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Tech Talk for Tuesday January 2nd 2018

 

WALL STREET RAW RADIO – DECEMBER 30, 2017:

HOSTED BY MARK LEIBOVIT

GUESTS INCLUDE: DON VIALOUX (EQUITYCLOCK.COM), HARRY BOXER (THETECHTRADER.COM, HENRY WEINGARTEN (AFUND.COM), AND SINCLAIR NOE (EARTHEBANKERS.COM).

https://tinyurl.com/ybfw427x

 

The Bottom Line

Once again, several broadly based U.S. equity indices as well as the TSX Composite Index reached all-time highs last week during their Santa Claus rally period from mid-December to the first week in January. Seasonal influences for most world equity markets turned positive in mid-October and remain positive until the end of the first week in January. Traditional seasonal sensitive sectors (e.g. Consumer Discretionary, Industrials and Financials) continue to lead the market higher. However, medium term technical indicators for the S&P 500 Index, NASDAQ Composite Index, Dow Jones Industrial Average as well as TSX Composite Index remain overbought and short term technical indicators showed early signs of rolling over last week. Preferred strategy is to take at least partial profits on strength in seasonally attractive equities and Exchange Traded Funds near the end of the current “Santa Claus rally” with the understanding that their next significant intermediate upside move likely will not resurface until next February.

Tax loss selling pressures in the underperforming energy, oil service and precious metal sectors peaked on schedule at the end of the second week in December. These sectors have recovered strongly since then as they entered into a period of seasonal strength. Look for continuing outperformance by these sectors into at least February.

 

Economic News This Week

December Manufacturing ISM to be released at 10:00 AM EST on Wednesday is expected to slip to 58.0 from 58.2 in November.

November Construction Spending to be released at 10:00 AM EST on Wednesday is expected to increase 0.6% versus a gain of 1.4% in October.

FOMC Meeting Minutes from the December 13th meeting are released at 2:00 PM EST on Wednesday.

December ADP Employment Report to be released at 8:15 AM EST on Thursday is expected to decline to 185,000 from 190,000 in November.

Weekly Jobless Claims to be released at 8:30 AM EST on Thursday are expected to decline to 240,000 from 245,000 last week.

December Non-farm Payrolls to be released at 8:30 AM EST on Friday are expected to drop to 190,000 from 228,000 in November. December Private Non-farm Payrolls are expected to drop to 183,000 from 221,000 in November. December Unemployment Rate is expected to remain unchanged from November at 4.1%. December Hourly Earnings are expected to increase 0.3% versus a gain of 0.2% in November.

November U.S. Trade Deficit to be released at 8:30 AM EST on Friday is expected to slip to $48.3 billion from $48.7 billion in October.

Canadian December Employment report released at 8:30 AM EST on Friday is expected to record a gain of 15,000 versus an increase of 79,500 in November. December Unemployment Rate is expected to increase to 6.0% from 5.9% in November.

Canadian November Merchandise Trade Deficit to be released at 8:30 AM EST on Friday is expected to slip to $1.4 billion from $1.5 billion in October.

December Services ISM to be released at 10:00 AM EST on Friday is expected to increase to 57.6 from 57.4 in November.

 

Earnings Reports This Week

Thursday: Walgreen, Monsanto, Bombardier

Friday: Constellation Brands

Observations

Technical action by individual S&P 500 stocks was quietly bullish, typical during the middle week during the Santa Claus rally period from mid-December to the first week in January. Number of stocks breaking resistance totaled 7 while number of stocks breaking support totaled 3. Number of stocks trading in an uptrend increased to 315 from 314, number of stocks trading in a neutral trend increased to 54 from 52 and number of stocks in a downtrend decreased to 131 from 134. The Up/Down ratio increased last week to (315/131=) 2.40 from 2.34.

Economic and earning news this week is quiet. Economic focus is on the December Employment report to be released on Friday.

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

Short term technical indicators for equity markets and most sectors (short term momentum, above/below 20 day moving average) generally are overbought and showing early signs of rolling over. Exceptions are industrial commodity futures and related ETFs/equities.

Seasonal influences on a wide variety of equity indices and sectors began to turn neutral/positive in early October and tend to reach a short term peak at the end of the first week in January. During the past 20 years, the S&P 500 Index and TSX Composite Index bottomed on average on October 10th. Historically, December has been one of the strongest months and the “Santa Claus rally” from December 15th to January 6th is the strongest three week period in the year for U.S. and Canadian equity indices. The TSX significantly outperforms the S&P 500 and Dow Jones Industrial Average during this period.

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The outlook for S&P earnings and sales remains positive (unchanged from last week). Fourth quarter earnings are expected to increase 10.9% on a year-over-year basis on a 6.7% increase in sales. First quarter 2018 earnings are expected to increase 11.2% on a 6.8% increase in sales. Second quarter 2018 earnings are expected to increase 10.9% on a 6.8% increase in revenues. Third quarter earnings are expected to increase 12.4% on a 5.8% increase in revenues. Fourth quarter 2018 earnings are expected to increase 11.7% on a 4.4% increase in revenues. For all of 2018, earnings are expected to increase 11.8% on a 5.6% increase in sales.

Short term political uncertainties remain, including North Korean “sabre rattling”, struggling NAFTA negotiations 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 throughout 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. Weakness last week likely will encourage analysts to raise their 2018 earnings estimates.

 

Equity Indices and Related ETFs

Daily Seasonal/Technical Equity Trends for December 29th 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 dropped 9.73 points (0.36%) with the entire drop happening in the last half hour of trading on Friday. Intermediate trend remains up. 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) was unchanged last week at 72.80. Percent remains intermediate overbought and showing early signs of rolling over.

Percent of S&P 500 trading above their 200 day moving average increased last week to 78.60 from 78.00. Percent remains intermediate overbought.

Bullish Percent Index for S&P 500 stocks increased last week to 78.20 from 78.00 and remained above its 20 day moving average. The Index remains intermediate overbought.

Bullish Percent Index for TSX stocks slipped las week to 65.86 from 66.67 last week and moved below its 20 day moving average. The Index remains intermediate overbought and trending down.

TSX Composite Index added 43.86 points (0.27%) last week. Intermediate trend remains up (Score: 2). Strength relative to the S&P 500 Index changed to Neutral from Negative (Score: 0). The Index remains above its 20 day moving average (Score: 1). Short term momentum indicators are trending up (Score: 1). Technical score increased last week to 4 from 2.

Percent of TSX stocks trading above their 50 day moving average increased last week to 61.57 from 59.09. Percent remains intermediate overbought.

Percent of TSX stocks trading above their 200 day moving average increased last week to 67.36 from 61.98. Percent remains intermediate overbought.

Dow Jones Industrial Average dropped 34.84 points (0.14%) last week. Intermediate trend remains up. 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 remained last week at 4.

Bullish Percent Index for Dow Jones Industrial stocks was unchanged last week at 93.33% and remained above its 20 day moving average. The Index remains intermediate overbought.

Bullish Percent Index for NASDAQ Composite Index increase last week to 63.95 from 63.34 and remained above its 20 day moving average. The Index remains intermediate overbought.

NASDAQ Composite Index dropped 56.57 points (0.81%) 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.

Russell 2000 Index dropped 7.42 points (0.48%) last week. Intermediate trend remains up.

Strength relative to the S&P 500 Index remains negative. The Index remains above its 20 day moving average. Short term momentum indicators turned down on Friday. Technical score dropped last week to 0 from 2.

Dow Jones Transportation Average dropped 62.68 points (0.59%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains positive. The Average remained above its 20 day moving average. Short term momentum indicators began to roll over on Friday. Technical score dropped last week to 4 from 6.

The Australia All Ordinaries Composite Index dropped 10.70 points (0.24%) 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 up. Technical score remained last week at 4.

The Nikkei Average dropped 137.82 points (0.60%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed last week to neutral from negative. The Average remained above its 20 day moving average. Short term momentum indicators have turned down. Technical score remained last week at 2.

Europe iShares added $0.15 90.32%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed last week to neutral from negative. Units remain above their 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to 4 from 2.

Shanghai Composite Index added 10.11 points (0.31%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index changed to neutral from negative. 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.

Emerging Markets iShares gained $0.62 (1.33%) last week. Intermediate trend changed to up from down on a move above $47.22 on Friday. 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 increased last week to 6 from 2.

 

Currencies

The U.S. Dollar Index plunged 1.09 (1.17%) last week. Intermediate trend changed to down on a move below 92.43. The Index remains below its 20 day moving average. Short term momentum indicators are trending down.

The Euro gained 1.41 (1.19%) last week. Intermediate uptrend resumed on a move above 119.61. The Euro remains above its 20 day moving average. Short term momentum indicators are trending up.

The Canadian Dollar gained US0.96 cents (1.22%) last week. Intermediate trend returned to neutral from negative on a move above 79.22. The Canuck Buck moved above its 20 day moving average. Short term momentum indicators are trending up.

The Japanese Yen gained 0.49 (0.56%) last week. Intermediate trend remains up. The Yen returned to above its 20 day moving average. Short term momentum indicators are trending up.

British Pound gained 1.42 (1.06%) last week. Intermediate trend remains up. The Pound remained above its 20 day moving average. Short term momentum indicators are trending up.

 

Commodities and Related ETFs

Daily Seasonal/Technical Commodities Trends for December 29th 2017

Green: Increase from previous day

Red: Decrease from previous day

* Excludes adjustment from rollover of futures contracts

 

The CRB Index responded strongly to weakness in the U.S. Dollar Index. The CRB Index gained 5.98 points (3.18%) last week. Intermediate uptrend was confirmed on a move above 192.99 on Friday. 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 increased last week to 6 from -2.

Gasoline added 2.6 cents per gallon (1.47%) last week. Trend changed to neutral from down on a move above $1.79 per gallon. 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 increased last week to 4 from 0.

Crude Oil gained $1.95 per barrel (3.34%) last week. Intermediate uptrend was confirmed on a move above $59.05. 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 gained $0.19 per MBtu (7.14%) last week on colder than average weather. Intermediate trend remained down. Strength relative to the S&P 500 Index changed to positive from negative. “Natty” moved above its 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to 2 from -6.

S&P Energy Index gained 1.05 points (0.20%) last week. Intermediate trend remained up. Strength relative to the S&P 500 Index remained positive. The Index remains above its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 6.

Philadelphia Oil Services Index added 3.09 points (2.11%) 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.

Gold gained $30.50 per ounce (2.39%) last week. Intermediate trend changed on Friday to up from down on moves above $1301.30 and $1308.40. Strength relative to the S&P 500 Index changed to positive from neutral. Gold remained above its 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to 6 from 0.

Silver gained $0.45 per ounce (2.69%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index changed to positive from neutral. Silver remained 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 3.40 points (1.80%) last week. Intermediate trend changed to neutral from down on a move above 191.08. 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 4 from 0.

Platinum gained $15.30 per ounce (1.66%) last week. Trend remains down. Relative strength turned positive. PLAT remains above its 20 day MA. Momentum remains up.

Palladium gained $31.45 per ounce (3.05%) last week. Trend remains up. Relative strength remains positive. PALL remains above its 20 day MA. Momentum remains up.

Copper gained another $0.06 per lb. (1.85%) last week. Intermediate trend changed to up from neutral on a move above $3.26. 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 increased last week to 6 from 4.

BMO Base Metals ETF gained another $0.10 (0.81%) last week. Intermediate trend changed to up from neutral on a move above $12.22. 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 increased last week to 6 from 4.

Lumber dropped 8.70 (1.93%) last week. Trend remains up. Relative strength remains positive. Lumber remained above its 20 day MA. Momentum turned down on Friday.

Grain ETN slipped $0.02 (0.08%) last week. Trend remains down. Relative strength remains negative. Units remain below their 20 day moving average. Indicators have turned up.

The Agriculture ETF added $0.29 (0.47%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to Positive from Neutral. Units remained above their 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to 6 from 4.

 

Interest Rates

Yield on 10 year Treasuries dropped 8 basis points (3.22%) last week. Intermediate trend remains up. Yield remains above its 20 day moving average. Short term momentum indicators have turned down.

Price of the long term Treasury ETF gained $2.09 (1.68%) last week. Intermediate trend remains up. Units moved back above their 20 day moving average. Short term momentum indicators are trending up.

 

Volatility

The VIX Index added 1.14 (11.52%) last week. Intermediate trend remains down. The Index moved above its 20 day moving average. Short term momentum indicators are trending up.

 

Sectors

Daily Seasonal/Technical Sector Trends for December 29th 2017

Green: Increase from previous day

Red: Decrease from previous day

 

StockTwits Released on Friday @EquityClock

U.S. Healthcare Providers iShares $IHF moved above $158.86 to an all-time high extending an intermediate uptrend.

Morgan Stanley China A Shares Fund $CAF moved above $23.47 to an all-time high extending an intermediate uptrend.

Technical action by S&P 500 stocks to 10:00: No intermediate breakouts or breakdowns.

Editor’s Note: After 10:00 AM EST, breakout included MLM and breakdowns included BWA and YUM.

Another Cdn. gold producer stock Detour Gold $DGC.CA moved above $14.44 and $14.73 setting intermediate uptrend.

Emerging Markets iShares $EEM moved above $47.22 to an all-time high extending an intermediate uptrend

Gold ETN $GLD moved above $123.33 and $123.97 setting new intermediate uptrend.

U.S. Dollar Index ETN $UUP moved above $24.04 setting new intermediate downtrend.

 

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