Tech Talk for Monday September 10th 2018
U.S. equity index futures were higher this morning. S&P 500 futures were up 11 points in pre-opening trade.
Cenovus (CVE $8.88 U.S. $11.71 Cdn) is expected to open higher after JP Morgan upgraded the stock to Overweight from Neutral.
Cummins slipped $0.03 to $141.00 after lowered target price to $156 from $172
Constellation Brands (STI $) is expected to open lower after SunTrust downgraded the stock to Hold from Buy. Target price was cut to $220 from $260.
Costco (COST $241.46) is expected to open higher after Raymond James raised its target price to $252 from $225.
EquityClock's Daily Market Comment
Following is a link:
http://www.equityclock.com/2018/09/07/stock-market-outlook-for-september-10-2018/
See seasonality charts on U.S. Non-farm Payrolls, Hourly Earnings and Canadian Employment
WALL STREET RAW RADIO
WITH MARK LEIBOVIT – SEPTEMBER 8, 2018.
GUESTS INCLUDE: DON VIALOUX, SINCLAIR NOE AND RAY MERRIMAN
Greg Schnell's video on Natural Gas
Greg notes that seasonality is about to turn positive and technicals are in the set-up stage. See:
Excerpts from Wall Street Raw by Don Vialoux
'Tis the season for weakness in U.S. equity markets! Historically, the month of September has been the weakest month for U.S. equity indices. Last week, the S&P 500 Index dropped more than 1% and the NASDAQ Composite Index dropped more than 2.5%. Weakness can be attributed primarily to growing political noise out of Washington prior to the mid-term election and growing concerns about a trade war.
Weakness in U.S. equities last week was notable in the technology sector. Technology SPDRs were down over 2% despite all-time highs reached by Apple and Amazon. Apple is moving higher in anticipation of new Apple products expected to be announced next Wednesday. The other FAANG stocks had a rough week: Google dropped over 4%. Netflix fell more than 5%. Facebook plunged more than 6%. Also, Twitter plunged more than 11%. Investors are concerned that the social media stocks will come under greater regulatory control.
Also, 'Tis the season" for weakness in Canadian equity markets! Last week, the TSX Composite Index dropped by more than 1.0%. The Index completed a classic Head & Shoulders pattern on a move below 16,075. Weakness by Canadian equities is attributed partially to a lack of a NAFTA agreement following negotiations last week.
Gold prices were virtually unchanged last week. 'Tis the season" for gold prices to move higher until the first week in October.
The Bottom Line
Seasonal influences for major U.S. equity indices finally have begun to following their regular pattern. Seasonal influences normally turn Negative from the third week in July to mid-October.
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, but only began to surface last week. 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. 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 completed a Head & Shoulders pattern on a move below 16,075.
The summer swoon in North American equity markets frequently is related to increased volatility into October. Last week, the VIX Index rose over 16%. Traders will monitor closely
Economic News This Week
August Canadian Housing Starts to be released at 8:15 AM EDT on Tuesday are expected to increase to 210,000 units from 206,300 units in July.
August Producer Prices to be released at 8:30 AM EDT on Wednesday are expected to increase 0.2% versus no change in July. Excluding food and energy, August Producer Prices are expected to increase 0.2% versus a gain of 0.1% in July.
The Beige Book is released at 2:00 PM EDT on Wednesday
August Consumer Prices to be released at 8:30 AM EDT on Thursday are expected to increase 0.2% versus a gain of 0.2% in July. Excluding food and energy, August Consumer Prices are expected to increase 0.2%.
Weekly Jobless Claims to be released at 8:30 AM EDT on Thursday are expected to increase to 210,000 from 203,000 last week.
Bank of England and European Central Bank announce their monetary policy at 7:45 AM EDT on Thursday. Overnight lending rates are expected to remain unchanged
August Retail Sales to be released at 8:30 AM EDT on Friday are expected to increase 0.5% versus a gain of 0.5% in July. Excluding auto sales, August Retail Sales are expected to increase 0.5% versus a gain of 0.6% in July.
August Capacity Utilization to be released at 9:15 AM EDT on Friday is expected to increase to 78.3 from 78.1 in July. August Industrial Production to be released at 9:15 AM EDT on Friday is expected to increase 0.3% versus a gain of 0.1% in July.
September Michigan Consumer Sentiment Index to be released at 10:00 AM EDT on Friday.
Earnings News This Week
Thursday: Adobe, Oracle, Kroger
Observations
Technical action by individual S&P 500 stocks was bearish last week. Number of stocks breaking intermediate resistance totaled 20 while number of stocks breaking support totaled 51. Notable on the list of breakouts were utility stocks. Notable on the list of breakdowns were energy and technology stocks. The Up/Down ratio dropped last week to (283/163=) 1.74 from 1.92.
U.S. economic focus this week is on inflation (PPI and CPI) and retail sales
Medium term technical indicators for U.S. equity markets (e.g. Percent of stocks trading above their 50 day moving average, Bullish Percent Index) remain intermediate overbought, and moved lower last week
Medium term technical indicators in Canada also moved lower last week. They are intermediate neutral/oversold and continue to trend lower.
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 and the 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 quarter will be strong on a year-over-year basis, but at a slightly lower rate than previous. Consensus calls for a 21.1% increase in earnings and a 7.5% increase in sales in the third quarter. Consensus calls for a 17.4% increase in earnings and 5.9% sales in the fourth quarter. Consensus calls for a 7.2% increase in earnings and 6.2% is sales in the first quarter 2019. Consensus calls for a 7.5% increase in earnings and 4.4% in sales in the second quarter 2019. Consensus for 2019 calls for a 10.3% in earnings and a 5.2% increase in sales.
Trader's Corner
Equities and Related ETFs
Daily Seasonal/Technical Equity Trends for September 7th 2018
Green: Increase from previous day
Red: Decrease from previous day
Commodities
Daily Seasonal/Technical Commodities Trends for September 7th 2018
Green: Increase from previous day
Red: Decrease from previous day
Sectors
Daily Seasonal/Technical Sector Trends for September 7th 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
StockTwits Released on Friday @EquityClock
Tech action by S&P 500 stocks to 10:30: Bearish. Breakouts: $SBUX $LMT $AVGO. Breakdowns: $PHM $TAP $BHGE $DO $DVN $EOG $PSX $AMG $GILD $VAR $FCX
Editor's Note: After 10:30 AM EDT, breakouts included MMM and JEC. Breakdowns included EXR and HRS.
Starbucks $SBUX, a Dow Jones Industrial stock moved above $54.44 extending an intermediate uptrend.
United Kingdom $EWU moved below $32.89 extending an intermediate downtrend.
Suncor $SU.CA, a TSX 60 stock moved below $51.15 completing a Head & Shoulders pattern.
Encana $ECA $ECA.CA, a TSX 60 stock moved below $16.24 Cdn extending an intermediate downtrend.
Teck Resources $TECK $TECK.B.CA moved below $21.63 U.S. and $28.49 extending an intermediate downtrend.
Base Metals ETFs $COPX $PICK moved below intermediate support extending an intermediate downtrend.
Enbridge $ENB.CA, a TSX 60 stock moved below $44.37 completing a double top pattern.
Manulife Financial $MFC.CA, a TSX 60 stock moved below $23.11 extending an intermediate downtrend.
MMM $MMM, a Dow Jones Industrial stock moved above $211.36 extending an intermediate uptrend.
Canada Employment down 0.5% (NSA) in August, weaker than the 0.1% average decline for the summer month. $MACRO #CDNecon #CAD
US Non-farm payrolls up 0.2% in August, in line with average change for the month. $MACRO #Economy #Employment
Investors' Digest comment on the "gassy" sector
Don Vialoux hosted a comment in the latest edition of Investors Digest released electronically on Friday. Top Pick was the "gassy" sector and related stocks/ ETFs in Canada and the U.S. The comment is available to Investors Digest subscribers.
Josef Shachter on BNN Market Call on Friday
Following are links:
Top picks
https://www.bnnbloomberg.ca/video/josef-schachter-s-top-picks~1483256
Past picks:
https://www.bnnbloomberg.ca/video/josef-schachter-s-past-picks~1483207
Market Outlook
https://www.bnnbloomberg.ca/video/josef-schachter-s-market-outlook~1483189
Josef has a bullish stance on natural gas and "gassy" stocks.
S&P 500 Momentum Barometers (Medium term indicators)
Percent of S&P 500 stocks trading above their 50 day moving average dropped last week to 65.60 from 70.20. Percent remains intermediate overbought and has rolled over.
Bullish Percent Index for S&P 500 stocks dropped last week to 66.40 from 67.80. The Index remains intermediate overbought and showing early signs of rolling over.
TSX Momentum Barometers
Percent of TSX stocks trading above their 50 day moving average dropped last week to 36.55 from 47.70. Percent changed to intermediate oversold from intermediate neutral on a move below 40 and trending lower.
Bullish Percent Index dropped last week to 55.92 from 59.76. The Index remains intermediate neutral and 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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