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Tech Talk for Monday July 31st 2017

 

Mark Leibovit’s WALL STREET RAW RADIO – JULY 29, 2017:

GUESTS INCLUDE:  DON VIALOUX, JEFF BISHOP,  SINCLAIR NOE , HENRY WEINGARTEN, KYLE DENNIS AND JASON BOND:

http://tinyurl.com/y8uo5uff

The Bottom Line

More technical signs that North American equity markets have reached a seasonal peak! Despite better than consensus second quarter earnings and sales, traders were sellers on news. Exceptions existed when a blowout report was released (e.g. Boeing, Facebook). Look for more of the same this week as the U.S. report season begins to wind down and the Canadian report season peaks. Seasonal influences have a history of turning negative for a wide variety of equity indices and sectors at this time of year. The exception is the precious metal sector which continues to gain strength. Volatility remains unusually low for this time of year. When volatility appears during the next couple of months (as has happened in 20 of the past 20 periods from mid-June to mid-October), the expected correction will arrive. Holding a robust positon in cash continues to make sense.

Economic News This Week

July Chicago PMI to be released at 9:45 AM EDT on Monday is expected to drop to 62.0 from 65.7

June Personal Income to be released at 8:30 AM EDT on Tuesday is expected to increase 0.4% versus a gain of 0.4% in May. June Personal Spending is expected to increase 0.1% versus a 0.1% gain in May.

July ISM to be released at 10:00 AM EDT on Tuesday is expected to slip to 56.4 from 57.8 in June.

June Construction Spending to be released at 10:00 AM EDT at Tuesday is expected to increase 0.5% versus no change in May.

July ADP Private Employment to be released at 8:15 AM EDT on Wednesday is expected to increase to 175,000 from 158,000 in June.

Bank of England Monetary Policy Statement is expected to be released at 7:00 AM EDT on Thursday. No change in rate is anticipated

Weekly Jobless Claims to be released at 8:30 AM EDT on Thursday is expected to remain unchanged from last week at 244,000.

June Factory Orders to be released at 10:00 AM EDT on Thursday are expected to increase 2.6% versus a decline of 0.8% in May.

July ISM Services to be released at 10:00 AM EDT on Thursday is expected to slip to 56.9 from 57.4 in June.

June U.S. Trade Deficit to be released at 8:30 AM EDT on Friday is expected to slip to $45.6 billion from $46.5 billion in May.

Canadian July Employment to be released at 8:30 AM EDT on Friday is expected to record a gain of 18,000 versus an increase of 45,300 in June. July Unemployment Rate is expected to remain unchanged from June at 6.5%.

July Non-farm Payrolls to be released at 8:30 AM EDT on Friday are expected to drop to 180,000 from 222,000 in June. July Private Non-farm Payrolls are expected to slip to 175,000 from 187,000 in June. July Unemployment Rate is expected to slip to 4.3% from 4.4% in June. July Average Hourly Earnings are expected to increase 0.3% versus a gain of 0.2% in June.

June Canadian Merchandize Trade Deficit to be released at 8:30 AM EDT on Friday is expected to dip to $900 million from $1.1 billion in May.

 

Earnings Reports This Week

 

Observations

Technical action by individual S&P 500 stocks was bearish last week. Notable among stocks breaking resistance were Consumer Staples and Energy. Notable among stocks breaking support were Financials, Health Care and Industrials. Number of stocks breaking resistance totaled 60 while number of stocks breaking support totaled 75. Number of stocks trading in an uptrend dropped to 277 from 301, number of stocks trading in a neutral trend increased to 65 from 15 and number of stocks in a downtrend increased to 158 from 149. The Up/Down ratio dropped last week to (272/158=) 1.73 from 2.02.

The earnings and sales outlook for S&P 500 stocks remain promising: According to FactSet, 57% of companies have reported to date. 73% reported higher than consensus earnings and 73% reported higher than consensus revenues. Accordingly, consensus for blended second quarter earnings on a year-over-basis for all companies increased to 9.1% from 7.2%. Consensus for blended second quarter revenues increased to 5.2% rate from 5.0% . This week another 131 S&P 500 companies are scheduled to report (including 2 Dow Jones Industrial companies). Beyond the second quarter, consensus by FactSet shows a 6.1% increase in third quarter earnings (down from 6.4% last week) and a 4.8% increase in revenues (down from 5.0% last week. Consensus for fourth quarter shows an 11.7% increase in earnings and a 5.2% increase in revenues. For 2017, earnings are expected to increase 9.5% (up from 9.3%) and revenues are expected to increase 5.5% (up from 5.4%).

Responses to second quarter reports were less than encouraging again last week. High profile companies (e.g. United Technologies, Starbucks, Ford, MasterCard) reported higher than consensus second quarter profits, but traders took profits on news.

Second quarter earnings reports for TSX 60 companies have been and are expected to continue to be impressive. On a year-over-year basis, earnings per share on average (median) are expected to increase 11.3%. Canadian equity prices have yet to respond.

Short term technical indicators (momentum, above/below 20 day moving average in most cases reached overbought levels with many rolling over.

Medium term technical indicators (Percent of stocks trading above their 50 day moving average, Bullish Percent Index) mostly are overbought and trending down.

The S&P 500 Index, Dow Jones Transportation Average and TSX Composite Index on average during the past 20 periods have reached a seasonal peak on July 17th. Other than the Dow Jones Industrial Average, U.S. equity indices and the TSX Composite Index recorded small losses last week in line with the regular seasonal peak period. A correction lasting until mid-October is anticipated. Notable weaker for the second consecutive week was the Dow Jones Transportation Average, down 5.5% from its peak two weeks ago.

Note below changes in seasonality on a wide variety of equity indices, commodities and sectors. Most of the changes were downgrades.

Weakest months for equity markets are August and September. Current technical indicators for North American equity indices suggest that history is about to repeat.

The Dow Jones Industrial Average has a history of moving lower from late July to the end of October in the first year after a U.S. Presidential election.

Equity Indices and Related ETFs

Daily Seasonal/Technical Equity Trends for July 28th 2017

Green: Increase from previous day

Red: Decrease from previous day

 

Calculating Technical Scores

Technical scores are 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.

 

The S&P 500 Index slipped 0.44 (0.02%) last week. Intermediate trend remains up. The Index remains above its 20 day moving average. Short term momentum indicators have rolled over

Percent of S&P 500 stocks trading above their 50 day moving average (Also known as the S&P 500 Momentum Barometer) dropped last week to 66.20 from 71.80. Percent remains intermediate overbought and trending down.

Percent of S&P 500 stocks trading above their 200 day moving average increased last week to 76.80 from 75.40. Percent remains intermediate overbought.

Bullish Percent Index for S&P 500 stocks dropped last week to 72.60 from 74.60 and dropped below its 20 day moving average. The Index remains intermediate overbought and showing early signs of rolling over.

Bullish Percent Index for TSX stocks dropped last week to 60.24 from 61.45 and remained below its 20 day moving average. The Index remains intermediate overbought and trending down.

The TSX Composite Index lost 54.48 points (0.36%) last week. Intermediate trend remains down (Score: -2). Strength relative to the S&P 500 Index remains negative (Score: -2). The Index dropped returned to below its 20 day moving average on Friday (Score: -1. Momentum indicators rolled over from overbought levels (Score: -1). Technical score dropped last week to -6 from -4.

Percent of TSX stocks trading above their 50 day moving average (Also known as the TSX Momentum Barometer) increased last week to 50.21 from 40.00. Percent has recovered to a neutral level.

Percent of TSX stocks trading above their 200 day moving average increased last week to 52.72 from 48.33. Percent remains neutral.

The Dow Jones Industrial Average gained 250.24 points (1.16%) last week thanks mainly to strength in one stock, Boeing. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to positive from negative. The Average remained above its 20 day moving average. Short term momentum indicators turned back up. Technical score increased last week to 6 from 0.

Bullish Percent Index for Dow Jones Industrial stocks was unchanged last week at 80.00 and remained below its 20 day moving average. The Index remains intermediate overbought and showing signs of rolling over.

Bullish Percent Index for NASDAQ Composite stocks dropped last week to 63.01 from 63.91, but remained above its 20 day moving average. The Index remains intermediate overbought and showing early signs of rolling over.

The NASDAQ Composite Index dropped 13.07 points (0.20%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains positive. The Index remained above its 20 day moving average. Short term momentum indicators have rolled over. Technical score slipped last week to 4 from 6.

The Russell 2000 Index lost 6.58 points (0.46%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index has turned negative from neutral. The Index remains above its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to 0 from 4.

The Dow Jones Transportation Average dropped another 244.20 points last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains negative. The Average remains below its 20 day moving average. Short term momentum indicators are trending down. Technical score remained last week at -2.

The Australia All Ordinaries Composite Index dropped 16.00 points (0.28%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains negative. The Index returned to below its 20 day moving average on Friday. Short term momentum indicators are trending up. Technical score remained last week at -4.

The Nikkei Average dropped 139.91 points (0.70%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains negative. The Average dropped below its 20 day moving average. Short term momentum indicators have turned down. Technical score dropped last week to -2 from 2.

Europe iShares added $0.15 (0.33%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains neutral. Units remain above their 20 day moving average. Short term momentum indicators are trending down. Technical scored slipped last week to 2 from 4.

The Shanghai Composite Index added 15.26 points (0.47%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains neutral. The Index remains above its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 0.

Emerging Markets iShares added $0.12 (0.28%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains positive. Units remain above their 20 day moving average. Short term momentum indicators are trending up. Technical score remains at 6.

 

Currencies

The U.S. Dollar Index dropped another 0.57 (0.61%) last week. Intermediate trend remains down. The Index remains below its 20 day moving average. Short term momentum indicators are trending down.

The Euro gained 0.86 (0.74%) last week. Intermediate trend remains up. The Euro remains above its 20 day moving average. Short term momentum indicators are trending up.

The Canadian Dollar gained US0.68 cents (0.85%) last week. Intermediate trend remains up. The Dollar remains above its 20 day moving average. Short term momentum indicators are trending up.

The Japanese Yen added 0.40 (1.09%) last week. Intermediate trend remains down. The Yen remains above its 20 day moving average. Short term momentum indicators are trending up.

The British Pound added 1.40 (1.08%) last week. Intermediate trend remains up. The Pound remains above its 20 day moving average. Short term momentum indicators are trending up.

 

Commodities and Related ETFs

Daily Seasonal/Technical Commodities Trends for July 28th 2017

Green: Increase from previous day

Red: Decrease from previous day

* Excludes adjustment from rollover of futures contracts

 

The CRB Index gained 5.46 points (3.09%) last week thanks mainly to weakness in the U.S. Dollar Index. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to positive from neutral. The Index remains above its 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to 6 from 4.

Gasoline added $1.12 per gallon (0.73%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains positive. Gas remains above its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 2.

Crude Oil gained $2.94 per barrel (6.29%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to positive from neutral. Crude remains above its 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to 6 from 4.

Natural Gas slipped $0.02 (0.68%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index turned to negative from neutral. “Natty” remained below its 20 day moving average. Short term momentum indicators are trending down. Technical score remained last week at -2.

The S&P Energy Index added 8.99 points (1.88%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index remains neutral. The Index remains above its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 2.

The Philadelphia Oil Services Index added 0.03 (0.02%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index remains neutral. The Index remains above its 20 day moving average. Short term momentum indicators are trending down. Technical score slipped last week to 0 from 2.

Gold gained $13.50 per ounce (1.08%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index turned positive. Gold remained above its 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to 4 from 2.

Silver gained another $$0.23 per ounce (1.40%) last week. Intermediate trend remains down. Strength relative to the S&P 500 changed to positive from neutral. Silver remains above its 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to 2 from 0.

The AMEX Gold Bug Index gained 4.50 points (2.35%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index changed to positive from neutral. The Index remains above its 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to 2 from 0.

Platinum slipped $0.80 per ounce (0.09%) last week. Trend remains down. Relative strength remains neutral. PLAT remains above its 20 day MA. Momentum remains up.

Palladium gained $35.80 per ounce (4.24%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index turned positive from negative. PALL moved above its 20 day moving average. Short term momentum indicators turned positive. Score increased to 2

Copper added 1.52 cents per lb (5.58%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains positive. Copper remains above its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 6.

BMO Base Metal ETF gained another $0.42 (4.02%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains positive. Units remain above their 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 6.

Lumber dropped $9.00 (2.33%) last week. Trend remains up. Relative strength remains positive. Trades above its 20 day MA. Momentum turned down. Score dropped to 4 from 6.

The Grain ETN dropped $0.58 (1.99%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains negative. Units moved below their 20 day moving average. Short term momentum indicators are trending up. Technical score remained at 0.

The Agriculture ETF added $0.21 (0.37%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains positive. Units remain above their 20 day moving average. Short term momentum indicators are trending up. Technical score remains at 6.

 

Interest Rates

Yield on 10 year Treasuries added 5.7 basis points last week. Intermediate trend remains down. Short term momentum indicators are trending down. Units moved below their 20 day moving average.

Conversely, price of the long term Treasury Bond ETF dropped $1.80 (1.43%) last week. Intermediate trend remains up. Units dropped below their 20 day moving average.

 

Volatility

The VIX Index gained 0.93 (9.94%) last week. Intermediate trend remains down. The Index remains below its 20 day moving average.

 

Sectors

Daily Seasonal/Technical Sector Trends for July 28th 2017

Green: Increase from previous day

Red: Decrease from previous day

 

StockTwits Released on Friday @EquityClock

Outside reversal on chart of the NASDAQ Composite suggesting buying exhaustion.

See http://www.equityclock.com/2017/07/27/stock-market-outlook-for-july-28-2017/

Technical action by S&P 500 stocks to 10:00: Bearish. Breakouts: $MHK $CHK $AFL $AIV. Breakdowns: $GT $MAT $SBUX $LUK $FLS $XLNX $EMN $SCG.

Editor’s Note: After 10:00 AM EDT, breakouts included CVX, COTY, KORS, DE and EQIX. Breakdowns included KEY ABBV, PDCO, HOLX, PM, MO, VLO, PX and WDC

Peyto Expl $PEY.CA completed a double bottom pattern by moving above $23.42.

Editor’s Note: Another “gassy” stock, Bonavista Pete completed a similar pattern.

Gasoline ETN $UGA moved above $26.60 expanding its intermediate trading range.

Norbord $OSB.CA moved above $42.49 on earnings to an 8 year high extending its intermediate uptrend.

Aecon $ARE moved below $14.53 extending an intermediate uptrend.

U.S. Medical Devices iShares $IHI moved below $164.71 completing a double top pattern.

Chevron $CHV, a Dow Jones Industrial stock moved above $108.49 to a new higher trading range.

Altria Group $MO completed a double top pattern on a move below $69.23.

Energy SPDRs $XLE completed a double bottom pattern on a move above $66.48

Metro $MRU.CA moved below $41.91 extending an intermediate downtrend.

Canadian Utilities $CU.CA moved below $40.44 completing a Head & Shoulders pattern.

AltaGas $ALA.CA moved below $28.77 extending an intermediate downtrend.

 

Disclaimer: Seasonality and technical ratings offered in this report and 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