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Tech Talk for Monday July 24th 2017

 

Another Milestone

Number of StockTwits followers exceeded 40,000 over the weekend. Previous milestone at 39,000 followers was reached on June 28th

Editor’ Note: Mr. Vialoux is scheduled to appear on BNN as the guest analyst today on Berman’s Call at 11:00 AM EDT.

WALL STREET RAW RADIO – JULY 22, 2017

VRTRADER.COM CELEBRATES ITS 38TH ANNIVERSAY!

GUESTS INCLUDE:  DON VIALOUX, JEFF BISHOP, PETRA HESS, SINCLAIR NOE , HARRY BOXER, JAYANT BHANDARI AND HENRY WEINGARTEN.

http://tinyurl.com/yd84nuc5

The Bottom Line

Early signs of a seasonal peak in North American equity markets have arrived. The S&P 500 Index, Dow Jones Transportation Average and TSX Composite Index on average during the past 20 years have reached their seasonal peak on July 17th followed by at least a shallow correction lasting until mid-October. Last week, the TSX Index was virtually unchanged, the S&P 500 Index gained 0.54% (but weakened on Thursday and Friday), the Dow Jones Industrial Average lost 0.27% and the Dow Jones Transportation Average plunged 2.79%. Many S&P 500 stocks came under profit taking pressure last week shortly after reporting strong second quarter earnings. Another 191 S&P 500 companies are scheduled to release second quarter results this week. However, volatility associated with the summer correction is not there yet. With the VIX Index at a multi-year low on Friday, full force of the summer correction has yet to arrive. Political events (most notably in the U.S.) could change the timing quickly. Possibilities this summer include a show down with North Korea, failure by the U.S. Congress to pass meaningful legislation on health care and tax reform, disruptive news from the investigation on Russia’s interference in the U.S. election, an unexpected increase in the Fed Fund Rate and disruptive trade negotiations leading to threat of a trade war. Be careful out there! A spike in volatility above levels reached three weeks ago will be the most likely sign that the summer correction is in full force. Meanwhile, holding a robust position in cash in your investment portfolio makes sense.

 

Economic News This Week

June Existing Home Sales to be released at 10:00 AM EDT on Monday are expected to slip to 5.56 million units from 5.62 million units in May.

OPEC Ministerial Meeting to discuss crude oil quotas is scheduled on Monday

Congressional hearings on Russian interference in the U.S. election are scheduled throughout the week.

July Consumer Confidence to be released at 10:00 AM EDT on Tuesday is expected to slip to 116.8 from 118.9 in June.

May Case/Shiller 20 City Home Price Index on a year-over-year basis to be released at 9:00 AM EDT on Tuesday is expected to remain unchanged from April at a 5.7% increase.

June New Home Sales to be released at 10:00 AM EDT on Wednesday are expected to increase to 615,000 units from 610,000 in May.

FOMC Decision on the Fed Fund Rate is expected to be announced at 2:00 PM EDT on Wednesday. No change in the Fed Fund rate at 1.0%-1.25% is expected.

June Durable Goods Orders to be released at 8:30 AM EDT on Thursday are expected to increase 3.0% versus a decline of 0.8% in May. Ex transportation, June Durable Goods Orders are expected to increase 0.5% versus a gain of 0.3% in May.

Weekly Jobless Claims to be released at 8:30 AM EDT on Thursday are expected to increase to 240,000 from 233,000 last week.

Second quarter real GDP to be released at 8:30 AM EDT on Friday is expected to grow at a 2.5% rate versus a 1.4% rate in the first quarter.

Canadian May Real GDP to be released at 8:30 AM EDT on Friday is expected to grow 0.2% versus a gain of 0.2% in April.

July Michigan Sentiment Index to be released at 10:00 AM EDT on Friday is expected to remain unchanged from June at 93.1

 

U.S. Earnings Reports This Week

 

 

Canadian Earnings Reports This Week

 

 

Observations

Technical action by S&P 500 stocks was bullish last week. . Sectors showing strongest positive technical action included Consumer Discretionary, Energy and Health Care. Sector showing weakest technical action was Industrials. Number of S&P 500 stocks breaking intermediate resistance totaled 73 while number of stocks breaking support totaled 17. Number of S&P 500 stocks in an intermediate uptrend increased to 301 from 22, number of stocks in a neutral trend slipped to 50 from 52 and number of stocks in an intermediate downtrend dropped to 149. The Up/Down ratio increased last week to (301/149=) 2.02 from 1.70.

The earnings and sales outlook for S&P 500 stocks remain promising (albeit at a slightly lower level than previous): According to FactSet, 19% of companies have reported to date. 73% reported higher than consensus earnings and 77% reported higher than consensus revenues. Accordingly, consensus for blended second quarter earnings on a year-over-basis for all companies increased to 7.2% from 6.8%. Consensus for blended second quarter revenues increased to 5.0% rate from 4.8% . This week another 191 S&P 500 companies are scheduled to report (including 13 Dow Jones Industrial companies. Beyond the second quarter, consensus by FactSet shows a 6.4% increase in third quarter earnings (down from 7.2% last week) and a 5.0% increase in revenues. Consensus for fourth quarter shows an 11.7% increase in earnings (down from 12.2%) and a 5.0% increase in revenues. For 2017, earnings are expected to increase 9.3% (down from 9.6%) and revenues are expected to increase 5.4% (up from 5.3%).

Responses to second quarter reports were less than encouraging again last week. High profile companies (e.g. IBM, Microsoft, Travelers, General Electric) reported higher than consensus second quarter profits, but traders took profits on news.

A word of caution on U.S. second quarter earnings reports! On one hand, consensus estimates are notorious for under-estimating actual earnings. On the other hand, consensus estimates for Dow Jones Industrial Average companies are significantly lower than consensus estimates for S&P 500 companies (3.0% increase for Dow companies versus a 7.2% increase for S&P 500 companies). The discrepancy implies that a small number of S&P 500 companies (think FANG companies) will report oversized sales and earnings gains while other companies will report less than consensus results. Rotation within sectors could be significant during the next few weeks.

Second quarter earnings reports for TSX 60 companies are expected to be impressive. On a year-over-year basis, earnings per share on average (median) are expected to increase 11.3%. Canadian equity prices have yet to respond.

Economic focus this week is on the FOMC meeting on Tuesday and Wednesday. News from the conference at 2:00 PM EDT on Wednesday is expected to show no change in the Fed Fund rate. Watch closely for guidance on timing of the next increase in the Fed Fund rate.

Short term technical indicators (momentum, above/below 20 day moving average) for the most part continued to move higher last week. However, in most cases they are short term overbought and are vulnerable to a change in trend.

Medium term technical indicators (Percent of stocks trading above their 50 day moving average. Bullish Percent indices) for the most part moved higher last week, but became more overbought.

The S&P 500 Index, Dow Jones Transportation Average and TSX Composite Index on average during the past 20 periods have reached a seasonal peak on July 17th. Early technical signs showing weakening momentum in broadly based North American equity indices surfaced last week. Dow Industrials slipped 0.27%, Dow Transports plunged 2.79% and the TSX Composite was virtually unchanged.

 

Equity Indices and Related ETFs

Daily Seasonal/Technical Equity Trends for July 21st 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 gained 13.27 points last week (0.54%). Intermediate trend remains up. The Index remains above its 20 day moving average. Short term momentum indicators are trending up.

Percent of S&P 500 stocks trading above their 50 day moving average increased last week to 71.80 from 70.80. Percent remains intermediate overbought and showing early signs of rolling over.

Percent of S&P 500 stocks trading above their 200 day moving average increased last week to 75.40 from 73.80. Percent remains intermediate overbought.

Bullish Percent Index for S&P 500 stocks increased last week to 74.80 from 73.20 and remained above its 20 day moving average. The Index remains intermediate overbought.

Bullish Percent Index for TSX stocks slipped to 61.45 from 62.65 last week and remained below its 20 day moving average. The Index remains intermediate overbought and trending down.

The TSX Composite Index added 8.32 points (0.05%) last week. Intermediate trend remains down (Score: -2). Strength relative to the S&P 500 Index remains negative (Score: -2). The Index returned to below its 20 day moving average on Friday (Score: -1). Short term momentum indicators are trending up (Score: 1). Technical score remained last week at 4.

Percent of TSX stocks trading above their 50 day moving average increased last week to 40.00 from 38.43. Percent is slightly intermediate oversold.

Percent of TSX stocks trading above their 200 day moving average dropped last week to 48.33 from 50.00. Percent remains intermediate neutral and trending down.

Dow Jones Industrial Average slipped 57.57 points (0.27%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to negative from neutral last week. The Average remains above its 20 day moving average. Short term momentum indicators began to roll over on Friday. Technical score dropped last week to 0 from 4.

Bullish Percent Index for Dow Jones Industrial Average stocks dropped last week to 80.00 from 83.33 and dropped 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 63.91 from 62.45. Percent remains intermediate overbought and remains above its 20 day moving average.

NASDAQ Composite Index increased 75.28 points (1.19%) last week. Intermediate trend changed last week to up from neutral on a move above 6,341.70. 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 increased last week to 6 from 4.

The Russell 2000 Index gained 7.02 points (0.49%) 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.

Dow Jones Transportation Average plunged 271.49 points (2.79%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index turned negative from positive. The Average dropped below its 20 day moving average. Short term momentum indicators turned down. Technical score dropped last week to -2 from 6.

Australia All Ordinaries Composite Index dropped 37.50 points (0.65%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains negative. The Index dropped below its 20 day moving average on Friday. Short term momentum indicators are trending up. Technical score dropped last week to -4 from 0.

The Nikkei Average dropped 19.11 points (0.09%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to negative from neutral. The Average remained above its 20 day moving average. Short term momentum indicators have turned down. Technical score dropped last week to 2 from 4.

Europe iShares slipped $0.04 (0.09%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains neutral. Units remain above their 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 4

The Shanghai Composite Index added 15.56 points (0.48%) last week. Intermediate trend remains down. 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 0.

Emerging Markets iShares gained $0.21 (0.48%) 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 up. Technical score remained last week at 6.

 

Currencies

The U.S. Dollar Index plunged 2.43 (1.92%) last week. Intermediate trend remains down. The Index remained below its 20 day moving average. Short term momentum indicators are trending down.

The Euro gained 1.98 (1.73%) last week. Intermediate trend remains up. The Euro remains above its 20 day moving average. Short term momentum indicators are trending up.

The Canadian Dollar gained U.S. 0.69 cents (0.87%) last week. Intermediate trend remains up. The Canuck Buck remains above its 20 day moving average. Short term momentum indicators are trending up.

The Japanese Yen added 1.11 (1.25%) last week. Intermediate trend remains down. The Yen moved above its 20 day moving average. Short term momentum indicators are trending up.

The British Pound dropped 1.08 (0.82%) last week. Intermediate trend remains up. The Pound remains above its 20 day moving average. Short term momentum indicators are mixed.

 

Commodities and Related ETFs

Daily Seasonal/Technical Commodities Trends for July 21st 2017

Green: Increase from previous day

Red: Decrease from previous day

* Excludes adjustment from rollover of futures contracts

The CRB Index gained 0.38 (0.22%) last week thanks mainly to U.S. Dollar Index weakness. Intermediate trend turned up on a move above 176.73. 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 increased last week to 4 from 0

Gasoline added $0.01 cent per gallon (0.07%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains neutral. Gas remains above its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 2.

Crude Oil added $0.23 per barrel (0.49%) last week. Intermediate trend changed to up from down on a move above $47.32. Strength relative to the S&P 500 Index remained neutral. Crude remained above its 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to 4 from 0.

Natural Gas slipped $0.02 per MBtu (0.67%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index remains neutral. “Natty” dropped below its 20 day moving average on Friday. Short term momentum indicators rolled over on Friday. Technical score dropped last week to -2 from 2.

S&P Energy Index slipped 2.33 points (0.48%) last week. Intermediate trend changed to neutral from down. Strength relative to the S&P 500 Index remains neutral. The Index remained above its 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to 2 from 0.

Philadelphia Oil Services Index advanced 0.38 (0.29%) last week. Intermediate trend changed to neutral from down on a move above 136.01. The Index remained above its 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to 2 from 0.

Gold gained $27.40 per ounce (2.23%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index changed to neutral from negative. Gold moved above its 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to 2 from -2.

Silver gained $0.53 per ounce (3.33%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index changed to neutral from negative. Silver moved above its 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to 0 from -4.

The AMEX Gold Bug Index gained 5.89 points (3.17%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index changed to neutral from negative. The Index remained above its 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to 0 from -2.

Platinum gained $13.90 per ounce (1.51%) last week. Trend remains down. Relative strength improved to neutral. PLAT remained above its 20 day MA. Momentum: up. Score: 0

Palladium dropped $12.40 per ounce (1.45%) last week. Relative strength changed to negative from neutral. PALL dropped below its 20 day moving average. Short term momentum indicators turned down. Technical score dropped last week to 6 from -2.

Copper added 3.2 cents per lb. (1.19%) last week. Intermediate trend remains up. 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 remained last week at 6.

BMO Base Metals ETF added $0.05 (0.48%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains positive. Units remained above their 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 6.

Lumber added 9.40 (2.49%) last week, triggered by forest fires in the West. Trend remains up. Relative strength: positive. Trades above its 20 day MA. Momentum: up. Score: 6

Grain ETN added $0.07 (0.24%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains positive. Units trade above their 20 day moving average. Short term momentum indicators are trending down. Technical score remained last week at 4.

Agriculture ETF added $0.30 (0.53%) 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 up. Technical score increased last week to 6 from 4.

 

Interest Rates

Yield on 10 year Treasuries slipped 8.7 basis points (3.75%) last week. Intermediate trend remains down. Yield dropped below its 20 day moving average. Short term momentum indicators are trending down.

Conversely, price of the long term Treasury Bond ETF gained $2.35 (1.91%) last week. Intermediate trend remains up. Units moved back above their 20 day moving average.

 

Volatility

The VIX Index slipped 0.22 (2.30%) to a multi-year low.

 

Sectors

Daily Seasonal/Technical Sector Trends for July 21st 2017

Green: Increase from previous day

Red: Decrease from previous day

 

StockTwits Released on Friday

Factory shutdown period in full force. See http://www.equityclock.com/2017/07/20/stock-market-outlook-for-july-21-2017/

Technical action by S&P 500 stocks to 10:00: Bullish. Breakouts: $CINF $COF $SYF $CBOE $NDAQ $ALXN $CTAS. Breakdown: $GE

 

Editor’s Note: After 10:00 AM EDT, breakouts included NVDA, RAI, EFX, KMX VFC HPQ VFC HPQ FISV KSS BLL MAT NLSN and NKE. Breakdown: ADS ALK RRC

General Electric $GE, a Dow Jones Industrial stock moved below $28.05 extending an intermediate downtrend.

Celestica $CLS.CA moved below $17.01 extending an intermediate downtrend.

New Flyer Industries $NFI.CA moved below $51.17 extending an intermediate downtrend.

Nike $NKE, a Dow Jones Industrial stock moved above $59.71 extending an intermediate uptrend.

Another Biotech ETF breaks out! $BBH moved above $131.50 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