Tech Talk for Tuesday September 4th 2018

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Pre-opening Comments for Tuesday September 4th

U.S. equity index futures were lower this morning. S&P 500 futures were down 5 points in pre-opening trade.

Crude Oil gained $1.38 to $71.18 per barrel in pre-opening trade. Strength partially is related to Tropical Storm Gordon entering oil and gas producing areas in the Gulf of Mexico.

TransOcean (RIG $12.11) plans to purchase Ocean Rig (ORIG $28.08) in a cash and stock deal valued at $2.7 billion.

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UPS added $2.00 to $124.88 after Raymond James upgraded the stock to Strong Buy from Market Perform.

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Verizon fell $0.60 to $53.77 after Barclay’s downgraded the stock to Equal Weight from Over Weight.

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EquityClock’s Daily Market Comment

Following is a link:

http://www.equityclock.com/2013/06/04/stock-market-outlook-for-june-5-2013/

Note seasonality charts on S&P 500 Index, Materials sector and Natural Gas

Jon Vialoux on BNN Bloomberg’s Market Call Tonight

Following are links to the show on Friday:

Top Picks

https://www.bnnbloomberg.ca/video/jon-vialoux-s-top-picks~1477305

Past Picks

https://www.bnnbloomberg.ca/video/jon-vialoux-s-past-picks~1477274

Market Outlook

https://www.bnnbloomberg.ca/video/jon-vialoux-s-market-outlook~1477251

 

WALL STREET RAW RADIO

FOR SATURDAY, SEPTEMBER 1

WITH YOUR HOST, MARK LEIBOVIT

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

https://tinyurl.com/y8fjul95

 

Excerpts from the Wall Street Raw interview on Saturday

Historically, the month of September has been the weakest month for U.S. and Canadian equity markets. During the month, analysts frequently review their estimates following release of second quarter results and lower their estimates for the remainder of the year. Stock prices respond accordingly. On the charts, U.S. equity markets currently are short term overbought and showing early technical signs of rolling over. History is about to repeat. Canadian equity markets already have rolled over from their seasonal high on July 13th.

The Trans Mountain Pipeline was the headline in Canada last Thursday. Shareholders ratified sale of the Pipeline to the Canadian government for $4.5 billion. On the same day, the Federal Court of Appeal quashed the Canadian government’s construction permits for expansion of the pipeline. Canadian “oil” stocks immediately moved lower on the news. Canadian Pacific, the largest transporter of Canadian oil by rail moved to an all-time high.

NAFTA negotiations are impacting equity markets. U.S. equities moved higher after the U.S. and Mexico reached a trade agreement on Monday. As of Friday, NAFTA negotiations with Canada were continuing but failed to reach a conclusion and the Canadian Dollar moved lower. If negotiations reach an agreement, the Canadian Dollar and Canadian equity prices are expected to rise. Conversely, no agreement is expected to weaken the Canadian Dollar and Canadian equity prices.

Cannabis stocks continue to move higher as October 17th approaches. That’s the date when the public use of cannabis becomes legal in Canada.

The Bottom Line

Responses to second quarter reports were mixed agiain last week. Companies that offered positive guidance (Hewlett Packard Enterprises, Salesforce.com, Lululemon) saw their share prices move smartly higher. Conversely, companies that offered lower guidance (Best Buy, American Eagle Outfitters, Abercrombie &Fitch, Tiffany, Campbell Soup, Dollar Tree) saw their share prices fall significantly.

Seasonal influences for major U.S. equity indices are not following their regular pattern this year. Seasonal influences, that normally turn Negative from the third week in July to mid-October, have not surfaced yet despite market turmoil last week related to trade (Mexico: positive, China: negative, Canada: Negative)

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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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In contrast, Canadian equity markets continue to follow their seasonal pattern. They normally are negative from the third week in July to mid-October. This year, the TSX Composite

Index has continued to drift down/sideways from its seasonal peak reached on July 13th

The summer swoon in North American equity markets frequently is related to increased volatility. Last week, the VIX Index showed early technical signs of increasing during its traditional mid-July to mid-October period. Traders will monitor closely.

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Economic News This Week

July Construction Spending to be released at 10:00 AM EDT on Tuesday is expected to increase 0.6% versus a decline of 1.1% in June.

August Manufacturing ISM to be released at 10:00 AM EDT on Tuesday is expected to slip to 57.7 from 58.1 in July.

July U.S. Trade Deficit to be released at 8:30 AM EDT on Wednesday is expected to increase to $49.6 billion from $46.3 billion in June

July Canadian Trade Deficit to be released at 8:30 AM EDT on Wednesday is expected to increase to $1.0 billion from $0.63 billion in June.

Bank of Canada statement on monetary policy is released at 10:00 AM EDT on Wednesday. Interest rate to Canada’s banks is expected to remain at 1.50%.

August ADP Employment Report to be released at 8:15 AM EDT on Thursday is expected to see a dip in Private Employment to 187,000 from 219,000 in July.

Weekly Jobless Claims to be released at 8:30 AM EDT on Thursday are expected to increase to 215,000 from 213,000 last week.

July Factory Orders to be released at 10:00 AM EDT on Thursday are expected to drop 0.5% versus a gain of 0.7% in June.

August ISM Services to be released at 10:00 AM EDT on Thursday are expected to increase to 56.7 from 56.5 in July.

August Non-Farm Payrolls to be released at 8:30 AM EDT on Friday are expected to increase to 187,000 from 157,000 in July. August Private Non-farm Payrolls are expected to increase to 184,000 from 170,000 in July. August Unemployment Rate is expected to slip to 3.8% from 3.9% in July. August Hourly Earnings are expected to increase 0.2% versus a gain of 0.3% in July.

August Canadian Employment to be released at 8:30 AM EDT on Friday is expected to increase 15,000 versus a gain of 54,100 in July. August unemployment rate is expected to increase to 5.9% from 5.8% in July.

 

Earnings News This Week

No major U.S. or Canadian companies are scheduled to report.

 

Observations

Technical action by individual S&P 500 stocks was bullish last week. Number of stocks breaking intermediate resistance totaled 42 while number of stocks breaking support totaled 13. The Up/Down ratio increased last week to (290/151=) 1.92 from 1.77.

U.S. economic focus this week is on the August employment report on Friday

Canadian economic focuses this week also is on the employment report on Friday

Medium term technical indicators for U.S. equity markets (e.g. Percent of stocks trading above their 50 day moving average, Bullish Percent Index) slightly higher last week and remain intermediate overbought

Medium term technical indicators in Canada last week were mixed last week. They remain intermediate neutral and continue to trend lower.

Short term technical indicators for U.S. markets and sectors (20 day moving averages, short term momentum) were mixed last week

Short term technical indicators for Canadian markets and sectors moved lower last week.

Short term political concerns remain elevated. Issues include heightened tariff wars, stalled NAFTA negotiations (resuming with Canada on Wednesday) and the ramp up of U.S. mid-term election political rhetoric.

Longer term outlook for S&P 500 company earnings remains positive, but less positive than previous. Second quarter results (99% reported to date) increased 25.0% and sales increased 10.1% on a year-over-year basis. According to FactSet, earnings gains during the next four quarter will be positive on a year-over-year basis, but at a slightly lower rate than previous. Analysts have lowered their third quarter earnings guidance on 72 S&P 500 companies while raising guidance on 24 companies. Consensus calls for a 20% increase in earnings and a 7.7% increase in sales in the third quarter. Consensus calls for a 17.4% increase in earnings and 6.0% sales in the fourth quarter. Consensus calls for a 7.2% increase in earnings and 6.2% is sales in the first quarter 2019. Consensus calls for a 7.5% increase in earnings and 4.5% in sales in the second quarter.

 

Trader’s Corner

Equities and Related ETFs

Daily Seasonal/Technical Equity Trends for August 31st 2018

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Green: Increase from previous day

Red: Decrease from previous day

 

Commodities

Daily Seasonal/Technical Commodities Trends for August 31st 2018

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Green: Increase from previous day

Red: Decrease from previous day

 

Sectors

Daily Seasonal/Technical Sector Trends for August 31st 2018

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Green: Increase from previous day

Red: Decrease from previous day

 

Technical scores

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

 

Changes Last Week

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StockTwits Released on Friday @EquityClock

Technical action by S&P 500 stocks to 10:30: Quietly bearish. Intermediate breakout: $ULTA. Breakdowns: $CMA $IVZ $TDG $COO.

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Chile iShares $ECH moved below $43.23 extending an intermediate downtrend. Impacted by lower copper prices.

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TransAlta $TA.CA moved above $7.71 extending an intermediate uptrend.

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Canada Industrial Product Prices still running well above average YTD, now 2.2% above the seasonal norm. $MACRO #CDNecon #CAD

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S&P 500 Momentum Barometers (Medium term indicators)

Percent of S&P 500 stocks trading above their 50 day moving average increased last week to 70.20 from 69.80. Percent remains intermediate overbought.

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Bullish Percent Index for S&P 500 stocks increased last week to 67.80 from 65.80 last week. It remains intermediate overbought.

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TSX Momentum Barometers (Medium term indicators)

Percent of TSX stocks trading above their 50 day moving average slipped to 47.70 last week from 49.79. Percent remains intermediate neutral and trending down.

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Bullish Percent Index for TSX stocks increased last week to 59.76 from 58.54. The Index remains intermediate neutral and trending down.

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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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3 Responses to “Tech Talk for Tuesday September 4th 2018”

  1. KC Says:

    Good Morning Ron/BC,

    Thank you for your detailed comments on SAP, BMO and CWB last week.

    Cheers,
    KC

  2. KC Says:

    Hello Paula,

    Are you continuing to hold onto your BCE holdings for now ?

    Thanks
    KC

  3. Paula Says:

    KC, yes. Goes X-dividend September 13, next week. Current yield ~ 5.6%.

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