Tech Talk for Monday January 8th 2018

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Pre-opening Comments for Monday January 8th

U.S. equity index futures were lower this morning. S&P 500 futures were down 4 points in pre-opening trade.

Darden Restaurants (DRI $99.31) is expected to open higher after the company raised its 2018 earnings guidance

Lululemon gained $2.07 to $81.50 after increasing its fourth quarter sales and earnings guidance

Kohl’s added $4.19 to $58.55 after raising its fiscal fourth quarter earnings guidance.

United Technologies gained $2.32 to $113.89 after Goldman Sachs upgraded the stock to Buy from Hold.

Caterpillar added $2.37 to $164.33 after JP Morgan upgraded the stock to Overweight from Neutral.

EquityClock’s Daily Market Comment

Following is a link:

http://www.equityclock.com/2018/01/05/stock-market-outlook-for-january-8-2018/

Note seasonality charts on Non-farm Payrolls, Hourly Earnings and Canadian Employment

WALL STREET RAW RADIO SATURDAY, JANUARY 6, 2018:

GUESTS INCLUDE: DON VIALOUX, HENRY WEINGARTEN, HARRY BOXER AND SINCLAIR NOE

https://tinyurl.com/ydydr2ey

 

The Bottom Line

Once again, several broadly based U.S. equity indices as well as the TSX Composite Index reached all-time highs last week. The Santa Claus rally period from mid-December to the first week in January proved once again as the strongest three week period in the year for North American equity indices. Traditional seasonally strong sectors (e.g. Consumer Discretionary, Industrials, Technology and Materials) lead the market higher. However, medium term technical indicators for the S&P 500 Index, NASDAQ Composite Index, Dow Jones Industrial Average as well as TSX Composite Index remain overbought and seasonal influences turn neutral for most equity markets and sectors turn neutral from the second week in January into February. Preferred strategy is to take at least partial trading profits on strength this week in seasonally attractive equities and Exchange Traded Funds with the end of the “Santa Claus rally”. Seasonally, significant intermediate upside move for most equity markets and economically sensitive sectors (other than commodity sensitive sectors) is expected to resume in February.

The exceptions are Energy, Oil Services and Precious Metals sectors. They have recovered strongly since mid-December when they entered into their period of seasonal strength that lasts until at least the end of February. Look for continuing outperformance by these sectors. Buy on weakness.

 

Economic News This Week

Annual Canadian Housing Starts for December to be released at 8:15 AM EST on Tuesday are expected to drop to 220,000 from 251,000 in November.

Weekly Jobless Claims to be released at 8:30 AM on Thursday are expected to drop to 245,000 from 250,000 last week.

December Producer Prices to be released at 8:30 AM EST on Thursday are expected to increase 0.2% versus a gain of 0.4% in November. Excluding food and energy December Producer Prices are expected to increase 0.2% versus a gain of 0.3% in November.

December Consumer Prices to be released at 8:30 AM EST on Friday are expected to increase 0.1% versus a gain of 0.4% in November. Excluding food and energy, December Consumer Prices are expected to increase 0.2% versus a gain of 0.1% in November.

December Retail Sales to be released at 8:30 AM EST on Friday are expected to increase 0.4% versus a gain of 0.8% in November. Excluding auto sales, December Retail Sales are expected to increase 0.4% versus a gain of 1.0% in November.

November Business Inventories to be released at 10:00 AM EST on Friday are expected to increase 0.3% versus a decline of 0.1% in October.

 

Earnings News This Week

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Observations

The Santa Claus rally from mid-December to the end of the first week in January (December 15th to January 6th this year) once again was exceptionally profitable for investors. The TSX Composite Index gained 1.9% and the S&P 500 Index gained 2.5%.

Technical action by individual S&P 500 stocks remained bullish last week, typical during the Santa Claus rally period. Number of stocks breaking resistance totaled 66 while number of stocks breaking support totaled 10. Number of stocks trading in an uptrend increased to 334 from 315, number of stocks trading in a neutral trend decreased to 50 from 54 and number of stocks in a downtrend decreased to 116 from 131. The Up/Down ratio increased last week to (334/116=) 2.88 from 2.40.

Economic news this week focuses on inflation (PPI and CPI) and Retail Sales

Fourth quarter earnings reports start to appear this week. Focus is on reports by major U.S. banks released on Friday. Seven S&P 500 companies are scheduled to report (including one Dow Jones Industrial stock, JP Morgan)

Medium term technical indicators (Percent of stocks trading above their 50 day moving average, Bullish Percent Index) remain at intermediate overbought levels, but have yet to show technical signs of rolling over.

Short term technical indicators for equity markets and most sectors (short term momentum, above/below 20 day moving average) generally are overbought and turned higher last week.

Seasonal influences on a wide variety of equity indices and sectors began to turn neutral/positive in early October and tend to reach a short term peak at the end of the first week in January. Beyond the first week in January, North American equity indices have a history of entering into a flat period lasting into February. See charts below. Also, note changes in seasonal ratings for equity indices and sectors.

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The outlook for S&P earnings and sales remains positive. According to FactSet, fourth quarter earnings are expected to increase 10.5% on a year-over-year basis (down from 10.9% last week) on a 6.7% increase in sales. Estimates beyond the fourth quarter of 2017 have been revised higher thanks partially to changes in U.S. corporate tax laws. First quarter 2018 earnings are expected to increase 12.0% (up from 11.2% 0 on a 6.8% increase in sales. Second quarter 2018 earnings are expected to increase 12.3% (up from 10.9%) on a 6.8% increase in revenues. Third quarter earnings are expected to increase 13.4% (up from 12.4%) on a 5.6% increase in revenues (down from 5.8%). Fourth quarter 2018 earnings are expected to increase 13.0% (up from 11.7%) on a 4.4% increase in revenues. For all of 2018, earnings are expected to increase 13.1% (up from 11.8%) on a 5.7% increase in sales (up from 5.6%).

Short term political uncertainties remain, including North Korean “sabre rattling”, struggling NAFTA negotiations and increased scrutiny by special council on Russia’s influence on the Presidential election

Earnings and revenue prospects beyond the fourth 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 13% in 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 are translated into U.S. Dollars. The U.S. Dollar Index averaged 100 in the fourth quarter of 2016 and 101 in the first quarter of 2017. Weakness again last week to below the 92 level likely will encourage analysts to raise their 2018 earnings and revenue estimates.

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Equity Indices and Related ETFs

Daily Seasonal/Technical Equity Trends for January 5th 2018

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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.

 

S&P 500 Index gained 69.54 points (2.60%) last week. Intermediate trend remains up. The Index remains above its 20 day moving average. Short term momentum indicators have turned back up.

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Percent of S&P 500 stocks trading above their 50 day moving average (Also known as the S&P 500 Momentum Barometer) increased last week to 82.80 from 72.80, the highest level in 18 months. Percent remains intermediate overbought, but has yet to show signs of peaking.

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Percent of S&P 500 stocks trading above their 200 day moving average increased last week to 79.80 from 78.60. Percent remains intermediate overbought.

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Bullish Percent Index for S&P 500 stocks increased last week to 82.40 from 78.20 to the highest level since June 2014 and remained above its 20 day moving average. The Index remains intermediate overbought, but has yet to show signs of peaking.

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Bullish Percent Index for TSX stocks increased last week to 67.34 from 65.86 and moved above its 20 day moving average. The Index remains intermediate overbought.

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TSX Composite Index gained 340.31 points (2.10%) last week. Intermediate trend remains up (Score: 2). Strength relative to the S&P 500 Index returned to Negative from Neutral (Score: -2). The Index remains above its 20 day moving average (Score: 1). Short term momentum indicatotrs are trending up (Score: 1). Technical score dropped last week to 2 from 4.

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Percent of TSX stocks trading above their 50 day moving average (Also known as the TSX Momentum Barometer) slipped last week to 59.58 from 61.57. Percent remains intermediate overbought and showing early signs of rolling over.

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Percent of TSX stocks trading above their 200 day moving average increased last week to 69.58 from 67.36. Percent remains intermediate overbought.

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Dow Jones Industrial Average increased 576.65 points (2.33%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed last week to Neutral from Positive. The Average remains above its 20 day moving average. Short term momentum indicators turned back up. Technical score remained last week at 4.

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Bullish Percent Index for Dow Jones Industrial stocks remained unchanged last week at 93.33, matching its 20 day moving average. The Index remains intermediate overbought.

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Bullish Percent Index for NASDAQ Composite stocks increased last week to 66.05 from 63.95 and remained above its 20 day moving average. The Index remains intermediate overbought.

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NASDAQ Composite Index gained 233.17 points (3.38%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Neutral. The Index remains above its 20 day moving average. Short term momentum indicators turned back up. Technical score increased last week to 6 from 4.

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Russell 2000 Index gained 24.50 points (1.60%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Negative. The Index remains above its 20 day moving average. Short term momentum indicators turned back up. Technical score increased last week to 2 from 0.

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Dow Jones Transportation Average gained 299.45 points (2.82%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Positive. The Average remained above its 20 day moving average. Short term momentum indicators turned back up. Technical score increased last week to 6 from 4.

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Australia All Ordinaries Composite Index gained 70.90 points (1.15%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to Negative from Neutral. The Index remains above its 20 day moving average. Short term momentum indicators have turned back up. Technical score slipped last week to 2 from 4.

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Nikkei Average gained 949.59 points (4.17%) last week. Intermediate trend remains up. The Average reached a 25 year high. Strength relative to the S&P 500 Index changed to Positive from Neutral. The Average remained above its 20 day moving average. Short term momentum indicators turned back up. Technical score increased last week to 6 from 2.

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Europe iShares gained $1.37 (2.90%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index turned Positive from Neutral. Units remained above their 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to 6 from 4.

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Shanghai Composite Index gained 84.58 points (2.56%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index remained Neutral. The Index remains above its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 2.

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Emerging Markets iShares gained $2.01 (4.27%) 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.

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Currencies

U.S. Dollar Index lost another 0.16 (0.17%) last week. Intermediate trend remains down. The Index remained below its 20 day moving average. Short term momentum indicators are trending down, but are oversold.

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The Euro gained 0.26 (0.22%) last week. Intermediate trend remains up. The Euro remains above its 20 day moving average. Short term momentum indicators are trending up, but are overbought and showing early signs of rolling over.

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Canadian Dollar gained US1.01 cents (1.27%) last week following release of an encouraging December employment report. Intermediate trend remains neutral. The Canuck Buck remains above its 20 day moving average. Short term momentum indicators are trending up, but are overbought.

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Japanese Yen slipped 0.31 (0.35%) last week. Intermediate trend remains up. The Yen slipped back below its 20 day moving average on Friday. Short term momentum indicators are mixed.

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British Pound added 0.66 (0.49%) last week. Intermediate trend remains up. The Pound remains above its 20 day moving average. Short term momentum indicators are trending up, but are overbought.

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Commodities and Related ETFs

Daily Seasonal/Technical Commodities Trends for January 5th 2018

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Green: Increase from previous day

Red: Decrease from previous day

* Excludes adjustment from rollover of futures contracts

CRB Index slipped 0.41 (0.21%) 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 turned down on Friday. Technical score slipped last week to 4 from 6.

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Gasoline slipped $0.01 per gallon (0.56%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index remains Positive. Gas remains above its 20 day moving average. Short term momentum indicators have turned down. Technical score dropped last week to 2 from 4.

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Crude Oil gained another $1.02 per barrel (1.69%) 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.

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Natural Gas dropped $0.05 per MBtu (1.75%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index changed last week to Neutral from Positive. “Natty” remains above its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -2 from 2.

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S&P Energy Index added 21.00 points (3.94%) 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.

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Philadelphia Oil Services Index jumped 7.56 points (5.06%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Positive. The Index remained above its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 6.

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Gold gained another $13.00 per ounce (0.99%) last week. Intermediate trend remains up. 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 6.

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Silver gained another $0.13 per ounce (0.76%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains Positive. Silver remains above its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 2.

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AMEX Gold Bug Index gained another 5.82 points (3.03%) last week. Intermediate trend remains neutral. 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 4.

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Platinum gained $36.90 per ounce (3.93%) last week. Trend changed to neutral on a move above $959.20. Relative strength: Positive. Trades above its 20 day MA. Momentum : up.

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Palladium gained $21.20 per ounce (2.00%) last week. Trend remains up. Relative strength remains positive. PALL remains above its 20 day MA. Momentum remains up.

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Copper slipped $0.07 per lb. (2.12%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Positive. Copper remains above its 20 day moving average. Short term momentum indicators have turned down. Technical score dropped last week to 4 from 6.

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BMO Base Metals ETF added $0.36 (2.90%) 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.

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Lumber gained $17.20 (3.89%) last week. Intermediate trend remains up. Relative strength remains Positive. Lumber remains above its 20 day MA. Momentum turned back up.

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Grain ETN added $0.23 (0.94%) last week. Intermediate trend remains down. Relative strength remains Negative. Units moved above their 20 day MA. Momentum remains up.

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Agriculture ETF gained $1.88 (3.05%) 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.

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Interest Rates

Yield on 10 year Treasuries increased 7.1 basis points (2.95%) last week. Intermediate trend remains up. Yield remained above its 20 day moving average. Short term momentum indicators are trending up.

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Price of long term Treasury ETF dropped $1.15 (1.00%) last week. Intermediate trend remains up. Units dropped below their 20 day moving average.

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Volatility

The VIX Index plunged 1.82 (16.49%) last week. The Index dropped below its 20 day moving average.

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Sectors

Daily Seasonal/Technical Sector Trends for January 5th 2018

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Green: Increase from previous day

Red: Decrease from previous day

 

StockTwits Released on Friday @EquityClock

Technical action by S&P 500 stocks to 10:30: Bullish. Breakouts: $AMZN $KMX $CVS $SPGI $HSIC $LLL $FISV. Breakdown: $AVB

Editor’s Note: Breakouts after 10:30 AM EST include TMO, NWS, RMD, WAT, PHM, HUM, TAP, IDXX and WU. Breakdown: NI

Valeant $VRX.CA, a TSX 60 stock moved above $29.28 extending an intermediate uptrend.

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Amazon $AMZN, one of the FAANG stocks broke to an all-time high extending an intermediate uptrend.

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FirstService $FSV.CA moved below $84.82 setting new intermediate downtrend.

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Constellation Software $CSU.CA, a TSX 60 stock moved below $736.08 completing a double top pattern on a move below $736.08.

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Disclaimer: Seasonality and technical ratings offered in this report and at

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

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10 Responses to “Tech Talk for Monday January 8th 2018”

  1. Sandra Says:

    EIF.TO has not found support yet. Anybody watching it ?

  2. dutchcanuck Says:

    BMO Investorline reported slow service with some outages this morning due to the enormous amount of transactions being processed. Usual apologies with the promise of adding more capacity.
    Had no trouble personally other than some of the quotes did not update properly.
    With all the trx being processed the banks must be making a ton of revenue on that line of business.

  3. Ron/BC Says:

    Telus despite being oversold and testing support and outperforming other Utility stocks is breaking down below $47 price support. A break below $47 that holds would suggest a continued pullback to its one year uptrendline and solid price support at $45.

    http://stockcharts.com/h-sc/ui?s=T.TO&p=D&yr=2&mn=0&dy=0&id=p96232957765&a=502812062

    http://stockcharts.com/h-sc/ui?s=T.TO&p=D&yr=9&mn=0&dy=0&id=p86031483703&a=532616940

  4. roy Says:

    Hello Ron/BC
    Thanks for your responses to my queries wrt SU and CNQ. Much appreciated.

  5. Ron/BC Says:

    Roy
    Both those big Oil stocks were at multi year resistance levels as I mentioned. Also keep in mind the broad stock market is presently reported to be at the most overbought level in over 20 years. Most of the stocks and ETFs I look at have RSI levels at or approaching 80-90 which is extremely overbought. Doesn’t guarantee of a selloff immediately but is a shot across the bow warning at the very least.

  6. Zero/TX Says:

    Ron/BC et al: re ETFs, Check https://www.etfscreen.com/rsftrends.php for a weekly RS at a 3 month spread on 1 page of all ETF’s. You’ll get to see up and comers by RS.
    Not like the OLD days when we had to wait till Friday evening to check W$W on PBS and see if Louis (Rukeyser) was going on vacation to sell, and then buy according to his return, thanks to the Elves as Mark (Leibovit), Marty (Zweig) and Laszlo (Birinyi).
    Or for 44 Wall Street Fund that only had 12 – 14 stocks in the mix that let me make 129% my first year in the ‘70’s,
    or for the Daily 1 – 2 minute Matter-of-Fact commentary (Mr. Time and Price) Mike Jenkins on the financial radio network.
    Those were the days!
    ZERO/TX

  7. roy Says:

    Thanks again for the heads up Ron/BC

  8. Ron/BC Says:

    Roy
    Another thing to keep in mind is the small futures speculators that are ultimately wrong when at an extreme are very, very long $WTIC. And they are also very, very short the U.S.$ which is at support and very oversold. Just something else to think about.

  9. Ron/BC Says:

    Here is a chart of EMA.to that has been mentioned many times on this site. Like most Utility stocks it has sold off and is presently very oversold,showing a positive divergence on the oscillators,closed on the high of the day and is also bouncing off its uptrendline support. To be fussy clearing $47.26 would confirm very bullish price action. Other Utility stocks are also starting to reverse back up. A reversal in the broad market could see Utility stocks outperforming once again. Hard to believe with interest rate bullishness in the news constantly but the charts do suggest such a scenario ahead. I’m sure there will be a ‘story’ to explain it all away.

    http://stockcharts.com/h-sc/ui?s=EMA.TO&p=D&yr=1&mn=0&dy=0&id=p13247919086&a=526551696

  10. Ron/BC Says:

    Zero/TX
    Thanks for the link. I’ve seen it before but hadn’t come across it for some time.

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