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Tech Talk for Tuesday September 6th 2016

 

Economic News This Week

Results of the G20 Meeting in China are released on Tuesday

August ISM Services to be released at 10:00 AM EDT on Tuesday is expected to slip to 54.7 from 55.5 in July.

Bank of Canada Policy statement is expected to be released at 10:00 AM EDT on Wednesday

Fed Beige Book is released at 2:00 PM EDT on Wednesday

ECB Monetary Policy statement is expected to be released at 7:45 AM EDT on Thursday

Weekly Initial Jobless Claims to be released at 8:30 AM EDT on Thursday are expected to increase to 265,000 from 263,000 last week.

Canadian August Housing Starts to be released at 8:15 AM EDT on Friday are expected to slip to 190,000 from 194,963 in July.

August Canadian Employment to be released at 8:30 AM EDT on Friday is expected to increase 5,000 versus a decline of 31,200 in July.

July Wholesale Inventories to be released at 10:00 AM EDT on Friday are expected to be unchanged versus a gain of 0.3% in June.

 

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 in September/early October. Traders and seasonal investors should respond accordingly.

Observations

On Friday, bad news (lower than consensus non-farm payrolls) was good news for equity markets. The news suggested deferral of an increase in the Fed Fund rate until at least December. The bad news came after a series of economic reports earlier in the week (e.g. lower than expected August ISM, lower than expected July Construction Spending, worse than expected August Auto Sales, lower than expected August Chicago PMI) suggesting a slowdown by the U.S. economy.

Economic news this week is relatively quiet. Focus is on news from the G20 meeting over the weekend and the Fed Beige Book on Wednesday. In Canada, focus is on the Bank of Canada’s Policy Statement on Wednesday. In Europe, focus is on the ECB Monetary Policy on Thursday.

Short term technical indicators turned higher on Friday (daily momentum indicators, 20 day moving average) when many equity markets, commodities and sectors recorded higher technical scores.

Medium term technical indicators (e.g. Bullish Percent Index, Percent of stocks trading above their 50 and 200 day moving averages) remain intermediate overbought and trending down.

Seasonal influences on a wide variety of equity markets, commodities and sectors historically change to negative in the month of September. The exception is natural gas, which turns positive.

Technical action by individual S&P 500 stocks was mildly positive last week: 29 stocks broke resistance and 17 stocks broke support. Financials were notable on the list of stocks breaking resistance and Utilities were notable on the list of stocks breaking support. 314 stocks are in intermediate uptrends (down 2 from last week), 60 stocks are in neutral trends (down 2 from last week and 136 stocks are in downtrends (up 4 from last week.

Second quarter results by S&P 500 companies have been released by 498 companies to date. The last two companies are scheduled to release results this week. 70% of reporting companies reported higher than consensus earnings and 53% of reporting companies reported higher than consensus revenues. Blended earnings for the quarter on a year-over-year basis fell 3.2% while blended revenues slipped 0.2%. 78 companies have issued negative third quarter guidance while 33 companies have issued positive guidance.

Analysts continue to lower third quarter expectations. According to FactSet, third quarter earnings on a year-over-year basis for S&P 500 companies are expected to drop 2.5% while revenues are expected to increase 0.2%. Fourth quarter prospects remain positive at this stage. Consensus is calling for a 5.5% year-over-year gain in earnings and a 4.8% increase in revenues.

U.S. equity markets have a history of moving lower from the end of August to 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 September 2nd 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 gained 10.94 points (0.50%) last week. Intermediate trend remains up. The Index moved above its 20 day moving average on Friday. Short term momentum indicators are trending down, but showing early signs of recovery.

Percent of S&P 500 stocks trading above their 50 day moving average (also known as the S&P Momentum Barometer) increased last week to 61.00% from 59.80%. Percent remains intermediate overbought and trending down.

Percent of S&P 500 stocks trading above their 200 day moving average increased last week to 80.20% from 78.80%. Percent remains intermediate overbought and showing early signs of rolling over.

Bullish Percent Index for S&P 500 stocks increased last week to 75.80% from 75.60%, but slipped below its 20 day moving average. The Index remains intermediate overbought.

Bullish Percent Index for TSX Composite stocks slipped last week to 79.58% from 80.00% and remained below its 20 day moving average. The Index remains intermediate overbought and trending down.

The TSX Composite Index added 155.82 points (1.06%). Intermediate trend remains up (Score: 2). Strength relative to the S&P 500 Index remained neutral (Score: 0). The Index moved above its 20 day moving average on Friday (Score: 1). Short term momentum indicators turned upward (Score: 1). Technical score improved last week to 4 from 0.

Percent of TSX stocks trading above their 50 day moving average (also known as the TSX Momentum Barometer) increased last week to 62.23% from 60.2%. Percent remains intermediate overbought and trending down.

Percent of TSX stocks trading above their 200 day moving average increased last week to 85.41% from 80.77%. Percent remains intermediate overbought.

The Dow Jones Industrial Average gained 96.56 points (0.52%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remained neutral. The Average remained below its 20 day moving average. Short term momentum indicators are trending down, but showing early signs of bottoming. Technical score remained last week at 0

Bullish Percent Index for Dow Jones Industrial Average stocks was unchanged last week at 83.33% and matched its 20 day moving average. The Index remains intermediate overbought.

Bullish Percent Index for NASDAQ Composite stocks increased last week to 63.70% from 62.83% and remained above its 20 day moving average. The Index remains intermediate overbought.

The NASDAQ Composite Index added 30.98 points (0.59%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains positive. The Index moved back above its 20 day moving average on Friday. Short term momentum indicators are trending down, but showing early signs of bottoming. Technical score remained last week at 4.

The Dow Jones Transportation Average gained 122.25 points (1.56%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index turned positive from neutral. The Average moved above its 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to 4 from -2

The Russell 2000 Index gained 13.80 points (1.11%) 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 remain down, but showing early signs of recovery. Technical score remained last week at 4.

The Australia All Ordinaries Composite Index lost 136.80 points (2.44%) last week. Intermediate trend changed to down from up on a move below 5551.40. Strength relative to the S&P 500 Index changed to negative from neutral. The Index remained below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -6 from 0.

The Nikkei Average added 564.97 points (3.45%) last week. Intermediate trend remained down. Strength relative to the S&P 500 Index changed to positive from neutral. 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.

Europe iShares gained $0.86 (2.20%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains positive. Units moved above their 20 day moving average. Short term momentum indicators have turned up. Technical score last week improved to 2 from -2.

The Shanghai Composite Index dropped 2.96 points (0.10%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains positive. The Index returned to above its 20 day moving average on Friday. Short term momentum indicators are trending down. Technical score remained last week at 4.

Emerging Markets iShares added $0.65 (1.77%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to neutral from positive. Units returned to above their 20 day moving average on Friday. Short term momentum indicators have just turned up. Technical score increased last week to 4 from 2.

 

Currencies

U.S. Dollar Index added 0.39 (0.41%) last week. The Index remained above its 20 day moving average. Short term momentum indicators are trending up.

The Euro slipped 0.05 (0.04%) last week. Intermediate trend remained neutral. The Euro remained below its 20 moving average. Short term momentum indicators are trending down

The Canadian Dollar added U.S. 0.05 cents (0.06%) last week. Intermediate trend remains down. The Canuck Buck remains below its 20 day moving average. Short term momentum indicators are trending down.

The Japanese Yen dropped 1.89 (1.92%) last week. Intermediate trend remains up. The Yen remained below its 20 day moving average. Short term momentum indicators are trending down.

The British Pound added 1.61 (1.23%) last week. Intermediate trend remains down. The Pound remained above its 20 day moving average. Short term momentum indicators are trending up.

 

Commodities

Daily Seasonal/Technical Commodities Trends for September 2nd 2016

Green: Increase from previous day

Red: Decrease from previous day

The CRB Index dropped 6.12 points (3.29%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index changed to negative from positive. The Index dropped below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -6 from 0.

Gasoline plunged 12.6 cents per gallon (8.82%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index changed last week to negative from positive. Gas dropped below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped to -6 from 0.

Crude Oil dropped $3.20 per barrel (6.72%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to negative from positive. Crude dropped below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -2 from 4.

Natural Gas dropped $0.12 per MBtu (4.12%) last week. Intermediate trend remained neutral. Strength relative to the S&P 500 Index remained positive. “Natty” remained above its 20 day moving average. Short term momentum indicators have turned down. Technical score dropped to 2 from 4.

The S&P Energy Index slipped 2.87 points (0.56%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index changed to neutral from positive. The Index dropped below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -2 from 2.

The Philadelphia Oil Services Index dropped 4.67 points (2.91%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index changed to negative from neutral. The Index remained below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -6 from -4.

Gold added $0.80 per ounce (0.06%) last week. Intermediate trend remained up. Strength relative to the S&P 500 Index remained neutral. Gold remained below its 20 day moving average. Short term momentum indicators turned higher on Friday. Technical score improved last week to 2 from 0.

Silver added $0.62 per ounce (3.31%) last week. Intermediate trend remained down. Strength relative to the S&P 500 Index turned neutral from negative on Friday. Silver moved above its 20 day moving average on Friday. Short term momentum indicators have turned up. Technical score improved last week to 0 from -6.

The AMEX Gold Bug Index added 1.74 points (0.73%) last week. Intermediate trend remained neutral. Strength relative to the S&P 500 Index remained negative. The Index remained below its 20 day moving average. Short term momentum indicators turned up on Friday. Technical score improved last week to -2 from -4.

Platinum dropped $15.50 per ounce (1.44%) last week. Trend remains up. Relative strength remains negative. PLAT remains below its 20 day MA. Momentum remains negative

Palladium dropped $20.20 per ounce (2.91%) last week. Trend changed to down from up on a move below $686.50. Relative strength changed to negative from neutral. PALL remained below its 20 day MA. Momentum remains down. Technical score dropped last week to -6 from 0

Copper slipped 0.07 cents per lb (0.34%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index remains negative. Copper remained below its 20 day moving average. Short term momentum indicators are trending down. Technical score remained last week at -4.

Lumber dropped $11.10 (3.50%) last week. Trend changed to down from up on a move below 313.30. Relative strength: negative. Trades below its 20 day MA. Momentum:down

Grain ETN dropped $0.13 (0.47%) last week. Intermediate trend remains down. Relative strength remains negative. Units remain below their 20 day moving average. Short term momentum indicators turned up on Friday. Technical score improved to -4 from -6.

The Agriculture ETF added $1.11 (2.21%) last week thanks to strength in fertilizer stocks related to Potash Corp/ Agrium merger rumors. 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 have turned up. Technical score improved last week to 6 from 4.

 

Interest Rates

Yield on 10 year Treasuries slipped 3.9 basis points (2.39%) last week. Intermediate trend changed to up from down on a move above 1.616%. Yield remained above its 20 day moving average. Short term momentum indicators are mixed.

Conversely, price of the long term Treasury ETF added $0.27 (1.95%) last week. Intermediate trend remains up. Price remained below its 20 day moving average.

 

Volatility

The VIX Index dropped 1.67 (12.23%) last week. Intermediate trend remains down. The Index dropped below its 20 day moving average on Friday.

 

Sectors

Daily Seasonal/Technical Sector Trends for September 2nd 2016

Green: Increase from previous day

Red: Decrease from previous day

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 HOST, MARK LEIBOVIT,

AND GUESTS ERIC HADIK, RAY MERRIMAN AND SINCLAIR NOE – SEPTEMBER 3, 2016

http://tinyurl.com/zq7qepn

 

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