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Tech Talk for Monday May 2nd 2016

 

Economic News This Week

April ISM to be released at 10:00 AM EDT on Monday is expected to slip to 41.4 from 51.8 in March.

March Construction Spending to be released at 10:00 AM EDT on Monday is expected to increase 0.6% versus a decline of 0.5% in February.

April ADP Employment Report to be released at 8:15 AM EDT on Wednesday is expected to slip to 196,000 from 200,000 in March

Preliminary first quarter U.S. Productivity to be released at 8:30 AM EDT on Wednesday is expected to drop 1.4% versus a decline of 2.2% in the fourth quarter.

Canadian March Trade Balance to be released at 8:30 AM EDT on Wednesday is expected to improve to -$1.2 billion from -$1.9 billion in February

March U.S. Trade Deficit to be released at 8:30 AM EDT on Wednesday is expected to improve to a deficit of $41.4 billion from a deficit of $47.1 billion in February

March Factory Orders to be released at 10:00 AM EDT on Wednesday is expected to improve 0.5% versus a decline of 1.7% in February.

April ISM Services to be released at 10:00 AM EDT on Wednesday are expected to remain unchanged from March at 54.5.

Weekly Initial Jobless Claims to be released at 8:30 AM EDT on Thursday is expected to increase to 259,000 from 257,000 last week.

April Non-farm Payrolls to be released at 8:30 AM EDT on Friday are expected to slip to 207,000 from 215,000 in March. April Private Non-farm Payrolls are expected to drop to 191,000 from 195,000 in March. April Unemployment Rate is expected to remain unchanged from March at 5.0%. April Hourly Earnings are expected to increase 0.3% versus a gain of 0.3% In March.

Canadian April Employment to be released at 8:30 AM EDT on Friday is expected to increase 5,000 versus 40,600 in March. The April Unemployment Rate is expected to increase to 7.2% from 7.1% in March.

 

Earnings News This Week


The Bottom Line

Technical deterioration last week at a time when equity markets are overbought suggests a cautious strategy for equity ownership at a time when seasonal influences normally change from Positive to at least Neutral. Appropriate action is recommended for investors employing seasonal strategies that are at or near the end of their optimal period of investment.

Interesting Observations

Economic focuses this week are on the ISM report on Monday and the U.S. employment report on Friday. Both are expected to confirm slow, but steady economic growth in the U.S.

First quarter reports continue to pour in this week. Approximately 310 S&P 500 companies have reported to date. Another 124 companies (including two Dow Jones Industrial Average companies) are scheduled to report this week.

Responses to first quarter reports have been bearish. According to FactSet, 74% of S&P 500 reports released to date beat consensus earnings and 55% of reports beat consensus revenues. Despite higher than consensus results, equity markets for the most part responded only to negative surprises. On a year-over-year basis, blended earnings were down 7.6% and revenues were down 1.3%.

Companies remain cautious about the futures: 36 S&P 500 companies have issued negative earnings guidance for the second quarter while only 18 companies have issued positive guidance.

According to FactSet, earnings and sales remain soft into the second quarter followed by a recovery in the second half. Consensus earnings estimates show a year-over-year decline of 4.4% in the second quarter followed by a gain of 1.6% in the third quarter and a 7.5% gain in the fourth quarter. Consensus sales estimates show a second quarter decline of 1.0% followed by a gain of 1.8% in the third quarter and a gain of 4.3% in the fourth quarter.

Volatility in currencies is having a significant impact on equity markets. The 1.91% drop in the U.S. Dollar Index combined with the 5.28% increase in the Japanese Yen was a once in a decade events. Weakness in the U.S. Dollar Index is the primary driver for strength in commodity prices and commodity equity prices. The breakout by Gold on Friday suggests that the move in commodity prices has more upside potential despite their short term overbought technical indicators.

Technical action by U.S. equity indices and primary sectors recorded significant short term deterioration last week. Intermediate technical indicators (e.g. S&P 500 Momentum Barometer and TSX Momentum Barometer based on Percent of stocks trading above their 50 day moving average have peaked at overbought levels and are rolling over.

U.S. equity indices during U.S presidential election years tend to trend down between now and late May.

Many equity markets and primary sectors have a history of changing their seasonality at this time of year from Positive to at least Neutral and frequently Negative.

Technical action by individual S&P 500 stocks turned bearish last week for the first time since mid-February. Last week, 25 stocks broke resistance and 37 broke support. Breakouts were most notable among Technology and Consumer Discretionary stocks. This trend is expected to continue this week.

 

Equity Indices and Related ETFs

Daily Seasonal/Technical Equity Trends for April 29th 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 fell 26.28 points (1.24%) last week. Intermediate trend remains up. The Index dropped below its 20 day moving average last week. Short term momentum indicators turned lower last week.

Percent of S&P 500 stocks trading above their 50 day moving average (Also known as the S&P 500 Momentum Barometer) plunged last week to 68.00% from 80.20%. Percent remains intermediate overbought and trending down.

Percent of S&P 500 stocks trading above their 200 day moving average dropped last week to 70.40% from 74.00%. Percent remains intermediate overbought and showing early signs of rolling over.

Bullish Percent Index for S&P 500 stocks slipped last week to 75.60% from 78.40% and dropped below its 20 day moving average. The Index is intermediate overbought and showing early signs of rolling over.

Bullish Percent Index for TSX Composite stocks increased last week to 74.90% from 72.38% and remained above its 20 day moving average. The Index remains intermediate overbought, but continues to trend higher.

The TSX Composite Index added 77.74 points (0.56%) last week. Intermediate trend remains up (Score:2). Strength relative to the S&P 500 Index remains positive (Score: 2). The Index remains above its 20 day moving average (Score: 1). Short term momentum indicators are mixed (Score: 0). Technical score slipped last week to 5 from 6.

Percent of TSX stocks trading above their 50 day moving average (Also known as the TSX Momentum Barometer) slipped last week to 78.11% from 79.06%. Percent remains intermediate overbought and showing early signs of rolling over.

Percent of TSX stocks trading above their 200 day moving average increased last week to 72.11% from 70.09%. Percent remains intermediate overbought and trending higher.

The Dow Jones Industrial Average dropped 229.81 points (1.28%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Neutral. The Average fell below its 20 day moving average. Short term momentum indicators have turned lower. Technical score slipped last week to 0 from 3.

Bullish Percent Index for Dow Jones Industrial Average stocks slipped last week to 93.33% from 96.67% and dropped to its 20 day moving average. The Index remains intermediate overbought and showing early signs of rolling over.

Bullish Percent Index for NASDAQ Composite stocks slipped last week to 55.23% from 56.04% but remained above its 20 day moving average. The Index remains intermediate overbought.

The NASDAQ Composite Index dropped 130.87 points (2.67%) last week. Intermediate trend remained Neutral. Strength relative to the S&P 500 Index remained Negative. The Index fell below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -4 from -2.

The Russell 2000 Index dropped 15.85 points (1.38%) last week. Intermediate trend remained Neutral. Strength relative to the S&P 500 Index remained Positive. The Index remained above its 20 day moving average. Short term momentum indicators have turned down. Technical score slipped last week to 2 from 4.

The Dow Jones Transportation Average lost 214.35 points (2.65%) last week. Intermediate trend remained Up. Strength relative to the S&P 500 Index remains Neutral. The Average fell below its 20 day moving average on Friday. Short term momentum indicators are trending down. Technical score dropped last week to 0 from 3.

The Australia All Ordinaries Composite Index added 16.80 points (0.32%) last week. Intermediate trend remained up. Strength relative to the S&P 500 Index remained Positive. The Index remained above its 20 day moving average. Short term momentum indicators slipped to mixed. Technical score slipped to 5 from 6.

The Nikkei Average plunged 906.44 points (4.16%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to Neutral from Positive on Friday. The Average remained above its 20 day moving average. Short term momentum indicators have just rolled over and are trending down. Technical score dropped last week to 2 from 6

iShares Europe 350 units slipped $0.07 (0.17%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remained Positive. Units remained above their 20 day moving average. Short term momentum indicators have turned down. Technical score slipped last week to 4 from 5.

The Shanghai Composite Index dropped 20.92 points (0.71%) last week. Intermediate trend remains up. 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. Technical score remained at -2

Emerging Markets iShares slipped $0.15 (0.43%) last week. Intermediate trend remained up. Strength relative to the S&P 500 Index remained Neutral. Units remained above their 20 day moving average. Short term momentum indicators continue to trend down. Technical score remained at 2.

 

Currencies

The U.S. Dollar Index plunged 2.02 (2.16%) last week. Intermediate trend remained down. The Index dropped last week below its 20 day moving average. Short term momentum indicators are trending down.

The Euro gained 2.15 (1.91%) last week. Intermediate trend remained up. The Euro moved back above its 20 day moving average. Short term momentum indicators are trending up.

The Canadian Dollar added another US 0.74 cents (0.94%) last week. Intermediate trend remained up. The Canuck Buck remained above its 20 day moving average. Short term momentum indicators continue to trend up, but are overbought.

The Japanese Yen jumped 4.53 (5.06%) last week. Intermediate trend remains up. The Yen moved back above its 20 day moving average. Short term momentum indicators are trending up.

 

Commodities

Daily Seasonal/Technical Commodities Trends for April 29th 2016

 

Green: Increase from previous day

Red: Decrease from previous day

 

The CRB Index gained 4.96 points (2.76%) last week in response to weakness in the U.S. Dollar Index. Intermediate trend remained up. Strength relative to the S&P 500 Index remained Positive. The Index remained above its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 6.

Gasoline added $0.05 per gallon (3.23%) last week. Intermediate trend remained up. Strength relative to the S&P 500 Index changed to Positive from Neutral. Gas remained above its 20 day moving average. Short term momentum indicators continued to trend higher. Technical score: 6

Crude Oil jumped $2.26 per barrel (5.17%) last week. Intermediate trend remained up. Strength relative to the S&P 500 Index remained positive. Crude remained above its 20 day moving average. Short term momentum indicators are trending up. Technical score remained at 6.

Natural Gas dropped $0.13 (5.73%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remained Positive. “Natty” remained above its 20 day moving average. Short term momentum indicators are trending down. Technical score slipped last week to 4 from 6.

The S&P Energy Index added 2.46 points (0.49%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remained Positive. The Index remained above its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 6.

The Philadelphia Oil Services Index gained 3.42 points (1.93%) last week. Intermediate trend remained up. Strength relative to the S&P 500 Index remained Positive. The Index remained above its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 6.

Gold jumped $64.90 per ounce (5.28%) last week thanks mainly to weakness in the U.S. Dollar. Intermediate uptrend was confirmed on Friday on a move above $1,287.80. Strength relative to the S&P 500 Index returned to Positive. Gold moved back above its 20 day moving average. Short term momentum indicators are trending up. Technical score improved last week to 6 from 0.

Silver gained $0.94 per ounce (5.55%) last week. Intermediate trend remains 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. Strength relative to Gold remained Positive.

The AMEX Gold Bug Index jumped 31.17 points (15.41%) last week. Intermediate trend remained up. Strength relative to the S&P 500 Index remained Positive. The Index remained above its 20 day moving average. Short term momentum indicators are trending up. Technical score improved last week to 6 from 5. Strength relative to Gold remained Positive.

Platinum gained $68.60 per ounce (6.78%) last week. Intermediate trend remains up. Relative strength: Positive. Trades above its 20 day MA. Momentum indicators are trending higher.

Palladium gained $14.90 per ounce (2.44%) last week. Intermediate trend remains up. Relative strength remained Positive. PALL Remained above its 20 day moving average. Short term momentum indicators continue to trend up. Technical score remained at 6.

Copper added $0.01 per lb. (0.44%) last week. Intermediate trend remained Neutral. Strength relative to the S&P 500 Index remained Positive. Copper remained above its 20 day moving average. Short term momentum indicators are trending down. Technical score slipped last week to 2 from 4.

The TSX Metals & Mining Index jumped 75.84 points (14.63%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remained Positive. The Index remained above its 20 day moving average. Short term momentum indicators returned to uptrends. Technical score remained last week at 6.

Lumber added 13.30 (4.73%) last week. Intermediate trend remains up. Relative strength turned Positive. Lumber moved above its 20 day MA. Momentum indicators: Trending up.

The Grain ETN added $1.40 (4.39%) last week. Intermediate trend remained up. Strength relative to the S&P 500 Index remained Positive. Units remained above their 20 day moving average. Momentum indicators are trending up. Technical score improved to 6 from 4

The Agriculture ETF slipped $0.16 (0.33%) 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 at 6.

 

Interest Rates

The yield on 10 year Treasuries slipped 6.9 basis points (3.65%) last week. Intermediate trend remains down. Yield remains above its 20 day moving average. Short term momentum indicators are trending down.

Conversely, price of the long term Treasury ETF added $1.02 (0.79%) last week. Intermediate trend remains up. Price remained below its 20 day moving average

 

Volatility

The VIX Index jumped 2.48 (18.76%) last week. Intermediate trend remains down. The Index moved above its 20 day moving average. Short term momentum indicators are trending up.

 

Sectors

Daily Seasonal/Technical Sector Trends for March April 29th 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:

 

Mark Lebovit’s Wall Street Raw Radio Broadcast

WALL STREET RAW RADIO WITH MARK LEIBOVIT AND GUEST SINCLAIR NOE AND BERT DOHMEN – APRIL 30, 2016: 

http://tinyurl.com/j7klzy7

 

StockTwits Released on Friday

Head and shoulders topping pattern on the chart of Apple could suggest a move to around $83.

Technicals for S&P 500 stocks to 10:10: Bearish. Breakouts: $AMZN, $NWL, $MNST, $NOV. Breakdowns: $WFM, $NDAQ, $ANTM, $SRCL, $CA, $ORCL, $TEL

Editor’s Note: After 10:10 AM EDT, one stock broke resistance (LEG) and seven stocks broke support: NWSA, TGT, COST, CVS, TSO, WDC and LYB

 

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