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Tech Talk for Monday August 22nd 2016

 

Economic News This Week

July New Home Sales to be released at 10:00 AM EDT on Tuesday are expected to slip to 580,000 from 592,000 in June.

July Existing Home Sales to be released at 10:00 AM EDT on Wednesday are expected to slip to 5.54 million from 5.57 million units in June.

Weekly Jobless Claims to be released at 8:30 AM EDT on Thursday are expected to increase to 265,000 from 262,000 last week.

July Durable Goods Orders to be released at 8:30 AM EDT on Thursday are expected to increase 3.5% versus a decline of 4.0% in June. Excluding Transportation, July Orders are expected to increase 0.4% versus a decline of 0.5% in June.

Second estimate of second quarter real GDP is expected to slip to 1.1% from the first estimate at 1.2%.

August Michigan Sentiment to be released at 10:00 AM EDT on Friday is expected to increase to 90.6 from 90.4 in July.

 

Earnings News This Week

 

The Bottom Line

Technical, seasonal and fundamental factors point to start of an intermediate correction by equity markets and economic sensitive sectors this month and into September. Traders and seasonal investors should respond accordingly.

 

Observations

North American equity indices were virtually unchanged again last week. Intermediate upside momentum continued to dissipate. Short term momentum indicators remain overbought and trending down.

Volatility in equity markets remains low. Technical signs of an unusual event, that could trigger a spike in volatility, have yet to surface.

Economic news this week is relatively quiet. Focuses are on a speech by Federal Reserve Chairperson, Janet Yellen and the second estimate of second quarter real GDP scheduled to be released on Friday.

Earnings focus this week is on fiscal third quarter reports by Canada’s largest banks. Consensus estimates show an average year-over-year decline in earnings of 1.5% with Scotia, Royal and Toronto Dominion reporting gains near 1%. Analysts are guessing that Royal Bank and Scotia Bank will raise their dividend. On a seasonal basis, Canada’s banks have a history of entering into a period of strength starting from release of fiscal third quarter earnings near the end of August and ending at release of fiscal fourth quarter earnings near the end of November.

Technical action by individual S&P 500 equities was mixed last week: 34 stocks broke intermediate resistance and 29 stocks broke intermediate support. Sector with the greatest number of breakdowns was Consumer Discretionary. Sector with the greatest number of breakouts was energy. 329 stocks are in intermediate uptrends (down 6 from last week), 56 are in neutral trends (down 4) and 125 are in downtrends (Up 10).

Responses to second quarter earnings by TSX Composite and S&P 500 companies have been mixed: 95% of S&P 500 companies have reported to date. Blended earnings to date were down 3.2% on a year-over-year basis. 71% of reporting companies exceeded consensus earnings and 54% beat consensus revenues. In addition to second quarter reports, 72 S&P 500 companies issued negative third quarter guidance and 30 companies issued positive guidance.

U.S. equity markets have a history of moving lower from near the end of August until late October during U.S. Presidential Election years when a new President is elected following a two term President

 

Equity Indices and Related ETFs

Daily Seasonal/Technical Equity Trends for August 19th 2016

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 0.18 (0.01%) last week. Intermediate trend remains up. The Index remained above its 20 day moving average. Short term momentum indicators are trending down.

Percent of S&P 500 stocks trading above their 50 day moving average (also known as the S&P 500 Momentum Barometer) slipped last week to 68.60% from 71.00%. Percent remains intermediate overbought and trending down.

Percent of S&P 500 stocks trading above their 200 day moving average increased last week to 81.80% from 79.60%. Percent remains intermediate overbought.

Bullish Percent Index for S&P 500 stocks was unchanged lasts week at 76.00% and remained above its 20 day moving average. The Index remains intermediate overbought.

Bullish Percent Index for TSX Composite stocks slipped last week to 82.92% from 83.33% and remained above its 20 day moving average. The Index remains intermediate overbought.

The TSX Composite Index dropped 59.99 points (0.41%) last week. Intermediate trend remains up (Score: 2). Strength relative to the S&P 500 Index changed to Neutral from Positive (Score: 0). The Index remains above its 20 day moving average (Score: 1). Short term momentum indicators are trending down (Score: -1). Technical score dropped last week to 2 from 6.

Percent of TSX stocks trading above their 50 day moving average (also known as the TSX Momentum Barometer) dropped last week to 68.80 from 71.79. Percent remains intermediate overbought and trending down.

Percent of TSX stocks trading above their 200 day moving average was unchanged last week at 79.91%. Percent remains intermediate overbought and rolling over.

The Dow Jones Industrial Average slipped 23.90 points (0.13%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to Neutral from Negative. The Average remained above its 20 day moving average. Short term momentum indicators are trending down. Technical score remained last week at 2.

Bullish Percent Index for Dow Jones Industrial Average stocks remained last week at 83.33% 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 increased last week to 62.85% from 62.43% and remained above its 20 day moving average. The Index remains intermediate overbought.

The NASDAQ Composite Index added 5.48 points (0.10%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains positive. The Index remains above its 20 day moving average. Short term momentum indicators are trending down. Technical score remained last week at 4.

The Russell 2000 Index gained 6.95 points (0.57%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains positive. The Index remains above its 20 day moving average. Short term momentum indicators are trending down. Technical score remained last week at 4.

The Dow Jones Transportation Average gained 123.17 points (1.58%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index improved to Neutral from Negative. The Average moved above its 20 day moving average. Short term momentum indicators are trending up. Technical score improved last week to 2 from -4.

The Australia All Ordinaries Composite Index slipped 0.90 (0.02%) last week. Intermediate trend remains up. 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 remained last week at 2.

The Nikkei Average dropped 374.10 points (2.21%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains neutral. The Average dropped below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -4 from 0.

Europe iShares added $0.01 (0.30%) last week. Intermediate trend remains down. 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 2.

The Shanghai Composite Index added 57.43 points (1.88%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to positive from neutral. The Index remained above its 20 day moving average. Short term momentum indicators are trending up. Technical score improved last week to 6 from 2.

Emerging Markets iShares added $0.12 (0.32%) 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 down. Technical score slipped last week to 4 from 6.

 

Currencies

The U.S. Dollar Index dropped another 1.19 (1.24%) last week. Intermediate trend remains up. The Index remains below its 20 day moving average. Short term momentum indicators are trending down.

The Euro gained 1.60 (1.43%) last week. Intermediate trend remains neutral. The Euro remains above its 20 day moving average. Short term momentum indicators are trending up.

The Canadian Dollar gained US 0.58 cents (0.75%) last week. Intermediate trend remains down. The Canuck Buck remained above its 20 day moving average. Short term momentum indicators are trending up.

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The Japanese Yen gained 1.06 (1.07%) last week. Intermediate uptrend was confirmed on a move above 100.00. The Yen remains above its 20 day moving average. Short term momentum indicators are trending up.

The British Pound added 1.69 (1.31%) last week. Intermediate trend remains down. The Pound moved above its 20 day moving average on Friday. Short term momentum indicators are trending up.

 

Commodities

Daily Seasonal/Technical Commodities Trends for August 19th 2016

Green: Increase from previous day

Red: Decrease from previous day

 

The CRB Index added 6.10 points (3.34%) last week thanks to weakness in the U.S. Dollar Index. Intermediate trend remains down. Strength relative to the S&P 500 Index turned positive from negative. The Index remained above its 20 day moving average. Short term momentum indicators are trending up. Technical score improved last week to 2 from -2

Gasoline gained $0.14 per gallon (10.22%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index turned positive. Gas remained above its 20 day moving average. Short term momentum indicators are trending up. Technical score improved to 2 from -2.

Crude Oil gained $4.62 per barrel (10.38%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains positive. Crude remains above its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 6.

Natural Gas slipped $0.01 per MBtu (0.39%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains negative. “Natty” remains below its 20 day moving average. Short term momentum indicators are trending up. Technical score improved last week to -4 from -6.

The S&P Energy Index gained 9.99 points (1.97%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index improved to positive from neutral. The Index remains above its 20 day moving average. Short term momentum indicators are trending up. Technical score improved last week to 4 from 2.

The Philadelphia Oil Services Index gained 5.90 points (3.68%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index improved to positive from neutral. The Index moved above its 20 day moving average. Short term momentum indicators are trending up. Technical score improved last week to 2 from -2.

Gold gained $3.00 per ounce (2.23%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remained neutral. Gold dropped below its 20 day moving average on Friday. Short term momentum indicators are trending down. Technical score slipped last week to 0 from 2.

Silver dropped $0.38 per ounce (1.93%) last week. Intermediate trend changed on Friday to down from up on a move below $19.27. Strength relative to the S&P 500 Index turned negative from neutral. Silver remains below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -6 from 0. Strength relative to gold has turned negative.

The AMEX Gold Bug Index dropped 15.08 points (5.41%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to neutral from positive. The Index dropped below its 20 day moving average on Friday. Short term momentum indicators are trending down. Technical score dropped last week to 0 from 4. Strength relative to gold is positive, but showing signs of rolling over.

Platinum dropped $10.90 per ounce (0.97%) last week. Trend remains up. Relative strength changed to negative from neutral. PLAT remained below its 20 day MA. Momentum: down

Palladium gained $18.55 per ounce (2.69%) last week. Intermediate trend remains up. Relative strength remains neutral. PALL moved above its 20 day moving average. Short term momentum indicators are trending down.

Copper added 0.027 cents per lb. (1.26%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index remains negative. Copper remains below its 20 day moving average. Short term momentum indicators are trending up. Technical score improved last week to -2 from -4.

Lumber dropped 1.80 (0.56%) last week. Trend remains up. Relative strength remains neutral. Lumber remains below its 20 day MA. Momentum remains down. Score dropped to 0 from 2

The Grain ETN added $0.70 (2.44%) last week. Trend remains down. Relative strength changed to neutral from negative. Units moved above their 20 day moving average. Short term momentum indicators are trending up. Technical score improved last week to 0 from -4

The Agriculture ETF gained $0.59 (1.19%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index turned positive on Friday. Units remained above their 20 day moving average. Short term momentum indicators are trending up. Technical score improved to 4 from 0.

 

Interest Rates

Yield on 10 year Treasuries gained 6.3 basis points (4.16%) last week. Intermediate trend remains down. Yield moved above its 20 day moving average. Short term momentum indicators are trending up

Conversely, price of the long term Treasury ETF dropped $1.37 (0.98%) last week. Intermediate trend remains up. Units moved below their 20 day moving average.

 

Volatility

The VIX Index slipped 0.21 (1.82%) last week. Intermediate trend remains down. The Index remains below its 20 day moving average.

 

Daily Seasonal/Technical Sector Trends for August 19th 2016

 

Green: Increase from previous day

Red: Decrease from previous day

 

StockTwits Released on Friday @EquityClock

Pace of Natural Gas inventories this summer is well below average.

 

Editor’s Note: The period of seasonal strength in natural gas starts at the end of August. Hotter than average weather this year (typical after an El-Nino year) plus the start of hurricane season near the end of August suggests a close watch on natural gas prices and “gassy” stocks as the end of August approaches. The latter already is showing an improving technical profile.

Technical action by S&P 500 stocks to 10:30: Mixed. Breakouts: $FL, $TEL, $DD. Breakdowns: $MCD, $EL, $DPS

Editor’s Note: After 10:30 AM EDT, breakouts included: BF.B, HAL, DE, MSI and LYB. Breakdown included CMCSA

McDonalds $MCD broke support at $116.08 extending intermediate downtrend.

Dupont $DD moved above resistance at $69.49 extending intermediate uptrend.

 

Special Free Services available through www.equityclock.com

Equityclock.com is offering free access to a data base showing seasonal studies on individual stocks and sectors. The data base holds seasonality studies on over 1000 big and moderate cap securities and indices. To login, simply go to http://www.equityclock.com/charts/ Following is an example:

 

WALL STREET RAW RADIO WITH MARK LEIBOVIT

AND SPECIAL GUESTS CRAIG SMITH, HENRY WEINGARTEN AND SINCLAIR NOE – AUGUST 20, 2016

August 20:

http://tinyurl.com/jf8bvsr

 

Disclaimer: Seasonality and technical ratings offered in this report by www.timingthemarket.ca 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