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Tech Talk for Monday November 20th 2017

 

WALL STREET RAW RADIO – NOVEMBER 18, 2017

HOST, MARK LEIBOVIT

GUESTS: DON VIALOUX, HENRY WEINGARTEN, HARRY BOXER, KYLE DENNIS AND SINCLAIR NOE

http://tinyurl.com/ydgllbqr

 

Attention: StockTwits @EquityClock followers

Regular service resumed on Friday. Service had been sporadic during the past two weeks after Yahoo Finance discontinued access to its free data service. Thanks to Jim Ivey, President of the Canadian Society of Technical Analysts, software used to identify inter-day technical and seasonal investment ideas has been altered to use Google data. Number of followers who receive free StockTwits comments from EquityClock continues to increase. Latest number of followers is 44,896.

 

The Bottom Line

Equity markets continued to show 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 and TSX Composite Index remain intermediate overbought and continue to show short term technical signs of moving lower. The Russell 2000 Index and the Dow Jones Transportation Average passed their intermediate peak.

seven weeks ago and are down 1.5% and 5.9% 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 sectors and industry equities and Exchange Traded Funds with the understanding that their next significant intermediate uptrend likely will not resurface until next February.

Economic News This Week

October Leading Economic Indicators to be released at 10:00 AM EST on Tuesday is expected to increase 0.6% versus a decline of 0.2% in September.

October Existing Home Sales to be released at 10:00 AM EST on Tuesday are expected to increase to 5.40 million units from 5.39 million units in September

October Durable Goods Orders to be released at 8:30 AM EST on Wednesday are expected to increase 0.3% versus a gain of 2.2% in September. Excluding Transportation October Durable Goods Orders are expected to increase 0.4% versus a gain of 0.7% in September.

Weekly Jobless Claims to be released at 8:30 AM EST on Wednesday are expected to slip to 240,000 from 249,000 last week.

November Consumer Sentiment to be released at 10:00 AM EST on Thursday is expected to increase to 97.9 from 97.8 in October.

FOMC Minutes for the October 31st –November 1st meeting are released at 2:00 PM EST

Canadian September Retail Sales to be released at 8:30 AM EST on Thursday are expected to increase 0.9% versus a decline of 0.3% in August.

 

Earnings News This Week

 

Observations

Thursday is Thanksgiving in the U.S. History shows that U.S. and Canadian equity markets move higher just before and just after the U.S. Thanksgiving holiday. See

http://www.equityclock.com/2017/11/16/stock-market-outlook-for-november-17-2017/

for a study of the S&P 500 Index during this period.

Technical action by individual S&P 500 stocks was mixed last week. Notable among sectors breaking resistance were Technology stocks Number of stocks breaking resistance totaled 33 while number of stocks breaking support totaled 29. Number of stocks trading in an uptrend dropped to 291 from 300, number of stocks trading in a neutral trend decreased to 64 from 66 and number of stocks in a downtrend increased to 145 from 134. The Up/Down ratio dropped last week to (291/145=) 2.01 from 2.24.

Economic news this week is quiet prior to the holiday. Focus is on October Durable Goods Orders to be released on Wednesday.

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 generally moved lower.

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. However, technical influences recently have overwhelmed seasonal influences.

Earnings reports from U.S. companies continue to pour in this week. Another 15 S&P 500 companies are scheduled to release fiscal third quarter results. Focuses are on Lowe’s reporting on Tuesday and Deere reporting on Wednesday.

The outlook for S&P earnings and revenues remains positive. 61 companies have issued negative fourth quarter guidance and 32 companies have issued positive guidance. 95% reported third quarter results by the end of last week. According to FactSet, third quarter earnings are expected to increase 6.2% (up from 6.1% last week) on a 5.9% increase in revenues. Fourth quarter earnings are expected to increase 10.0% on a 6.4% increase in revenues. For all of 2017, earnings are expected to increase 9.5% (up from 9.4% last week) on a 6.3% increase in revenues (up from 6.2%). First quarter 2018 earnings are expected to increase 10.5% on a 6.6% increase in revenues (up from 6.2% last week). Second quarter 2018 earnings are expected to increase 10.1% on a 6.4% increase in revenues (up from 6.2%).

Short term political 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 17th the Average had dropped to 55.38%. Historically, 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. Next period of seasonal strength starts at the end of January.

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 17th it had dropped to 58.20%. This Index also is vulnerable to a flat to downward correction during the next 3-6 months after rolling over.

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 17th 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.

S&P 500 Index slipped 3.45 points (0.13%) last week. Intermediate trend remains up. The Index remains 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 62.80 from 63.00. Percent remains intermediate overbought and trending down.

Percent of S&P 500 stocks trading above their 200 day moving average increased last week to 71.20 from 70.60. Percent remains intermediate overbought and trending down.

Bullish Percent Index for S&P 500 stocks increased last week to 72.60 from 71.40 and moved back above its 20 day moving average. The Index remains intermediate overbought and showing signs of rolling over.

Bullish Percent Index for TSX stocks was unchanged last week at 67.87 and remained below its 20 day moving average. The Index remains intermediate overbought and trending down.

TSX Composite Index dropped 40.69 points (0.25%) last week. Intermediate trend remains up (Score: 2). Strength relative to the S&P 500 Index remains neutral (Score: 0). The Index moved back above its 20 day moving average on Friday (Score: 1). Short term momentum indicators are trending up (Score: 1). Technical score remained last week at 2.

Percent of TSX stocks trading above their 50 day moving average (also known as the TSX Momentum Barometer) dropped last week to 60.42 from 66.67. Percent remains intermediate overbought and trending down.

Percent of TSX stocks trading above their 200 day moving average dropped last week to 60.42 from 64.17. Percent remains intermediate overbought and trending down.

Dow Jones Industrial Average dropped 63.97 points (0.27%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains neutral. The Average dropped below its 20 day moving average on Friday. Short term momentum indicators are trending down. Technical score dropped last week to 0 from 2.

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

Bullish Percent Index for NASDAQ Composite stocks increased last week to 60.46 from 60.39 and remained below its 20 day moving average. The Index remains intermediate overbought and trending down.

NASDAQ Composite Index gained 31.85 points (0.47%) 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.

Russell 2000 Index added 16.55 points (1.12%) 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 on Friday. Short term momentum indicators have turned up. Technical score improved last week to 0 from 6.

Dow Jones Transportation Average lost another 18.27 points (0.19%) 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 up. Technical score increased last week to 0 from -2.

The Australia All Ordinaries Composite Index dropped 55.90 points (0.92%) 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 turned down. Technical score slipped last week to 4 from 6.

The Nikkei Average dropped 284.62 points (1.25%) 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 slipped last week to 2 from 4.

Europe iShares dropped $0.08 (0.17%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains negative. Units remained below their 20 day moving average. Short term momentum indicators are trending down. Technical score remained last week at -6.

The Shanghai Composite Index dropped 49.80 points (1.45%) 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. Short term momentum indicators are trending down. Technical score dropped last week to 0 from 6.

Emerging Markets iShares added $0.53 (1.14%) last week. Intermediate uptrend was confirmed on Friday when units reached an all-time high. Strength relative to the S&P 500 Index returned to positive on Friday. Units moved back above their 20 day moving average. Short term momentum indicators have turned back up. Technical score improved last week to 6 from 4.

 

Currencies

The U.S. Dollar Index dropped 0.71 (0.75%) last week. Intermediate trend remains up. The Index dropped below its 20 day moving average. Short term momentum indicators are trending down.

The Euro added 1.21 (1.03%) last week. Intermediate trend remains down. The Euro moved above its 20 day moving average. Short term momentum indicators are trending up.

The Canadian Dollar dropped US0.55 cents (0.70%) last week. Intermediate trend remains neutral. The Canuck Buck remained below its 20 day moving average. Short term momentum indicators are trending up.

The Japanese Yen added 1.06 (1.20%) last week. Intermediate trend remains up. The Yen moved back above its 20 day moving average. Short term momentum indicators are trending up.

The British Pound added 0.26 (0.20%) 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 17th 2017

Green: Increase from previous day

Red: Decrease from previous day

* Excludes adjustment from rollover of futures contracts

The CRB Index dropped 1.26 points (0.66%) last week. Intermediate trend remains up. Strength relative to the S&P500 Index changed to neutral from positive. The Index returned back above its 20 day moving average on Friday. Short term momentum indicators are trending down. Technical score dropped last week to 2 from 6

Gasoline dropped 6.2 cents per gallon (3.87%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to neutral from positive. Gas dropped below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to 2 from 6.

Crude Oil slipped $0.03 per barrel (0.05%) 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 down. Technical score slipped last week to 4 from 6.

Natural Gas dropped $0.11 per MBtu (3.43%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains positive. “Natty” remained above its 20 day moving average. Short term momentum indicators are trending down. Technical score turned down. Technical score dropped last week to 4 from 6.

The S&P Energy Index dropped 17.34 points (3.38%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to negative from positive. The Index moved below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -2 from 6.

The Philadelphia Oil Services Index dropped 9.67 points (6.84%) 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 4.

Gold gained $22.30 per ounce (1.75%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index turned positive on Friday. Gold moved back above its 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to 6 from 2.

Silver gained $0.50 per ounce (2.96%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index turned positive on Friday. Silver moved back above its 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to 4 from 0.

The AMEX Gold Bug Index added $0.85 (0.45%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index changed to neutral from negative. The Index closed at its 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to -1 from -4.

Platinum gained $22.50 per ounce (2.41%) last week. Trend changed to up. Relative strength turned positive. PLAR remains above its 20 day MA. Momentum is positive. Score: 6.

Palladium slipped $0.20 per ounce (0.02%) last week. Trend remains up. Relative strength remains positive. PALL remains above its 20 day MA. Momentum turned down. Score: 4

Copper slipped $0.01 per lb (0.32%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains negative. Copper remains below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -6 from -2.

BMO Base Metals ETF dropped $0.28 (2.37%) last week. Intermediate trend changed to down from up. Strength relative to the S&P 500 Index remains negative. Units remain below their 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -6 from -2.

Lumber dropped $19.90 (4.37%) last week. Trend remains up. Relative strength dropped to neutral. Lumber dropped below its 20 day MA. Momentum turned down. Score: 0.

The Grain ETN slipped $0.16 (0.63%) last week. Trend changed to down. Relative strength remains negative. Units remain below their 20 day MA. Momentum remains down.

Agriculture ETF added $0.10 (0.17%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains negative. Units remain below their 20 day moving average. Short term momentum indicators are trending down. Technical score remained last week at -2.

 

Interest Rates

Yield on 10 year Treasuries dropped 4.6 basis points (1.92%) last week. Intermediate trend remains neutral. Yield dropped below its 20 day moving average. Short term momentum indicators are trending down.

Conversely, price of the long term Treasury ETF gained $2.29 (1.85%) last week. Intermediate trend remains up. Units moved above their 20 day moving average.

 

Volatility

The VIX Index gained 0.14 (1.24%) last week. The Index remains above its 20 day moving average.

 

Sectors

Daily Seasonal/Technical Sector Trends for November 17th 2017

Green: Increase from previous day

Red: Decrease from previous day

 

StockTwits Released on Friday @EquityClock

Footlocker $FL is scheduled to open above $36.80 on better than consensus Q3 results

Abercrombie &Fitch is scheduled to open above $14.82 on better than consensus Q3 results

Technical action by S&P 500 stocks to 10:00: Quiet. Breakouts: $FL $ANF. No breakdowns

Platinum ETN $PPLT moved above $90.31 completing a double bottom pattern.

Nike $NKE, a Dow Jones Industrial stock moved above $57.25 extending an intermediate uptrend.

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