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Tech Talk for Monday November 13th 2017

 

WALL STREET RAW RADIO FOR SATURDAY, NOVEMBER 11, 2017

HOST, MARK LEIBOVIT

GUESTS: JENNIFER SANDERS, CNS EQUITY PARTNERS; HENRY WEINGARTEN, THE ASTROLOGERS FUND,;HARRY BOXER, THETECHTRADER.COM; SINCLAIR NOE, EATTHEBANKES.COM,; AND KYLE DENNIS, RAGINGBULL.COM.

DON VIALOUX WILL REJOIN US NEXT WEEK.

http://tinyurl.com/ybu6e4oe

 

The Bottom Line

Equity markets showed early technical signs of an intermediate peak last week. Short and medium term technical indicators for the S&P 500 Index, NASDAQ Composite Index, Dow Jones Industrial Average, European equity indices, Emerging Market indices and TSX Composite Index remain intermediate overbought and showed short term technical signs of moving lower. The Russell 2000 Index and the Dow Jones Transportation Average already are passed their peak. They reached their intermediate peaks six weeks ago and are down 2.6% and 5.7% respectively. Although seasonal influences for equity markets turned positive in mid-October and remain positive until the first week in January, particularly for economic sensitive sectors (e.g. Materials, Industrials, Financials and Technology), seasonal influences are being overwhelmed by technical influences. Preferred strategy is to take at least partial profits on strength in seasonally attractive sector and industry equities and Exchange Traded Funds with the understanding that their next intermediate uptrend likely will not resurface until next February.

Economic News This Week

October Producer Prices to be released at 8:30 AM EST on Tuesday are expected to increase 0.1% versus a gain of 0.4% in September. Excluding food and energy, October Producer Prices are expected to increase 0.2% versus a gain of 0.4% in September.

October Consumer Prices to be released at 8:30 AM EST on Wednesday are expected to increase 0.1% versus a gain of 0.5% in September. Excluding food and energy October Consumer Prices are expected to increase 0.2% versus a gain of 0.1% in September

October Retail Sales to be released at 8:30 AM EST on Wednesday are expected to be unchanged versus a gain of 1.6% in September. Excluding auto sales, October Retail Sales are expected to increase 0.3% versus a gain of 0.5% in in September

November Empire Manufacturing Survey to be released at 8:30 AM EST on Wednesday is expected to slip to 26.0 from 30.2 in October.

September Business Inventories to be released at 10:00 AM EST on Wednesday are expected to increase 0.1% versus a gain of 0.7% in August.

Weekly Jobless Claims to be released at 8:30 AM EST on Thursday are expected to slip to 235,000 from 239,000 last week.

November Philly Fed Index to be released at 8:30 AM EST on Thursday is expected to slip to 25.0 from 27.9 in October.

October Industrial Production to be released at 9:15 AM EST on Thursday is expected to increase 0.5% versus a gain of 0.3% in September. October Capacity Utilization is expected to increase to 76.3 from 76.0 in September.

October Housing Starts to be released at 8:30 AM EST on Friday are expected to increase to 1.186 million units from 1.127 million units in September.

 

Earnings News This Week

Today is a partial holiday in Canada (bank/ government employee holiday). Accordingly, volumes on Canadian equity markets are expected to be lower than average.

Technical action by individual S&P 500 stocks was bullish last week despite modest declines set by North American indices. Notable among sectors breaking resistance were Consumer Discretionary and Consumer Staple stocks Number of stocks breaking resistance totaled 60 while number of stocks breaking support totaled 25. Number of stocks trading in an uptrend increased to 300 from 295, number of stocks trading in a neutral trend increased to 66 from 65 and number of stocks in a downtrend decreased to 134 from 140. The Up/Down ratio was increased last week at (300/140=) 2.24.

Economic news this week is expected to focus on October PPI, CPI and Retail Sales. All are expected to record modest declines relative to September reports.

Medium term technical indicators (Percent of stocks trading above their 50 day moving average, Bullish Percent Index) remain at intermediate overbought levels and continue to trend down.

Short term technical indicators (short term momentum, above/below 20 day moving average) for equity indices began showing signs of rolling over.

Seasonality on a wide variety of equity indices, commodities and sectors began to turn neutral/positive in early October and continue to improve. During the past 20 years, the S&P 500 Index and TSX Composite Index normally bottomed on October 10th. Historically, the month of November has been the strongest month of the year of the S&P 500 Index and TSX Composite.

Earnings reports from U.S. companies continue to pour in this week. Another 17 S&P 500 companies are scheduled to release fiscal third quarter results including 3 Dow Industrial company.

The outlook for S&P earnings and revenues remains positive. 58 companies have issued negative fourth quarter guidance and 25 companies have issued positive guidance. 91% reported third quarter results by the end of last week. According to FactSet, third quarter earnings are expected to increase 6.1% (up from 5.9% last week) on a 5.9% increase in revenues (up from 5.8% last week). Fourth quarter earnings are expected to increase 10.0% (down from 10.4% last week) on a 6.4% increase in revenues (6.2% increase last week). For all of 2017, earnings are expected to increase 9.4% (down from 9.5%) on a 6.2% increase in revenues (down from 6.3%). First quarter 2018 earnings are expected to increase 10.5% (up from 10.4%) on a 6.2% increase in revenues). Second quarter 2018 earnings are expected to increase 10.1% (down from 10.2%) on a 6.2% increase in revenues (down from 6.3%).

Short term uncertainties remain, including North Korean “sabre rattling”, slow progress by Congress to pass crucial legislation (notably tax reform) and increased scrutiny by special council on Russia’s influence on the Presidential election.

Earnings and revenue prospects beyond the third quarter report season are exceptional for U.S. based companies with international exposure. Consensus for S&P 500 earnings on a year-over-year are expected to exceed 10% in the fourth quarter of 2017 and in the first and second quarters of 2018. Earnings will benefit significantly from weakness in the U.S. Dollar on a year-over-year basis when revenues and earnings from international operations will benefit from higher valued foreign currencies. The U.S. Dollar Index averaged 100 in the fourth quarter of 2016 and 101 in the first quarter of 2017.

A word of caution on U.S. equity markets in the short term! When the Relative Strength Index for the Dow Jones Industrial Average moves above 70%, the Average is considered overbought. On Friday October 20th, the Relative Strength Index closed at 88.10%, a level not seen during the past 20 years. On Friday, November 10th the Index had dropped to 61.93%. Historically, confirmation of a rollover of the Index from near its high level has been followed at best by a flat trend and, more frequently, by a downtrend lasting 3-6 months.

The TSX Composite Index is in a similar position. Its Relative Strength Index touched 80% two weeks ago, the highest level in over a decade. On Friday November 10th it had dropped to 66.10.This Index also is vulnerable to a flat to downward correction during the next 3-6 months when confirmation of a rolls over is received.

The time to buy both markets is when their Relative Strength Index is near or below the 30% level and are starting to turn up

 

Equity Indices and Related ETFs

Daily Seasonal/Technical Equity Trends for November 10th 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 5.54 points (0.21%) last week. Intermediate trend remains up. The Index remains above its 20 day moving average. Short term momentum indicators have turned down.

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 63.00 from 65.60. Percent remains intermediate overbought and trending down.

Percent of S&P 500 stocks trading above their 200 day moving average increased last week to 70.60 from 69.00. Percent remains intermediate overbought.

Bullish Percent Index for S&P 500 stocks slipped last week to 71.40 from 71.60 and remained below its 20 day moving average. The Index remains intermediate overbought and showing early signs of turning down.

Bullish Percent for TSX stocks dropped last week to 67.87 from 69.20 and dropped below its 20 day moving average. Percent remains intermediate overbought and showing early signs of rolling over.

TSX Composite Index added 19.10 points (0.12%) last week. Intermediate trend remains up (Score: 2). Strength relative to the S&P 500 Index remains neutral (Score: 0). The Index remains above its 20 day moving average (Score: 1). Short term momentum indicators have just turned down (Score: -1) Technical score slipped last week to 2 from 4.

Percent of TSX stocks trading above their 50 day moving average (also known as the TSX Momentum Indicator) dropped last week to 66.67 from 68.88. Percent remains intermediate overbought and trending down.

Percent of TSX stocks trading above their 200 day moving average increased last week to 64.17 from 63.49. Percent remains intermediate overbought and showing early signs of turning down.

Dow Jones Industrial Average dropped 116.98 points (0.50%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to neutral from positive. The Average remains above its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to 2 from 6.

Bullish Percent Index for Dow Jones Industrial stocks increased last week to 90.00 from 86.67 and remained above its 20 day moving average. The Index remains intermediate overbought.

Bullish Percent Index for NASDAQ stocks dropped last week to 60.39 from 62.35 and remained below its 20 day moving average. The Index remains intermediate overbought and trending down.

NASDAQ Composite Index slipped 13.50 points (0.20%) 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 have just turned down. Technical score slipped last week to 4 from 6.

Russell 2000 Index lost another 18.64 points (1.25%) last week. Intermediate trend changed to down from up on a move below 1,485. Strength relative to the S&P 500 Index remains negative. The Index remains below its 20 day moving average. Short term momentum indicators are trending down. Technical score changed last week to -6 from -2. The Index is down 2.6% from its early October high.

Dow Jones Transportation Average dropped another 253.64 points (2.60%) last week. The Average is down 5.7% from its October 13th high. 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 dropped last week to -6 from -2.

Australia All Ordinaries Composite Index gained 70.40 points (1.17%) 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 up. Technical score remained last week at 6.

The Nikkei Average gained 142.30 points (0.63%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains positive. The Average remains above its 20 day moving average. Short term momentum indicators have turned down. Technical score dropped last week to 4 from 6

Europe iShares dropped $0.66 (1.40%) last week. Intermediate trend changed to down on a move below $46.45. Units moved below their 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -6 from 2.

Shanghai Composite Index added 60.97 points (1.81%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index returned to positive. The Index moved back above its 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to 6 from 0.

Emerging markets iShares slipped $0.05 (0.11%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remained neutral. Units remain above their 20 day moving average. Short term momentum indicators have just turned down. Technical score slipped last week to 2 from 4.

 

Currencies

The U.S. Dollar Index slipped 0.58 (0.61%) last week. Intermediate trend remains up. The Index remains above its 20 day moving average. Short term momentum indicators have just turned down.

The Euro gained 0.55 (0.47%) last week. Intermediate trend remains down. The Euro remains below its 20 day moving average. Short term momentum indicators have just turned up.

The Canadian Dollar gained US 0.52 cents (0.66%) last week. Intermediate trend remains neutral. The Canuck Buck just moved above its 20 day moving average. Short term momentum indicators are trending up.

The Japanese Yen gained 0.43 (0.49%) last week. Intermediate trend remains down. The Yen remains below its 20 day moving average. Short term momentum indicators are trending up.

British Pound gained 1.11 (0.85%) last week. Intermediate trend remains up The Pound moved above its 20 day moving average. Short term momentum indicators are trending up.

 

Commodities and Related ETFs

Daily Seasonal/Technical Commodities Trends for November 10th 2017

Green: Increase from previous day

Red: Decrease from previous day

* Excludes adjustment from rollover of futures contracts

The CRB Index gained another 2.27 points (1.20%) 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 up. Technical score remained last week at 6.

Gasoline added 1.7 cents per gallon (0.95%) last week. Intermediate trend remain up. 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 6.

Crude Oil gained another $1.10 per barrel (1.98%) 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 gained $0.23 MBtu (7.72%) last week. Intermediate uptrend was confirmed on a move above $3.203. Strength relative to the S&P 500 Index changed to positive from neutral. “Natty” remained above its 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to 6 from 3.

S&P Energy Index added 5.53 points (1.09%) 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, but showing early signs of rolling over. Technical score increased last week to 6 from 4.

Philadelphia Oil Services Index gained 6.10 points (4.52%) last week. Intermediate trend remains neutral. 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 increased last week to 4 from 2.

Gold added $5.00 per oz. (0.39%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to neutral from negative. Gold dropped back below its 20 day moving average on Friday. Short term momentum indicators have turned up. Technical score increased last week to 2 from -2

Silver added $0.04 per ounce (0.24%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index remains neutral. Silver remains below its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 0.

AMEX Gold Bug Index added 1.01 points (0.54%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains negative. The Index remains below its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at -4.

Platinum gained $10.20 per ounce (1.03%) last week. Trend remains neutral. Relative strength remains neutral. PLAT moved above its 20 day MA. Momentum turned up. Score: 2

Palladium gained $1.60 per ounce (0.16%) last week. Trend remains up. Relative strength remains positive. PALL remains above its 20 day MA. Momentum: up. Score: 6

Copper slipped $0.04 per lb. (1.28%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to negative from neutral. Copper remained below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -2 from 0

BMO Base Metals ETF dropped $0.08 (0.67%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to negative from neutral. Units remained below their 20 day moving average. Short term momentum indicators have turned down. Technical score dropped last week to -2 from 2.

Lumber gained $20.00 (4.55%) last week. Trend remains up. Relative strength remains positive. Lumber remains above its 20 day MA. Momentum has turned up. Score increased to 6 from 4

Grain ETN dropped $0.10 (0.39%) last week. Trend: neutral. Relative strength remains neutral. Units remain below their 20 day MA. Momentum: up. Score increased to 0 from -2

Agriculture ETF dropped $0.67 (1.12%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to negative from neutral. Units dropped below their 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -2 from 2

 

Interest Rates

Yield on 10 year Treasuries increase 5.7 basis points (2.43%) last week with all of the gain recorded on Friday. Intermediate trend remains up. Short term momentum indicators have turned up. Yield moved above its 20 day moving average on Friday.

Price of the 20 year Treasury ETF dropped $1.54 (1.23%) last week. Intermediate trend remains up. Units dropped below their 20 day moving average on Friday. Short term momentum indicators have turned down.

 

Volatility

The VIX Index gained 2.30 (25.58%) last week. Intermediate trend remains down. The VIX moved above its 20 day moving average.

 

Sectors

Daily Seasonal/Technical Sector Trends for November 10th 2017

Green: Increase from previous day

Red: Decrease from previous day

StockTwits Released on Friday @EquityClock

Royal Bank $RY.CA, a TSX 60 stock moved below $100.04 completing a double top pattern.’

Another “Gassy” Stock! ARC Resources moved above $18.20 completing a base building pattern.

Cott Corp $BCB.CA moved above $20.15 extending an intermediate uptrend.

Cascades $CAS.CA moved above $13.76 extending an intermediate uptrend.

 

Accountability Report

Given our “Bottom Line” comments at the beginning of this report, now is the time to re-examine previously identified seasonal trades and to cull out chosen investment ideas that are showing technical signs of deterioration (underperformance relative to the S&P 500 Index and negative short term momentum indicators). When initially chosen, all securities were supported by a price chart and seasonality chart that subsequently were published in Tech Talk. Many of these securities originally were recommended on BNN. As indicated, most but not all, were profitable:

 

 

 

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