and continued to move lower from their August 31st highs.

Seasonal influences are particularly relevant during U.S. Mid-term election years. Volatility in equity markets normally 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. Recent election polls suggest that history is about to repeat.Anticipation of a possible change, regardless of the final result, is a major reason for a correction in North American equity markets into October

In contrast, Canadian equity markets continue to follow their seasonal pattern. They normally are negative from the third week in July to mid-October. This year, the TSX Composite

Index has moved lower from its seasonal peak reached on July 13th. Last week the Index recovered to the bottom of its Head & Shoulders pattern

.

The summer swoon in North American equity markets frequently is related to increased volatility into October. It has not happened yet this year. Last week, the VIX Index slipped lower to 11.68. Traders will continue to monitor closely

Economic News This Week

August Construction Spending to be released at 10:00 AM EDT is expected to increase 0.4% versus a gain of 0.1% in July.

September Manufacturing ISM to be released at 10:00 AM EDT is expected to slip to 60.3 from 61.3 in August.

September ADP Employment to be released at 8:15 AM EDT on Wednesday is expected to increase to 185,000 from 163,000 in August.

September Service ISM to be released at 10:00 AM EDT on Wednesday is expected to slip to 58.1 from 58.5 in August.

Initial Jobless Claims to be released at 8:30 AM EDT on Thursday are expected to slip to 210,000 from 214,000 last week

August Factory Orders to be released at 10:00 AM EDT on Thursday are expected to increase 0.9% versus a decline of 0.8% in July.

September Non-farm Payrolls to be released at 8:30 AM EDT on Friday are expected to slip to 185,000 from 201,000 in August. Private September Non-farm Payrolls are expected to slip to 185,000 from 204,000 in August. September Unemployment Rate is expected to slip to 3.8% from 3.9% in August. September Hourly Earnings are expected to increase 0.3% versus a gain of 0.4% in August.

August Trade Deficit to be released at 8:30 AM EDT on Friday is expected to increase to $53.1 billion from $50.1 billion in July.

Canadian September Employment to be released at 8:30 AM EDT is expected to increase 24,700 versus a drop of 51,600 in August. September Employment Rate is expected to remain at 6.0% set in August.

Earnings News This Week

Observations

Technical action by individual S&P 500 stocks was bearish last week. Number of stocks breaking intermediate resistance totaled 22 while number of stocks breaking support totaled 55 (including 14 Financials). The Up/Down ratio increased last week to (278/155=) 1.79 from 2.15.

U.S. economic focus this week is on the September Employment report on Friday.

Canadian economic focus this week also is on the September Employment report on Friday

Medium term technical indicators for U.S. equity markets (e.g. Percent of stocks trading above their 50 day moving average, Bullish Percent Index) remained intermediate overbought/neutral last week, moved lower and are trending down. See charts near the end of this report

Medium term technical indicators in Canada were virtually unchanged last week. They are intermediate neutral/oversold and continue to trend lower. 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) trended lower last week

Short term technical indicators for Canadian markets and sectors also trended lower last week.

Short term political concerns remain elevated. Issues include heightened tariff wars, stalled NAFTA negotiations, the Mueller investigation, the Kavanaugh investigation, the Rosenstein controversy and ramp up of U.S. mid-term election political rhetoric.

Longer term outlook for S&P 500 company earnings remains positive, but less positive than previous. According to FactSet, earnings gains during the next four quarters will be strong on a year-over-year basis, but at a slightly lower rate than previous. Consensus calls for a 19.3% increase in earnings (down from 20.4% last week) and a 6.9% increase in sales in the third quarter (down from 7.6%). Consensus calls for a 17.2% increase in earnings (down from 17.3%) and 5.7% increase in sales in the fourth quarter (down from 6.1%). Consensus calls for a 20.3% increase in earnings (down from 20.4%) and a 7.6% increase in sales for 2018 (down from 8.1%). Consensus calls for a 7.1% increase in earnings and 6.3% is sales in the first quarter 2019. Consensus calls for a 7.4% increase in earnings and 4.6% in sales in the second quarter 2019. Consensus for 2019 calls for a 10.3% increase in earnings and a 5.3% increase in sales.

Trader's Corner

Daily Seasonal/Technical Equity Trends for September 28th 2018

Green: Increase from previous day

Red: Decrease from previous day

Commodities

Daily Seasonal/Technical Commodities Trends for September 28th 2018

Green: Increase from previous day

Red: Decrease from previous day

Sectors

Daily Seasonal/Technical Sector Trends for September 28th 2018

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

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StockTwits Released on Friday @EquityClock

Base Metals ETN $DBB moved above $16.66 completing a double bottom pattern.

Blackberry $BB.CA, a TSX 60 stock moved above $14.30 completing a bottoming pattern.

Technical action by S&P 500 stocks to 10:00: Bearish. Breakouts: $TSCO $ALXN $TTWO. Breakdowns: $BWA $OMC $IPG $DFS $GS $RSG $TEL $IP.

Editor's Note: After 10:00 AM EDT, breakouts included DO, MUR and CBS. Breakdowns included GIS, MHK, SPGI, MCO, JPM, FBHS, DSDP, MTB, BK, SCHW and FBHS

Peyto $PEY.CA, a "gassy" stock moved above $11.21 completing a base building pattern.

Crew Energy $CR.CA, another Canadian "gassy" stock moved above $1.83 completing a base building pattern.

Kinross Gold $K.CA, a TSX 60 stock moved below $3.51 extending an intermediate downtrend.

JP Morgan $JPM, a Dow Jones Industrial stock moved below $112.67 completing a double top pattern.

Canada Industrial Product Prices down 0.5% in August, diverging from the 0.2% increase that is average for the month. $MACRO #CDNecon #CAD

Canada Monthly GDP down 4.8% (NSA) in July, better than the 6.2% decline that is average for the month. $MACRO #CDNecon #CAD

S&P 500 Momentum Barometers

Percent of S&P 500 stocks trading above their 50 day moving average dropped last week to 58.00 from 73.20. Percent has changed to intermediate neutral from intermediate overbought and is trending down.

Bullish Percent Index for TSX stocks slipped last week to 67.60 from 68.40. The Index remains intermediate overbought.

TSX Momentum Barometers

Percent of TSX stocks trading above their 50 day moving average slipped last week to 39.33 from 40.17. Percent changed to intermediate oversold from intermediate neutral and continues to trend down.

Bullish Percent Index for TSX stocks was unchanged last week at 55.10. It 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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