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Tech Talk for Monday November 7th 2016

 

Editor’s Note: Mr. Vialoux is scheduled to appear on BNN’s “Market Call Tonight” this evening at 6:00 PM EST

The Bottom Line

Tomorrow is an important day for North American equity indices. Three possibilities available: Hillary wins and equity markets move higher, Trump wins and equity markets move lower, results of the election are contested due to a variety of reasons (recounts, terrorist interference, claims of voter interference) and equity market move lower. The more important question is “What happens after the initial reaction”? History shows that U.S. equity markets move higher (on average 3%) between the day after Election Day and Inauguration Day (January 20th) when investors anticipate at least partial approval of the President’s new mandate by Congress. However, reality strikes shortly after when investors realize that Congressional action on the mandate will not come quickly. U.S. equity markets move lower into late January/March. Thereafter, U.S. equity markets have a history of moving higher. Enclosed is the relevant chart:

 

CSTA Technicians Day

Enclosed is a Youtube video of Don Vialoux’s presentation to the Canadian Society of Technical Analysts on October 13th. Topic was “Combining Technical Analysis with Seasonality Analysis”. Sound in the tape is low, but is well worth watching.

Don Vialoux, CSTA Technicians Day, October 15 2016: click here

 

Economic News This Week

Canadian October Housing Starts to be released at 8:15 AM EST on Tuesday are expected to drop to 195,000 from 219,341 in September.

September Wholesale Inventories to be released at 10:00 AM EST on Wednesday are expected to increase 0.2% versus a decline of 0.2% in August.

Weekly Jobless Claims to be reported at 8:30 AM EST on Thursday are expected to slip to 262,000 from 265,000 last week.

November Michigan Sentiment Index to be released at 10:00 AM EST on Friday is expected to improve to 87.9 from 87.2 in October.

 

Earnings News This Week

 

Observations

Technical action by individual S&P 500 stocks was bearish last week: 57 stocks broke intermediate support while only 22 stocks broke intermediate resistance. Notably weaker were Consumer Discretionary stocks with 11 breakdowns and the energy sector. Notably stronger were the Materials stocks with 5 breakouts. Number of S&P 500 stocks in an intermediate uptrend slipped last week to 169 from 185, number of stocks in an intermediate neutral trend increased last week to 55 from 49 and number of stocks in an intermediate downtrend increased to 284 from 274. The Up/Down ratio (169/284=) dipped to 0.60 from 0.68.

Short term technical indicators (e.g. momentum, 20 day moving average) for most equity markets, commodities and sectors (other than China, Transportation and Metals) moved lower last week and many are deeply oversold. However, signs of a bottoming have yet to appear.

Intermediate technical indicators for most equity markets, commodities and sectors (e.g. Percent trading above 50 day moving average, Bullish Percent Index) have returned to oversold levels and are trending down. However, signs of a bottom have yet to appear.

On average, third quarter results released to date by S&P 500 companies exceeded consensus: 85% of companies have reported to date, 71% exceeded consensus earnings and 54% exceeded consensus revenues. Blended earnings are up 2.7% on a year-over-year basis (versus 1.6% last week). Blended revenues are up 2.6% (versus 2.7%) last week.

Another 31 S&P 500 companies and one Dow Industrial company (Disney) are scheduled to release quarterly results this week.

Fourth quarter prospects by S&P 500 stocks are positive, but diminished: 57 companies have issued negative fourth quarter guidance while 25 companies have issued positive guidance. According to FactSet, fourth quarter earnings on a year-over-year basis are expected to increase 3.9% (versus 4.6% last week) and revenues are expected to increase 5.0% (versus 5.2% last week).

Prospects for S&P 500 companies in 2017 also are positive, but diminished. According to FactSet, earnings are expected to increase 11.6% (versus 12.0% last week) and 5.9% in revenues (versus 5.8% last week).

Third quarter earnings for Canada’s top 60 companies are scheduled to pour in this week. Consensus is calling for an average (median) gain on a year-over-year basis of 6.1%.

Economic and political focus this week is on results of the election on Tuesday. Polls released over the weekend show that Hillary Clinton likely will win sufficient College Electorate votes in a close battle to become the next President. Chances are high that results of the election will not be known by midnight on Tuesday.

North American equity markets have a history of moving higher from post- the-election- day response to early January.

Other economic reports this week are not expected to be market movers.

Seasonal influences for most equity markets and economically sensitive indices and stocks are currently positive. The TSX Composite Index probably reached a seasonal low on October 4th at 14,468.03. The seasonal low for the Dow Jones Industrial Average and S&P 500 Index is pending and likely will be reached shortly after results of the election are determined.

 

Equity indices and related ETFs

Daily Seasonal/Technical Equity Trends for November 4th 2016

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 plunged 41.23 points (1.94%) last week. The Index dropped nine consecutive trading days for the first time since 1980. Intermediate trend remained down. The Index remains below its 20 day moving average and closed near its 200 day moving average on Friday. Short term momentum indicators are trending down and are deeply oversold.

Percent of S&P 500 stocks trading above their 50 day moving average (Also known as the S&P 500 Momentum Barometer) dropped last week to 27.00 from 33.00, matching its October 13th low at 27.00. Percent is intermediate oversold and trending down, but has yet to show signs of bottoming.

Percent of S&P 500 stocks trading above their 200 day moving average plunged last week to 53.40 from 60.20. Percent has dropped from intermediate overbought to intermediate neutral. Trend remains down and has yet to show signs of bottoming.

Bullish Percent Index for S&P 500 stocks dropped last week to 50.20% and remained below its 20 day moving average. The Index has dropped from an intermediate overbought level to an intermediate neutral level. Trend remains down, but has yet to show signs of bottoming

Bullish Percent Index for TSX stocks dropped last week to 69.51% from 72.36% and remained below its 20 day moving average. The Index remains intermediate overbought and trending down.

The TSX Composite Index dropped 275.14 points (1.87%) last week. Intermediate trend remains up (Score: 2). Strength relative to the S&P 500 Index remains positive (Score: 2). The Index moved below its 20 day moving average (Score: -1). Short term momentum indicators are trending down and are deeply oversold (Score: -1). Technical score dropped last week to 2 from 4.

Percent of TSX stocks trading above their 50 day moving average (Also known as the TSX Momentum Barometer) plunged last week to 29.29% from 47.70%. Percent has dropped to an intermediate oversold level. Trend remains down, but has yet to show signs of change.

Percent of TSX stocks trading above their 200 day moving average dropped last week to 67.36% from 72.38%. Percent remains intermediate overbought and trending down.

The Dow Jones Industrial Average dropped 272.91 points (1.50%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains down. The Average remained below its 20 day moving average. Short term momentum indicators turned down. Technical score last week dropped to -2 from 0.

Bullish Percent Index for Dow Jones Industrial Average dropped last week to 70.00% from 73.33% and remained below its 20 day moving average. The Index remains intermediate overbought and trending down.

Bullish Percent Index for NASDAQ Composite stocks dropped last week to 51.88% from 56.68%. The Index remains intermediate overbought and trending down.

The NASDAQ Composite Index plunged 143.73 points (2.77%) last week. Intermediate trend changed last week to down from up on move below 5,169.76. Strength relative to the S&P 500 Index turned negative from neutral. The Index remains below its 20 day moving average. Short term momentum indicators are trending down and are deeply oversold. Technical score last week dropped to -6 from 0.

The Russell 2000 Index dropped 24.17 points (2.04%) last week. Intermediate trend remain neutral. 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 down and are deeply oversold. Technical score remained last week at -4.

The Dow Jones Transportation Average added 56.59 points (0.71%) last week thanks mainly to declining energy costs. Intermediate trend remains up. Strength relative to the S&P 500 Index remains positive. The Average moved above its 20 day moving average. Short term momentum indicators are trending up. Technical score last week increased to 6 from 2.

The Australia All Ordinaries Composite Index plunged 107.80 points (2.01%) last week. Intermediate downtrend was confirmed on a move below 5,294.10. Strength relative to the S&P 500 Index remained negative. The Index remained below its 20 day moving average. Short term momentum indicators are trending down and are deeply oversold. Technical score last week remained at -6.

The Nikkei Average plunged 541.05 points (4.33%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains positive. The Average dropped below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to 2 from 6.

Europe iShares dropped $0.90 (2.36%) last week. Intermediate downtrend was confirmed on a move below $37.71. 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 and are deeply oversold. Technical score remained last week to -6.

The Shanghai Composite Index added 21.05 points (0.68%) last week. Intermediate uptrend was confirmed on Thursday when the Index briefly moved above 3,140.44. 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 up. Technical score increased last week to 6 from 4.

Emerging Markets iShares dropped $1.00 (2.71%) last week. Intermediate trend changed to down from up on a move below $36.38. Strength relative to the S&P 500 Index changed to negative from neutral. Units remain below their 20 day moving average. Short term momentum indicators are trending down and are deeply oversold. Technical score dropped last week to -6 from 0.

 

Currencies

The U.S. Dollar Index dropped 1.36 (1.38%) last week. Intermediate trend remains up. The Index dropped below its 20 day moving average. Short term momentum indicators are trending down.

The Euro gained 1.50 (1.37%) 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 lost US 0.09 cents (0.12%) last week. Intermediate trend remains down. The Canuck Buck remains below its 20 day moving average. Short term momentum indicators are trending down.

The Japanese Yen added 1.58 (1.65%) 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 gained 3.26 (2.67%) last week. Intermediate trend changed to neutral from down on a move above 123.25. The Pound moved above its 20 day moving average. Short term momentum indicators are trending up.

 

Commodities

Daily Seasonal/Technical Commodities Trends for November 4th 2016

Green: Increase from previous day

Red: Decrease from previous day

 

The CRB Index dropped 6.90 points (4.64%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index turned negative. 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

Gasoline dropped 7.6 cents per gallon (5.22%) last week despite a spike in mid-week related to an explosion at a Columbia pipeline that curtailed distribution. Relative strength changed to negative from neutral. Gas dropped below its 20 day MA. Momentum remained down.

Crude oil dropped another $4.63 per barrel (9.51%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to negative from neutral. Crude remained below its 20 day moving average. Short term momentum indicators are trending down. Technical score slipped last week to -2 from 0.

Natural Gas dropped $0.34 per MBtu (10.93%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index changed to negative from neutral. “Natty” moved below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped to -6 from 0.

The S&P Energy Index dropped 11.09 points (2.17%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to negative from neutral. The Index remained below its 20 day moving average. Short term momentum indicators are trending down. Technical score slipped to -2 from 0.

The Philadelphia Oil Services Index dropped 3.89 points (2.53%) last week. Intermediate trend remained neutral. 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 down. Technical score remained at -4.

Gold gained $27.70 per ounce (2.17%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains positive. Gold remains above its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 2.

Silver gained $0.57 per ounce (3.20%) last week. Intermediate trend remained up. Strength relative to the S&P 500 Index remained positive. Silver remained above its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 6.

The AMEX Gold Bug Index gained 10.37 points (5.01%) last week. Intermediate trend changed to up from down on a move above 218.50. 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 6 from -2.

Platinum gained $23.10 per ounce (2.35%) last week. Intermediate trend remains down. Relative strength remained positive. PLAT remained above its 20 day MA. Momentum is up.

Palladium gained $8.45 per ounce (1.37%) last week. Trend remains down. Strength relative to the S&P 500 Index changed to neutral from negative. PALL remains below its 20 day MA.

Copper gained $0.08 per lb. (3.65%) last week. Intermediate trend remains neutral. 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 4.

The Base Metal ETN gained $0.21 (1.48%) 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.

Lumber gained $12.20 (4.07%) last week. Trend remains down. Relative strength turned to positive from negative. Trades below its 20 day MA. Momentum turned higher.

Grain ETN dropped $0.54 (1.85%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains positive. Units dropped below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to 2 from 6.

The Agriculture ETF slipped $0.06 (0.12%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains positive. Units remain below their 20 day moving average. Short term momentum indicators are trending up. Technical score improved last week to 4 from 2.

 

Interest Rates

Yield on 10 year Treasuries dropped 6.2 basis points (3.36%) last week. Intermediate trend remains up. Yield remains above its 20 day moving average. Short term momentum indicators are trending down.

Conversely, price on the long term Treasury ETF gained $1.29 (0.99%) last week. Intermediate trend remains down. Units remained below their 20 day moving average.

 

Volatility

The VIX Index jumped 6.52 (40.25%) last week. Intermediate uptrend was confirmed on a move above 20.51. The Index remained above its 20 day moving average. Short term momentum indicators are trending up.

 

Sectors

Daily Seasonal/Technical Sector Trends for November 4th 2016

Green: Increase from previous day

Red: Decrease from previous day

 

Special Free Services available through www.equityclock.com

Equityclock.com is offering free access to a data base showing seasonal studies on individual stocks and sectors. The data base holds seasonality studies on over 1000 big and moderate cap securities and indices. To login, simply go to http://www.equityclock.com/charts/ Following is an example:

 

StockTwits Released on Friday

S&P 500 Index tests its 200 day moving average as it awaits the outcome of the uncertain events ahead.

Technicals for S&P 500 stocks to 10:15: Bearish. Breakouts: $NBL, $ALXN, $MSI, $AES. Breakdowns: $GRMN, $PCLN, $KHC, $WFM, $WLTW, $FLR, $CSCO, $GOOG, $SYMC, $QRVO, $AMZN

BCE.CA, a TSX 60 stock moved below $56.16 extending an intermediate downtrend.

Metro $MRU.CA, a TSX 60 stock moved below $40.56 extending an intermediate downtrend.

The Auto ETF $CARZ moved below $32.75 completing a double top pattern. Parts stocks also weak e.g. MGA

TransAlta, a TSX 60 stock moved below $5.55 extending intermediate downtrend.

 

PRE-ELECTION SPECTACULAR ON WALL STREET RAW RADIO WITH GUESTS DINESH D’SOUZA, HENRY WEINGARTEN, SINCLAIR NOE –

http://tinyurl.com/hyqz7ca

 

Disclaimer: Seasonality and technical ratings offered in this report by www.timingthemarket.ca 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