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Tech Talk for Monday November 6th 2017

 

NOVEMBER 4, 2017: WALL STREET RAW RADIO WITH HOST, MARK LEIBOVIT

http://tinyurl.com/y92ekpwy

GUESTS INCLUDE: Don Vialoux, Harry Boxer, Henry Weingarten, Sinclair Noe, Kyle Dennis and Chris Kimble.

 

The Bottom Line

Equity markets continue to climb a “wall of worry”. Technical parameters for the S&P 500 Index, NASDAQ Composite Index, Dow Jones Industrial Average and TSX Composite Index are extremely overbought and are showing early signs of rolling over. The Russell 2000 Index and the Dow Jones Transportation Average reached intermediate peaks a month ago, down 1.3% and 2.3% respectively. Seasonal influences turned positive in mid-October, particularly for economic sensitive sectors (e.g. Materials, Industrials, Financials and Technology). Preferred strategy is to continue to hold seasonally attractive sector and industry equities and Exchange Traded Funds for now with the understanding the next intermediate trend will be flat to down.

 

Economic News This Week

October Canadian Housing Starts to be released at 8:15 AM EST on Wednesday is expected to slip to 210,000 from 217,299 in September

Weekly Jobless Claims to be reported at 8:30 AM EST on Thursday are expected to increase to 232,000 from 229,000.

November Consumer Sentiment to be released at 10:00 AM EST on Friday is expected to slip to 100.0 from 100.7 in October.

 

Earnings News This Week

 

Observations

Technical action by individual S&P 500 stocks was slightly mixed last week despite new all-time highs set by the Indices. The main reason for new index highs was strength in a handful of stocks (mainly high tech stocks). Notable among sectors breaking resistance were Utilities and Energy stocks Number of stocks breaking resistance totaled 43 while number of stocks breaking support totaled 35. Number of stocks trading in an uptrend increased to 295 from 291, number of stocks trading in a neutral trend dropped to 65 from 71 and number of stocks in a downtrend increased to 140 from 138. The Up/Down ratio was unchanged last week at (295/140=) 2.11.

Economic news this week is skewed by impact of hurricanes in September. Losses recorded in September are at least partially recovered in October. Focuses are on the Fed meeting on Tuesday and Wednesday, October ISM on Wednesday and October employment report on Friday.

Medium term technical indicators (Percent of stocks trading above their 50 day moving average, Bullish Percent Index) remain at intermediate overbought levels and have started to turn down.

Short term technical indicators (short term momentum, above/below 20 day moving average) for North American equity indices mostly moved higher last week to overbought level but are showing early signs of rolling over.

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.

Earnings reports from U.S. companies continue to pour in this week. Another 48 S&P 500 companies are scheduled to release fiscal third quarter results including 1 Dow Industrial company.

The outlook for S&P earnings and revenues remains positive. 51 companies have issued negative fourth quarter guidance and 26 companies have issued positive guidance. 81% reported third quarter results by the end of last week. According to FactSet, third quarter earnings are expected to increase 5.9% (up from 4.7% last week) on a 5.8% increase in revenues (up from 5.7% last week). Fourth quarter earnings are expected to increase 10.4% (down from 10.7% last week) on a 6.2% increase in revenues (6.1% last week. For all of 2017, earnings are expected to increase 9.5% (up from 9.3%) on a 6.3% increase in revenues (up from 6.0%). First quarter 2018 earnings are expected to increase 10.4% (down from 10.5%) on a 6.2% increase in revenues (down from 6.4%. Second quarter 2018 earnings are expected to increase 10.2% (down from 10.3% on a 6.3% increase in revenues.

Short term uncertainties remain, including assessment of impact of three hurricanes on the U.S. economy, 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.

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 9% in the fourth quarter of 2017 and 10% 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, October 27th the Index dropped to 77.30%. Historically, confirmation of a rollover of the Index from near this level has been followed at best by a flat trend and, more frequently, by a downtrend lasting 3-6 months.

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 3rd, it closed at 74.90.This Index also is vulnerable to a flat to downward correction during the next 3-6 months when confirmation of a rolls over is received.

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 3rd 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 6.77 points (0.26%) last week to another all-time high. 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 dropped last week to 65.60 from 69.60. Percent remains intermediate overbought and trending down.

Percent of S&P 500 stocks trading above their 200 day moving average dropped to 69.00 from 71.80. Percent remains intermediate overbought and trending down.

Bullish Percent Index increased last week to 71.60, but remained below its 20 day moving average. The Index remains intermediate overbought and has rolled over.

Bullish Percent Index for TSX stocks increased last week to 69.20 from 68.80 and remained above its 20 day moving average. The Index remains intermediate overbought and showing early signs of rolling over.

TSX Composite Index gained 66.65 points (0.42%) last week, reaching an all-time high earlier in the week. Intermediate trend remains up (Score: 2). Strength relative to the S&P 500 Index remained Neutral (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 slipped last week to 68.88% from 69.14%. Percent remains intermediate overbought and trending down.

Percent of S&P 500 stocks trading above their 200 day moving average increased last week to 63.49 from 60.91. Percent remains intermediate overbought.

Dow Jones Industrial Average gained 105.00 points (0.45%) last week to another all-time high. 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 are trending up. Technical score remained last week at 6.

Bullish Percent Index for Dow Jones Industrial stocks increased last week to 86.67 from 83.33 and remained above its 20 day moving average. The Index remains intermediate overbought.

Bullish Percent Index for NASDAQ Composite stocks fell last week to 62.35 from 63.34 and remained below its 20 day moving average. The Index remains intermediate overbought and trending down.

NASDAQ Composite Index gained 63.18 points (0.94%) last week to another all-time high. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Positive. The Index remains intermediate overbought. Short term momentum indicators are trending up. Technical score remained last week at 6.

Russell 2000 Index dropped 13.41 points (0.89%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Negative. The Index dropped below its 20 day moving average. Short term momentum indicators continue to trend down. Technical score slipped last week to -2 from 0.

Dow Jones Transportation Average dropped another 176.65 points (1.78%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Negative. The Average dropped below its 20 day moving average. Short term momentum indicators are trending down. Technical score dipped last week to -2.

The Australia All Ordinaries Composite Index gained 61.00 points (1.02%) 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.

The Nikkei Average gained another 530.67 points (2.41%) last week. Intermediate trend remained up. Strength relative to the S&P 500 Index remains Positive. The Average remains above its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 6.

Europe iShares added $0.47 (1.01%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Negative. Units moved above their 20 day moving average last week. Short term momentum indicators turned up. Technical score increased last week to 2 from -2.

Shanghai Composite Index lost 45.07 points (2.91%) last week. Intermediate trend changed to neutral from up on a move below 3,359.63. Strength relative to the S&P 500 Index changed to Negative from Neutral. The Index dropped below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -4 from 4.

Emerging Market ETF added $0.20 (0.43%) 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 trended higher. Technical score improved last week to 4 from 2.

 

Currencies

The U.S. Dollar Index added 0.35 (0.37%) last week. Intermediate trend remains up. The Index remains above its 20 day moving average. Short term momentum indicators are trending up.

The Euro added 0.02 (0.02%) last week. Intermediate trend remains down. The Euro remains below its 20 day moving average. Short term momentum indicators are trending down.

Canadian Dollar gained US 0.27 cents (0.35%) last week. Almost all of the gain came on Friday following release of a bullish October employment report. Intermediate trend remains neutral. The Canuck Buck remains below its 20 day moving average. Short term momentum indicators have just turned up from oversold levels.

Japanese Yen dropped 0.30 (0.34%) last week. Intermediate trend remains up. The Yen remains below its 20 day moving average. Short term momentum indicators are trending down.

British Pound dropped 0.49 (0.37%) last week despite an increase in the Bank of England’s Overnight Lending Rate. Intermediate trend remains up. The Pound remains below its 20 day moving average. Short term momentum indicators are trending down.

 

Commodities and Related ETFs

Daily Seasonal/Technical Commodities Trends for November 3rd 2017

Green: Increase from previous day

Red: Decrease from previous day

* Excludes adjustment from rollover of futures contracts

The CRB Index gained another 2.49 points (1.33%) 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.

Gasoline added 7.6 cents per litre (4.43%) last week. Intermediate trend changed to up from neutral on Friday on a move above $1.7832 per gallon. Strength relative to the S&P 500 Index remains Positive. Gas remains above its 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to 6 from 4.

Crude Oil gained another $1.74 per barrel (3.23%) 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 up. Technical score remained last week at 6.

Natural gas added $0.02 per MBtu (0.68%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Neutral. “Natty” remained above its 20 day moving average. Short term momentum indicators are neutral. Technical score slipped last week to 3 from 4.

S&P Energy Index gained 8.69 points (1.74%) last week. Intermediate uptrend was confirmed on a move above 510.24. Strength relative to the S&P 500 Index changed to Neutral from Negative. The Index moved back above its 20 day moving average. Short term momentum indicators have turned up. Technical score increased last week to 4 from -2.

Philadelphia Oil Services Index gained 6.56 points (5.11%) last week. Intermediate trend remains Neutral. Strength relative to the S&P 500 Index changed to Neutral from Negative. The Index moved back above its 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to from -2.

Gold slipped $2.60 per ounce (0.20%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Negative. Told remains below its 20 day moving average. Short term momentum indicators are trending down. Technical score remained unchanged last week at -2.

Silver added $0.08 per ounce (0.48%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index improved to Neutral from Negative. Silver dropped back below its 20 day moving average on Friday. Short term momentum indicators are trending up. Technical score improved last week to 0 from -4.

AMEX Gold Bug Index dropped 1.01 points (0.54%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains Negative. The Index remains below its 20 day moving average. Short term momentum indicators have turned up. Technical score increased last week to -4 from -6.

Platinum added $7.30 per ounce (0.80%) last week. Trend remains Neutral. Relative strength remains Neutral. PLAT remains below its 20 day MA. Momentum turned up. Score: -4

Palladium gained $33.25 per ounce (3.47%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Positive. PALL remains above its 20 day moving average. Short term momentum indicators have turned up. Technical score increased to 6 from 4

Copper added $0.02 per lb. (0.65%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remained Neutral. Copper remained below its 20 day moving average. Short term momentum indicators are trending down. Technical score remained last week at 0.

BMO Base Metals ETF added $0.01 (0.08%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Neutral. Units dropped below their 20 day moving average on Friday. Short term momentum indicators are trending up. Technical score increased last week to 2 from 0.

Lumber dropped $4.60 (1.04%) last week. Trend remains up. Strength remains Positive. Lumber remains above its 20 day MA. Momentum turned down. Score dropped to 4 from 6.

Grain ETN added $0.02 (0.08%) last week. Trend changed to Neutral from Up. Strength relative to the S&P 500 Index remained Neutral. Units dropped below their 20 day MA on Friday. Short term momentum indicators are trending down. Score dropped to -2 from 0

Agriculture ETF slipped $0.12 90.20%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remained Neutral. Units remained above their 20 day moving average. Short term momentum indicators remain trending down. Technical score remained last week at 2..

 

Interest Rates

Yield on 10 year Treasuries dropped 8.5 basis points (3.50%) last week. Intermediate trend remains up. Yield dropped below its 20 day moving average. Short term momentum indicators are trending down.

Conversely, price of the long term Treasury ETF increased $2.40 (1.95%) last week. Intermediate trend remains up. Price moved above its 20 day moving average.

 

Volatility

The VIX Index dropped 0.81 to 8.99 (8.27%) last week. Intermediate trend remains down. The Index remains below its 20 day moving average

 

Sectors

Daily Seasonal/Technical Sector Trends for November 3rd 2017

Green: Increase from previous day

Red: Decrease from previous day

 

StockTwits Released on Friday @EquityClock

Starbucks $SBUX moved above $56.43 extending an intermediate uptrend.

US Factory Orders higher by 0.8% (NSA) in September, 1.8% below average. #Manufacturing #Economy $MACRO

With a year-to-date gain in US payrolls of 1.26%, labor market on track for the weakest calendar year increase since 2010. #NFP $STUDY

US Nonfarm Payrolls higher by 0.7% in October, slightly better than average increase of 0.5% #Employment #NFP $MACRO

Canada #Employment increased by 0.2% in October, double average increase of 0.1% for the month. #CDNecon #CAD $MACRO

 

Editor’s Note: Access to our data source to identify StockTwits on individual charts was discontinued on Thursday afternoon. Another data source will be found shortly. Meanwhile, StockTwits on individual charts will be sporadic.

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