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Tech Talk for Tuesday July 18th 2017

 

Don Vialoux on BNN yesterday on “Berman’s Call”.

Following are notes used for the program:

 

Opening Segment

July 17th on average during the past 20 years is the date when the S&P 500 Index and TSX Composite Index have reached their seasonal peak. Every year, the peaks have been followed by at least a short term correction. The corrections have been triggered by lower than average trading volumes and greater than average volatility measured by the VIX Index. The VIX Index has a period of seasonal strength from early July to mid-October. What about this year? Trading volumes in July, related to summer holidays, already have declined to below average. However, volatility based on the VIX Index remains low near the 10% level. Accordingly, the normal summer correction from July 17th to mid-October likely will arrive slightly later than average this year.

 

Education segment

Let’s take a closer look at the VIX Index. During the past 20 periods from mid-June to mid-October, the VIX has spiked in every period and U.S. equity markets have experienced a correction in every spike in the VIX Index. Summer strength in the VIX Index is triggered each year by unexpected events. Last year, it was triggered by Brexit. In 2015, it was triggered by a meltdown in China. Biggest spike in the VIX Index and subsequent meltdown by equity markets occurred in the summer of 2008 when the S&P 500 Index and TSX Composite Index dropped by more than 41%. What will be the trigger this year? Lots of possibilities including a show down with North Korea, failure by U.S. Congress to pass major legislation, anticipation of higher interest rates, impending trade wars, etc.!

Summer strength in the VIX Index is highly correlated with strength in gold, silver and related equity and commodity ETFs. The period of seasonal strength for the TSX Gold Index is from the third week in July to the end of September. What about this year? Gold, silver and related ETFs currently are in a downtrend and have underperformed the S&P 500 and TSX Composite since early June. However, they are deeply oversold. Last week their short term momentum indicators started to turn higher.  Watch closely. The signal to initiate positions in the sector for a seasonal trade into October will be a spike in the VIX Index.

Following are links to the program:

http://www.bnn.ca/video/don-vialoux-s-take-on-equities-and-seasonality~1168890

http://www.bnn.ca/video/don-vialoux-takes-your-calls~1168894

http://www.bnn.ca/video/don-vialoux-on-the-recent-performance-of-the-vix~1168928

 

Observations

Base metal prices, base metal stocks and base metal equity ETFs continue to move higher during their current period of seasonal strength.


 

StockTwits Released Yesterday @EquityClock

VIX closes at the lowest level in more than 20 years as period of seasonal strength for volatility begins.

Technical action by S&P 500 stocks to 2:00 PM EDT: Bullish. Breakouts: $DLTR, $DISH, $WMT, $KMI, $NOV, $WLTW, $PNC, $HSIC, $AKAM. No breakdowns.

Editor’s Note: After 2:00 PM EDT, breakout included SNA. No breakdowns.

West Fraser Timber $WFT.CA moved above $63.32 to a 2 year high extending an intermediate uptrend.

Medical Marijuana ETF $HMMJ.CA moved above $8.98 completing a double bottom pattern.

 

Trader’s Corner

Daily Seasonal/Technical Equity Trends for July 17th 2017

Green: Increase from previous day

Red: Decrease from previous day

 

Daily Seasonal/Technical Commodities Trends for July 17th 2017

Green: Increase from previous day

Red: Decrease from previous day

* Excludes adjustment from rollover of futures contracts

 

Daily Seasonal/Technical Sector Trends for July 17th 2017

Green: Increase from previous day

Red: Decrease from previous day

 

S&P 500 Momentum Barometer

The Barometer increased 1.00 to 71.80 yesterday. It remains intermediate overbought.

 

TSX Momentum Barometer

The Barometer increased 0.83 to 39.26 yesterday. It remains intermediate oversold and showing early signs of bottoming.

 

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