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Tech Talk for Monday July 3rd 2017

 

Editor’s Note: Next Tech Talk report is to be released on Monday July 10th

The Bottom Line

Equity markets around the world (except China) remain intermediate overbought and vulnerable to a correction. The usual period of summer weakness from Mid-June to Mid-October has arrived. The Dow Jones Industrial Average and S&P 500 Index probably reached an intermediate peak on June 19th. However, volatility measured by the VIX Index remains relatively mute. Political events in a wide variety of countries (most notably in the U.S.) could change that quickly. Be careful out there! A spike in volatility above levels reached last week will be the most likely sign that the summer correction has been confirmed. Meanwhile, holding a robust position in cash in your investment portfolio makes sense.

 

Economic News This Week

June ISM to be released at 10:00 AM EDT on Monday is expected to increase to 55.0 from 54.9 in May.

May Construction Spending to be released at 10:00 AM EDT on Monday is expected to increase 0.3% versus a 1.4% drop in April

May Factory Orders to be released at 10:00 AM EDT on Wednesday are expected to slip 0.2% versus a decline of 0.7% in April.

FOMC Minutes from the June 13-14 meeting are to be released at 2:00 PM EDT on Wednesday

June ADP Private Employment report is to be released at 8:15 AM EDT on Thursday. May report showed a 253,000 gained

May U.S. Trade Deficit to be released at 8:30 AM EDT on Thursday is expected to slip to $46.2 billion from $47.6 billion in April

Weekly Jobless Claims to be released at 8:30 AM EDT on Thursday are expected to increase to 248,000 from 244,000 last week

Canada’s May Merchandise Trade Balance to be released at 8:30 AM EDT on Thursday is expected to break even versus a deficit of $370 million in April.

June ISM Services to be released at 10:00 AM EDT on Thursday are expected to slip to 56.5 from 56.5 in May

June Non-farm Payrolls to be released at 8:30 AM EDT on Friday are expected to increase to 175,000 from 138,000 in May. June Private Non-farm Payrolls, June Unemployment Rate is expected to remain unchanged from May at 4.3%. June Hourly Earnings are expected to increase 0.3% versus a gain of 0.2% in May.

Canada’s June employment to be released at 8:30 AM EDT on Friday is expected to add 20,000 versus a gain of 54,500 in May. June employment rate is expected to slip to 6.5% from 6.6% in May.

G20 meeting is scheduled to be held on Friday.

 

Earnings Reports This Week

No major companies are scheduled to report this week. Second quarter reports start to flow in late next week. Consensus second quarter earnings per share estimates for the Dow 30 Industrial companies shows an average (median) year-over-year gain of 3.0%. Consensus for S&P 500 company earnings shows an average year-over-year gain of 6.6%. Consensus second quarter earnings per share estimates for TSX 60 companies show an average (median) year-over-year gain of 11.3%.

 

Observations

Trading activity is expected to remain diminished this week. Today is a statutory holiday in Canada and tomorrow is the Independence Day holiday in the U.S. Many financial institutions are in a partially holiday mood.

Economic news in Canada and the U.S. this week is expected to focus on the employment reports to be released on Friday. Both reports are expected to be bullish.

Technical action by S&P 500 stocks were strangely mixed last week: 41 stocks broke intermediate resistance and 45 stocks broke support. Strange because break outs and breakdowns were highly concentrated as investors rotated between sectors. Breakouts were dominated by the Financials. Breakdowns were dominated by Utilities and Technology. Number of stocks in an intermediate uptrend dropped to 289 from 298, number of stocks in a neutral trend slipped to 45 from 47 and number of stocks in a downtrend increased to 166 from 155. The Up/Down ratio slipped last week to (289/166=) 1.74 from 1.92.

The earnings and sales outlook for S&P 500 stocks remains promising: According to FactSet, 23 companies have reported second quarter results to date with 18 reporting higher than consensus earnings. Consensus calls for a year-over-year gain in earnings by 6.6%. Consensus for sales is an increase of 4.9%. 76 companies have issued negative guidance for the second quarter while 38 companies have issued positive guidance. No S&P 500 companies are scheduled to report this week. Beyond the second quarter, consensus offered by FactSet shows a 7.4% increase in third quarter earnings and a 5.1% increase in sales. Fourth quarter earnings are expected to increase 12.4% and sales are expected to increase 5.1% last week. For 2017, earnings are expected to increase 9.8% and sales are expected to increase 5.4%.

Short term technical indicators (momentum, above/below 20 day moving average) deteriorated for most equity indices and sectors last week (exception: China and the financial sector). Notably weaker were European equity indices and related ETFs. Short term technical indicators for commodities and commodity stocks turned higher thanks to U.S. Dollar Index weakness.

Medium term technical indicators (Percent of stocks trading above their 50 day moving average, Bullish Percent Index) generally moved lower last week from overbought levels.

Seasonal influences for Canadian and U.S. equity indices normally are bullish between now and July 17th, the date that frequently is a seasonal peak. This year, technical evidence currently suggest that the S&P 500 Index and Dow Jones Industrial Average probably peaked on June 19th

U.S. equity markets have a history of moving lower from mid-June to mid-October in Presidential cycle years after a two term President has been replaced (as indicated this year). See red line in the chart below.

 

Equity Indices and Related ETFs

Daily Seasonal/Technical Equity Trends for June 30th 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 lost 14.89 points (0.61%) last week. Intermediate trend remains up. The Index dropped below 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 Index) dropped last week to 65.20 from 66.20. Percent remains intermediate overbought and trending down.

Percent of S&P 500 stocks trading above their 200 day moving average slipped last week to 74.00 from 74.20. Percent remains intermediate overbought.

Bullish Percent Index for S&P 500 stocks was unchanged last week at 72.40 and remained above its 20 day moving average. The Index remains intermediate overbought.

Bullish Percent Index for TSX stocks increased last week to 65.46 from 64.26, but remained below its 20 day moving average. The Index remains intermediate overbought.

The TSX Composite Index lost 137.37 points (0.90%) last week. Intermediate trend remains down (Score: -2). Strength relative to the S&P 500 Index remains negative (Score: -2). The Index remained below its 20 day moving average (Score:-1). Short term momentum indicators have turned down again (Score: -1). Technical score remained last week at -6.

Percent of TSX stocks trading above their 50 day moving average (Also known as the TSX Momentum Barometer).dropped last week to 42.15 from 47.11. Percent has dropped to a slightly oversold level.

Percent of TSX stocks trading above their 200 day moving average slipped last week to 54.13 from 54.55. Percent remains slightly overbought and trending down.

The Dow Jones Industrial Average dropped 45.13 points (0.21%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains positive. The Average recovered back above its 20 day moving average on Friday. Short term momentum indicators are trending down. Technical score dropped last week to 0 from 4.

Bullish Percent Index for Dow Jones Industrial stocks increased last week to 83.33 from 76.67 and moved above its 20 day moving average. The Index remains intermediate overbought.

Bullish Percent Index for NASDAQ Composite stocks dipped last week to 61.62 from 62.34, but remained above its 20 day moving average. The Index remains intermediate overbought.

The NASDAQ Composite Index dropped 124.83 points (1.99%) last week. Intermediate trend changed to down from up on a move below 6,107.85. Strength relative to the S&P 500 Index changed last week to Negative from Neutral. The Index moved below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -6 from 4.

The Russell 2000 Index added 0.58 (0.04%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index turned 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 Dow Jones Transportation Average gained 175.06 points (1.86%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index turned positive. The Average remained above its 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to 4 from 0.

The Australia All Ordinaries Composite Index added 9.40 points (0.16%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains neutral. The Index dropped below its 20 day moving average on Friday. Short term momentum indicators are trending up. Technical score improved last week to -2 from – 4

The Nikkei Average slipped 99.24 points (0.49%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed last week to positive from neutral. The Average dropped below its 20 day moving average on Friday. Short term momentum indicators have turned down. Technical score remained last week at 2.

Europe iShares added $0.09 (0.20%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to neutral from negative. Units remained below their 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 2.

The Shanghai Composite Index gained 34.56 points (1.09%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index changed to positive from neutral. The Index remained above its 20 day moving average. Short term momentum indicators are trending up. Technical score improved last week to 2 from -2.

Emerging Markets iShares slipped $0.13 (0.31%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed last week to positive from neutral. Units closed at their 20 day moving average. Short term momentum indicators are trending down. Technical score slipped last week to 3 from 4.

 

Currencies

The U.S. Dollar Index plunged 1.52 (1.16%) last week. Intermediate trend remains down. The Index remains below its 20 day moving average. Short term momentum indicators are trending down.

The Euro gained 2.24 (2.00%) last week. Intermediate trend remains up. The Euro remained above its 20 day moving average. Short term momentum indicators are trending up.

The Canadian Dollar gained 1.75 cents U.S. (2.32%) last week. Intermediate trend changed to up from neutral on a move above 77.10. The Canuck Buck remained above its 20 day moving average. Short term momentum indicators are trending up.

The Japanese Yen dropped 0.89 (0.99%) last week. Intermediate trend remains up. The Yen dropped below its 20 day moving average. Short term momentum indicators are trending down.

The British Pound gained 4.50 (3.54%) last week. Intermediate uptrend was confirmed on Friday on a move above 130.43. 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 June 30th 2017

Green: Increase from previous day

Red: Decrease from previous day

* Excludes adjustment from rollover of futures contracts

The CRB Index added 7.04 points (4.20%) in response to weakness in the U.S. Dollar Index. Intermediate trend remains down. Strength relative to the S&P 500 Index turned positive. The Index moved above its 20 day moving average on Friday. Short term momentum indicators are trending up. Technical score increased last week to 2 from -6.

Gasoline gained $9.2 cents per gallon (6.47%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index turned positive. Gas moved above its 20 day moving average last week. Short term momentum indicators are trending up. Technical score increased last week to 2 from -6.

Crude Oil gained $3.03 per barrel (7.04%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index turned positive. Crude moved above its 20 day moving average on Friday. Short term momentum indicators are trending up. Technical score improved last week to 2 from -6.

The S&P Energy Index added 3.08 points (0.65%) 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 are trending up. Technical score improved last week to -4 from -6.

The Philadelphia Oil Services Index gained 2.86 points (2.24%) 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 improved last week to -4 from -6.

Gold dropped $14.10 per ounce (1.12%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains negative. Gold remains below its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 0.

Silver slipped $0.02 per ounce (0.12%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains negative. Silver remains below its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at -2.

The AMEX Gold Bug Index dropped 8.71 points (4.48%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains neutral. The Index remains below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -4 from 0.

Platinum slipped $3.00 per ounce (0.32%) last week. Trend remains down. Relative strength remains negative. Trades below its 20 day moving average. Momentum is down.

Palladium dropped $20.00 per ounce (2.33%) last week. Trend changed to down on Friday on a move below $845.10. Strength relative to the S&P 500 Index dropped to neutral. PALL moved below its 20 day moving average. Short term momentum indicators are trending down. Score: -4

Copper gained 8.7 cents per lb. (3.32%) last week. Intermediate trend changed to up from down on a move above 2.6520 cents. Strength relative to the S&P 500 Index changed to positive from neutral. Copper remained above its 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to 6 from 0.

BMO Equal Weight Base Metals ETF gained $0.34 (3.63%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index turned positive. Units moved above their 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to 2 from -4.

Lumber added $2.20 (0.60%) last week. Trend remains down. Relative strength remains neutral. Trades above its 20 day moving average. Momentum has turned up. Score: 0

Grain ETN advanced 1.82 (6.70%) last week. Trend turned up on Friday on a move above $28.70. Momentum turned positive on Friday. Units moved above their 20 day moving average. Short term momentum indicators are trending up. Technical score increased to 6 from -6.

The Agriculture ETF slipped $0.25 (0.45%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index turned negative. Units remained below their 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last weekl to -2 from 0.

 

Interest Rates

Yield on 10 year Treasuries increased 15.8 basis points (7.37%) last week. Intermediate trend remains down. Yield moved above its 20 day moving average. Short term momentum indicators are trending up.

Conversely, price of the long term Treasuries ETF dropped $2.66 (2.08%) last week. Intermediate trend remains up. Units dropped below their 20 day moving average.

 

Volatility

The VIX Index gained 1.14 (11.35%) to 11.18 last week, but reached as high as 15.16 earlier this week. The Index moved back above its 20 day moving average.

 

Sectors

Daily Seasonal/Technical Sector Trends for June 30th 2017

Green: Increase from previous day

Red: Decrease from previous day

 

StockTwits Released on Friday @EquityClock

Nike $NKE, a Dow Industrial stock moved above $54.67 and $56.91 on higher than consensus earnings setting uptrend

Technical action by S&P 500 stocks to 10:00: Quietly bullish. Breakouts: $NKE $VFC $TWX. No breakdowns.

Husky Energy $HSE.CA, a TSX 60 stock moved below $14.80 extending an intermediate downtrend.

The DAX Index and related Germany iShares moved below $12,489.95 completing a double top pattern.

Grain prices finally show signs of bottoming. $JJG (1/3 corn, soybeans,wheat) moves above $28.70

Soybean ETN $SOYB responding to smaller than expected Brazil crop.

Another reason for $JJG breakout: Strength in Wheat ETN $WEAT.

 

Keith Richards’ Blog

The Canadian Dollar: Follow the big red line

Following is a link:

http://www.valuetrend.ca/follow-big-red-line/

 

WALL STREET RAW RADIO – JULY 1, 2017 – WITH HOST, MARK LEIBOVIT AND GUESTS DON VIALOUX, HENRY WEINGARTEN, SINCLAIR NOE, JEFFREY FRIEDLAND FROM INTIVA AND OWC PHARMA, AND KATE SMITH SINGING ‘GOD BLESS AMERICA’ FROM THE 1943 FILM  – ‘THIS IS THE ARMY’  - 

http://tinyurl.com/yak38zs8

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