Tech Talk for Monday October 7th 2019

U.S. equity index futures were lower this morning. S&P 500 futures were down 6 points in pre-opening trade.

Uber gained $0.97 to $30.64 after Citigroup upgraded the stock to Buy from Neutral. Target was set at $45.

Carnival slipped $0.28 to $40.86 after HSBC downgraded the stock to Hold from Buy.

Wendy's dropped $0.26 to $20.43 after Cowen downgraded the stock to Market Perform from Outperform

General Motors slipped $0.11 to $34.80 after labour negotiations with the United Auto Workers Union suffered a setback.

EquityClock's Daily Market Comment

Following is a link:

http://www.equityclock.com/2019/10/04/stock-market-outlook-for-october-7-2019/

Note seasonality chart on Non-farm Payrolls.

The Bottom Line

World equity markets moved lower again last week with elevated volatility, but showed short term momentum signs of a seasonal bottom. Equity markets have a history of elevated volatility at this time of year with a flat/downward bias from mid-July to mid-October. The weakest period for North American equity markets is from mid-September to mid-October while other developed equity markets in the world tend usually reach a seasonal low in the first half of October. Note the strength in Emerging Markets last week. Supplemental concerns this year include an earnings recession by major U.S. companies until the fourth quarter this year (particularly companies with extensive international operations), growing efforts by the Democrats to impeach Donald Trump, growing Middle East tensions and unsettled trade negotiations between the U.S. and China. Focus this week is on trade negotiations between the U.S. and China.

Observations

Seasonal influences this year are following their historic pattern. Seasonal influences on U.S. and Canadian equity markets tend to turn negative from the second half of September to the second half of October. Thereafter, they tend to bottom and move higher. Seasonal influences for equity markets in other developed nations tend to bottom in the first half of October and move higher thereafter.

Medium term technical indicators for U.S. equity markets (e.g. Percent of stocks trading above their 50 day moving average, Bullish Percent Index) moved lower last week, but showed signs of an intermediate low.

Medium term technical indicators for Canadian equity markets were mixed last week.

Most short term technical indicators for U.S. markets and sectors (20 day moving averages, short term momentum indicators) bottomed on Thursday and recovered strongly on Friday.

Short term technical indicators for Canadian markets and sectors were mixed last week

Third quarter corporate reports continue to trickle in this week: Three S&P 500 companies are scheduled to report.

'Tis the season' between now and the first week in October when major companies "confess" if they were unable to achieve previous guidelines.

Analysts continue to reduce earnings and revenue estimates slightly for S&P 500 companies. According to FactSet, third quarter earnings on a year-over-year basis are expected to drop by 3.7% (down from a drop of 3.7% last week) and revenues are expected to increase 2.8%. Fourth quarter earnings are expected to increase 2.6% (down from 2.9% last week) and fourth quarter revenues are expected to increase 3.6%. For all of 2019, earnings are expected to increase 1.2% (down from 1.3% last week) and revenues are expected to increase 4.1%. First quarter 2020 earnings are expected to increase 7.6% (down from 7.8%) and revenues are expected to increase 5.5 %. Second quarter 2020 earnings are expected to increase 8.7% (down from 9.0%) and revenues are expected to increase 6.3%. Earnings for all of 2020 are expected to increase 10.5% (down 10.6from and revenues are expected to increase 5.7%.

Economic News This Week

September Canadian Housing Starts to be released at 8:15 AM EDT on Tuesday are expected to slip to 219,000 units from 226,600 units in August.

September Producer Price Index to be released at 8:30 AM EDT on Tuesday is expected to increase 0.1% versus a gain of 0.1% in August. Excluding food and energy, September Producer Price Index is expected to increase 0.2% versus a gain of 0.3% in August.

FOMC Meeting Minutes are released at 2:00 PM EDT on Wednesday.

Trade negotiations between China and the U.S. resume in Washington on Thursday.

September Consumer Price Index to be released at 8:30 AM EDT on Thursday is expected to increase 0.1% versus a gain 0f 0.1% in August. Excluding food and energy, September CPI is expected increase 0.2% versus a gain of 0.3% in August.

Weekly Initial Jobless Claims to be released at 8:30 AM EDT on Thursday are expected to remain unchanged from last week at 219.000.

Canadian September Employment to be released at 8:30 AM EDT on Friday is expected to increase 7,500 versus a gain of 81,100 in August. September Unemployment Rate is expected to remain unchanged from August at 5.7%.

October Michigan Consumer Sentiment Index to be released at 10:00 AM EDT on Friday is expected to slip to 92.0 from 93.2 in September.

October 14th is a statutory holiday in Canada and a partial holiday in the U.S. (U.S. equity markets are open).

Earnings Reports This Week

Trader's Corner

Editor's Note: Data was updated from September 27th

Equity Indices and related ETFs

Daily Seasonal/Technical Equity Trends for October 4th 2019

Green: Increase from previous day

Red: Decrease from previous day

Commodities

Daily Seasonal/Technical Commodities Trends for October 4th 2019

Green: Increase from previous day

Red: Decrease from previous day

Sectors

Daily Seasonal/Technical Sector Trends for October 4th 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

S&P 500 Momentum Barometers

Percent of S&P 500 stocks trading above their 50 day moving average plunged last week from 63.73 to 34.37on Wednesday following by a recovery on Friday to 53.71.

Bullish Percent Index for S&P 500 stocks dropped last week from 64.80 to 53.60.

TSX Momentum Barometers

Percent of TSX stocks trading above their 50 day moving average dropped last week from 58.01 to as low as 44.89 on Thursday before recovering on Friday to 49.78

Bullish Percent Index for TSX stocks increased last week to 62.66 from 62.34. The Index remains intermediate overbought.

Jon Vialoux on BNNBloomberg's Market Call Tonight

Produced on Thursday. Following are links:

Market Outlook

https://www.bnnbloomberg.ca/market-call-tonight/jon-vialoux-s-market-outlook~1796455

Past Picks

https://www.bnnbloomberg.ca/market-call-tonight/jon-vialoux-s-past-picks~1796501

Top Picks

https://www.bnnbloomberg.ca/market-call-tonight/jon-vialoux-s-top-picks~1796529

Keith Richard's Blog

Keith says, "Things look to be setting up for a potential buying point". Following is a link:

https://www.valuetrend.ca/bear-o-meter-suggests-current-selloff-is-reducing-market-risk/

Greg Schnell's Weekly Comment from www.stockcharts.com. Greg extends his cautious stance on equity markets. Following is the link:

https://www.youtube.com/watch?v=lyuPdYz60lI&feature=youtu.be

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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