Tech Talk for Monday July 16th 2018

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Pre-opening Comments for Monday July 16th

U.S. equity index futures were mixed this morning. S&P 500 futures were unchaged in pre-opening trade.

Index futures were virtually unchanged following release of economic news at 8:30 AM EDT. Consensus for the July Empire State Manufacturing Survey was a slip to 22.0 from 25.0 in June. Actual was 22.6. Consensus or June Retail Sales was an increase of 0.5% versus an upwardly revised gain of 1.3% in May. Actual was a gain of 0.5%. Excluding auto sales, consensus for June Retail Sales was an increase of 0.3% versus a gain of 0.8% in May. Actual was an increase of 0.4%.

Advanced Micro Devices gained $0.16 to $16.43 after Stiffel Nicolus raised its target price to $21 from $17.

JB Hunt added $4.97 to $126.80 after reporting higher than consensus second quarter sales and earnings.

Bank of America improved $0.29 to $28.84 after reporting higher than consensus second quarter sales and earnings.

EquityClock’s Daily Market Comment

Following is a link:

http://www.equityclock.com/2018/07/15/stock-market-outlook-for-july-16-2018/

Note seasonality charts on KBW Bank Index, the VIX Index and the TSX Composite Index

WALL STREET RAW RADIO – SATURDAY, JULY 14, 2018

WITH YOUR HOST, MARK LEIBOVIT

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

https://tinyurl.com/y82uvlz5

 

The Bottom Line

The proverbial “Summer Rally” in North American equity markets continued last week on schedule. U.S. and Canadian equity markets have a history of moving higher from late June to mid-July prior to release of encouraging second quarter corporate results. The summer rally this year will be helped by strong second quarter corporate results (20% year-over-year gain by S&P 500 companies and a 24% increase by TSX 60 companies (led by the energy sector). Thereafter, seasonal influences turn Negative from the third week in July to mid-October. Early signs of a seasonal peak appeared on Friday when Financial SPDRs moved lower despite strong second quarter earnings recorded by Citigroup, PNC Financial and JP Morgan. Traders were sellers on news. On average during the past 20 periods, the TSX Composite, S&P 500 Index and Dow Jones Industrial Average have reached a seasonal peak on July 18th. Seasonal strength at the beginning of this week will give traders an opportunity to take profits into strength. Caveat emptor!

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Seasonal influences are particularly relevant during U.S. Mid-term election years. Volatility in equity markets increases from late April to mid-October due to concerns about a possible change in political control in Congress. These concerns are very real this year. Republicans control the House by 16 votes and the Senate by one vote. On average during a Mid-term election year, the controlling party loses 24 House seats to the opposition party. Anticipation of a possible change, regardless of the final result, is a major reason for a correction in North American equity markets between mid-July and October.

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Ditto for Canadian equities! Seasonal influences for Canadian equity markets follow a similar pattern to the U.S. They normally recover from late June to until mid-July in anticipation of encouraging second quarter corporate results and turn negative until mid-October. Data shows that the TSX Composite Index has advanced in 13 of the past 20 periods from June 1st to October 12th. However, the seven drops in the past 20 periods were significant: five of the seven drops exceeded 12%. Accordingly, caution by equity investors is advised. Current technical, seasonal and fundamental considerations suggest that a 12% + correction by the TSX Composite Index this summer is higher than average.

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Economic News This Week

July Empire State Manufacturing Survey to be released at 8:30 AM EDT on Monday is expected to slip to 22.0 from 25.0 in June.

June Retail Sales to be released at 8:30 AM EDT on Monday are expected to increase 0.5% versus a gain of 0.8% in May. Excluding auto sales, June Retail Sales are expected to increase 0.4% versus a gain of 0.8% in June.

May Business Inventories to be released at 10:00 AM EDT on Monday are expected to increase 0.4% versus a gain of 0.3% in April/

June Industrial Production to be released at 9:15 AM EDT on Tuesday is expected to increase 0.5% versus a decline of 0.1% in May. June Capacity Utilization is expected to increase to 78.2 from 77.9 in May.

Federal Reserve Chairman Powell gives his Humphrey Hawkins testimony to Congree on monetary policy at 10:00 AM EDT on Tuesday.

June Housing Starts to be released at 8:30 AM EDT on Wednesday are expected to slip to 1.32 million units (-2.2%) from 1.35 million units in May.

Beige Book is released at 2:00 PM EDT on Wednesday.

Weekly Jobless Claims to be released at 8:30 AM EDT are expected to increase to 222,000 from 214,000 last week.

July Philly Fed Index to be released at 8:30 AM EDT on Thursday is expected to increase to 22.0 from 19.9 in June.

Canada’s June Consumer Price Index to be released at 8:30 AM EDT on Friday is expected to increase 0.1% (2.3% annual) versus a 0.1% in May (2.2% annual).

Canadian May Retail Sales to be released at 8:30 AM EDT on Friday is expected increase 0.7% versus a drop of 1.2% in April. Excluding auto sales, Canadian May Retail Sales are expected to increase 0.7% versus a decline of 0.1% in April.

 

Earnings News This Week

 

spx for july 16 letter

Observations

Technical action by individual S&P 500 stocks was bullish again last week. Number of stocks breaking intermediate resistance totaled 59 while number of stocks breaking support totaled 4. Energy, Technology and Health Care stocks were notable on the list of breakouts. The Up/Down ratio increased last week to (266/176=) 1.51 from 1.29.

Earnings focus this week is on U.S. banks and technology. Sixty S&P 500 companies (and seven Dow Jones Industrial companies) are scheduled to release second quarter results this week.

U.S. economic news focuses this week are on June Retail Sales released on Monday. Humphry Hawkins testimony to Congress on Tuesday by Federal Reserve chairman Powell also will be watched closely

Canadian economic focus this week is on the Bank of Canada’s decision the Consumer Price Index released on Friday.

The U.S. Dollar Index continued to show technical signs of rolling over on entering its seasonal period of weakness at the beginning of July. A change in trend in the U.S. Dollar Index is particularly bullish for energy, precious metals and their related equities/ETFs.

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Medium term technical indicators for U.S. equity markets (Percent of stocks trading above their 50 day moving average, Bullish Percent Index) trended higher last week, typical of the “summer rally” They remain intermediate overbought

Medium term technical indicators in Canada rolled over last week but remain intermediate overbought.

Short term technical indicators for U.S. markets and sectors (20 day moving averages, short term momentum) generally continued to move higher last week and are overbought

Short term technical indicators for Canadian markets and sectors also turned higher and are overbought

The outlook for S&P 500 earnings and sales remains positive: According to FactSet , second quarter 2018 earnings are expected to increase 19.9% on an 8.8% increase in sales. Third quarter earnings are expected to increase 21.5% on a 7.6% increase in sales. Fourth quarter earnings are expected to increase 17.8% on a 5.7% increase in sales. For all of 2018, earnings are expected to increase 20.0%. First quarter 2019 earnings are expected to increase 6.9% on a 5.5% increase in sales. Second quarter 2019 earnings are expected to increase 10.8% on a 4.8% increase in sales.

Short term political concerns remain elevated. Proposed U.S. tariffs against Chinese goods to be implemented in two months were increased to products valued at $200 billion NAFTA negotiations were discontinued for July and are unlikely to resume until after the U.S. mid-term elections in November. Other issues included difficult NATO negotiations, impact of revocation of the Iran nuclear weapons agreement (including pressure on users of Iranian oil by the U.S. to halt imports), more indictments announced on Friday by

Special Council on Russia’s influence during the Presidential election. In addition, U.S. mid-term election political rhetoric has started and will ramp up into October.

 

Equity Indices and Related ETFs

Stay tuned for important changes in Seasonality rating on Jul 18th

Daily Seasonal/Technical Equity Trends for July 13th 2018

spx for july 16 letter

Green: Increase from previous day

Red: Decrease from previous day

 

Daily Seasonal/Technical Commodities Trends for July 13th 2018

crb for july 16 letterGreen: Increase from previous day

Red: Decrease from previous day

 

Daily Seasonal/Technical Sector Trends for July 13th 2018

xlk for july 16 letter

Green: Increase from previous day

Red: Decrease from previous day

 

Changes Last Week

percent change for july 16 letter

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

 

StockTwits Released on Friday @EquityClock

Wal-Mart $WMT, a Dow Jones Industrial stock moved above $87.59 completing a double bottom pattern.

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Technical action by S&P 500 stocks to 10:00: Bullish. Intermediate breakouts included $VFC $MDT $AET $WMT $PAYX

Editor’s Note: After 10:00 AM EDT, intermediate breakouts included GOOG, GOOGL, UTX, DXC, ADBE and ORCL. Breakdowns included UA and CSCO.

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Alphabet $GOOG $GOOGL, a FAANG stock moved above intermediate resistance to an all-time high extending an intermediate uptrend

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United Technologies $UTX, a Dow Jones Industrial stock moved above $129.03 extending an intermediate uptrend.

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Consumer Discretionary iShares $XLY moved above $112.62 to an all-time high extending an intermediate uptrend.

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Cisco $CSCO, a Dow Jones Industrial stock moved below $41.48 extending an intermediate downtrend.

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IGM Financial $IGM.CA moved above $39.36, $39.37 and $39.38 completing a Reverse Head & Shoulders pattern.

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Hap Sneddon on BNNBloomberg’s Market Call on Friday

Past Picks: https://www.bnnbloomberg.ca/market-call/hap-sneddon-s-past-picks~1438583

Top Picks: https://www.bnnbloomberg.ca/hap-sneddon-s-top-picks-july-13-2018-1.1107788

Market Comment:

https://www.bnnbloomberg.ca/market-call/hap-sneddon-s-market-outlook~1438559

 

S&P 500 Momentum Barometer

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The Barometer added 0.40 to 67.00 on Friday ( up 7.80 last week). It remains intermediate overbought.

 

TSX Momentum Barometer

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The Barometer dropped 2.75 to 61.00 on Friday (down 4.70 last week). It remains intermediate overbought and showing signs of rolling over.

 

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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9 Responses to “Tech Talk for Monday July 16th 2018”

  1. KC Says:

    Good Day Ron/BC,

    Quite often you’ve mentioned that when a stock is at a double top resistance, you would only buy the breakout above that resistance. However, in some cases of course we’ve had the breakout and a re-tracement where price holds for a day or two and then breaks below again. So if we are buying a break above resistance on a hold for a day or two, what then should the next strategy be – Stop loss slightly below that resistance ?

    Thanks,
    KC

  2. KC Says:

    Ron/BC,

    Would also appreciate if you have some time and can comment on charts for SAP.TO and CHP/UN.TO (overbought, wondering if its a short) please.

    Thanks,
    KC

  3. KC Says:

    Hi Paula,

    Hope you are having a good day.

    Wondering if you hold your BCE.To for dividend or trade it back and forth as well as try to capture dividend ? I have been holding it for last 3 dividend payouts. However, the recent double top and overbought RSI is making me nervous. David Cockfield and Hap Sneddon indicated on market call that its a buy at $55.90 However, couple of the other analysts thinks its a hold.

    Earnings release is in early August. I’m tempted to sell here, above my break even and eat the dividend, then re buy. What do you think ?

    Thanks,
    KC

  4. Ron/BC Says:

    KC
    I don’t like buying breakouts for that reason. Many breakouts are just short covering and smart money chasing them like scared rabbits trying to run. But the technical books say to buy breakouts. I prefer to buy support levels and if they breakdown you know to get out quickly. Even then bad news an scare longs out at support only to bounce back again soon. It pays to always have an exit plan regardless. You can always buy back in IF the stock proves itself. Being afraid of missing out will cost anyone dearly over time.
    Not at a computer now…..

  5. Paula Says:

    Hi KC, RE BCE.TO:
    I am currently holding. I have traded it back and forth to capture the dividend and may do so again but it is acting well lately. Don even mentioned it last week (July 11 I think): “BCE.TO moved above $54.72 completing a Head & Shoulders Reversal pattern.” It has moved above its 200EMA and the shorter moving averages are moving up. Also, this is supposed to be a seasonally strong period for it. Hap Sneddon and David Cockfield’s bullishness on it is encouraging. Other analysts don’t like it but everyone has their own opinion based on their own biases. If it made it back to its old high in the $60 area, that would be a nice gain and I would be tempted to sell then. So these are all reasons to hold for now but if it were to break down and reverse the recent uptrend that would be a good reason to sell. I suppose if it disappoints on earning news, that could happen but I suspect the earnings will be good enough. There is resistance around the current level ~ 56 to 57. Since you asked, that is what I think but of course, you have to decide for yourself what you want to do.

  6. rick Says:

    If somebody want to be a successful investor he/she need 3 things :

    1. capital
    2. time and patience
    3. a stock index to invest

    For example : S&P 400 Midcap = MDY or IJH

    http://www.tickertech.com/cgi/returns.mpl?symbol=MDY&smonth=01&sday=01&syear=1995&emonth=07&eday=16&eyear=2018&compareto=none&other=

    If an investor
    1. will buy this index and
    2. will wait 5 years he/she will make money = 97 %

    This index was created in 1981
    so :
    1. from 1 of January 1981 to 31 December of 1985 = 78 %
    2. from 1 of January 1982 to 31 December of 1986 = 97 %
    3. from 1 of January 1983 to 31 December of 1987 = 63 % included the crash of October 1987
    4. from 1 of January 1984 to 31 December of 1988 = 59 % included the crash of October 1987
    5. ……

    So there are 34 periods of 5 years.
    I included 2014 to 2018 even if 2018 is not over yet because the return in this moment is 48 %.

    In these 34 periods of 5 years there ONLY ONE negative .
    From 1 of January 2004 to 31 December of 2008 = minus 7 %
    From 1 of January 2005 to 31 December of 2009 = plus 9 %
    From 1 of January 2006 to 31 December of 2010 = plus 22 %
    From 1 of January 2007 to 31 December of 2011 = plus 9 %
    From 1 of January 2008 to 31 December of 2012 = plus 18 %
    These are the weaker results .
    So 33 on 34 periods were positive for a rate of success of 33/34= 97 %
    All other periods have a return above 40 % except one : 1998 to 2002= 28 %

    So all you have to do :
    1. buy an index ETF for S&P 400 Midcap = MDY or IJH
    2. have time and patience to wait 5 years
    and you will have 97 % chance of a positive result .

    I know that 9 % in 5 years is not a lot but :
    Keep in mind that in 9 periods from 34 , 9/34= 26 % , the results were above 100 % ( double the money ! ) .
    The best :
    1995 to 1999 = 162 %
    2009 to 2013 = 149 %
    1996 to 2000 = 137 %
    1988 to 1992 = 120 %
    1994 to 1998 = 120 %
    1991 to 1995 = 119 %
    1985 to 1989 = 118 %
    1989 to 1993 = 118 %

    If you don’t want to pass these good results you have to be invested .
    Timing the market is important but time in the market is important too.

    So buy an index and wait ; and in the mean time enjoy life

  7. rick Says:

    If you look to annual returns for S&P 400 : http://www.1stock1.com/1stock1_788.htm

    last 26 years , 6 negative and 20 positive
    So if you invest for only 1 year = rate of success = 20/26 = 77 %
    If you extend the period of investing to 5 years = rate of success = 33/34 = 97 %

    If you were bought in 1995 you would never be in the red ( neither in 2002 or 2008 )

  8. KC Says:

    Hi paula,

    All good input. I will consider it and make my own decision. I did notice the resistance at 57. I did look at the seasonal chart as well and it does dip a bit in the latter part of July and then goes up in August. But then seasonality does not always work. Will see whqt the rest of this week brings. Would appreciate a post from you if you act on it.

    Thanks
    KC

  9. Ron/BC Says:

    KC
    SAP.to is approaching resistance at the $46-$47 area. I wouldn’t short it though as it is in an overall uptrend. Buying at $39 support would make more sense.

    CHP/UN.TO is in a 2 year channel between $11.20 to $13.20. Not much of a range to play. Shorter term the breakout above that W pattern and above $12.16 was bullish but with resistance at the channel top of $13.20 area. Not much to play unless you are a swing trader.

    http://stockcharts.com/h-sc/ui?s=SAP.TO&p=D&yr=5&mn=0&dy=0&id=p68178320371&a=606583060

    http://stockcharts.com/h-sc/ui?s=CHP%2FUN.TO&p=D&yr=5&mn=0&dy=0&id=p41875363613&a=606583691

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