Tech Talk for Monday October 15th 2018

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Pre-opening Comments for Monday October 15th

U.S. equity index futures were lower this morning. S&P 500 futures were down 2 points in pre-opening trade.

Index futures moved slightly lower following release of economic news at 8:30 AM EDT. Consensus for September Retail Sales was an increase of 0.6% versus a gain of 0.1% in August. Actual was an increase of 0.1%. Excluding auto sales, consensus for September Retail Sales was an increase of 0.4% versus a gain of 0.3% in August. Actual was down 0.1%. Consensus for the October Empire Manufacturing Survey was 20.00 versus 19.00. Actual was 21.1.

Bank of America added $0.14 to $28.60 after reporting higher than consensus third quarter earnings.

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Sears Holdings (SHLD $0.41) has filed for chapter 11 Bankruptcy.

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Ralph Lauren (RL $121.42) is expected to open higher after JP Morgan upgraded the stock to Overweight. Target price was raised to $150 from $145.

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UnitedHealth Group added $1.39 to $261.00 after Sun Trust raised its target price to $330 to $300.

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EquityClock’s Daily Market Comment

Following is a link:

http://www.equityclock.com/2018/10/12/stock-market-outlook-for-october-15-2018/

Note seasonality charts on TSX Industrial sector and TSX Consumer Discretionary sector. Also, note updated seasonality chart on the Dow Jones Industrial Average during a Mid-term Election Year.

WALL STREET RAW RADIO

SATURDAY, OCTOBER 13, 2018:

WITH YOUR HOST MARK LEIBOVIT AND GUESTS DON VIALOUX AND SINCLAIR NOE:

https://tinyurl.com/yc3oqbvg

 

Excerpts from Don Vialoux’ comments on Wall Street Raw

U.S equity markets took scary moves last week. The Dow Jones Industrial Average dropped more than 1300 points on Wednesday and Thursday. Trader concerns included impact on the economy from Hurricane Michael, rising interest rates and trade negotiations with China (The Shanghai Composite Index dropped by more than 5% on Thursday). However, weakness has returned U.S. equities to intermediate oversold levels. Percent of S&P 500 stocks trading above their 50 day moving average dropped to 11%, lowest level since January 2016. Historically, a drop to this level and a subsequent recovery has led to significant stock market gains over the next two months.

Seasonal influences on U.S. equity indices normally turn positive at this time of year. Traders are lining up their choices to buy when indices show technical signs of a short term bottom. Sectors that have a history of moving higher at this time of year include Technology, Materials, Consumer Discretionary and Industrials.

Gold and gold stocks/ETFs finally received a bid last week. They recorded breakouts after completing short term double bottom and reverse Head & Shoulders patterns. A word of caution! This sector has a history of moving sideways between now and mid-December when it enters its next seasonal upturn

Cannabis stocks held up well during stock market weakness last week. Next Wednesday, recreational use of cannabis becomes legal in Canada. Also, the sector was helped by encouraging news including a report that Altria has been discussing a possible equity participation in Aphria.

 

The Bottom Line

Seasonal influences for major U.S. equity indices turned positive at the end of last week. Note seasonality charts below for the S&P 500 Index and Dow Jones Industrial Average.

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Seasonal influences normally are most notable during U.S. Mid-term election years. Investors are concerned 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 23 House seats to the opposition party. Recent election polls suggest that history is about to repeat. Anticipation of a possible change, regardless of the final result, is a major reason for uncertainty between now and the Mid-term Election on November 6th

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Seasonal influences also turned positive at the end of last week for the Canadian equity market. The TSX Composite Index has closely followed its seasonal pattern this year: Performance of the TSX Composite Index normally is negative from the third week in July to mid-October. This year, the TSX Composite Index moved lower from its seasonal peak reached on July 13th. Last week the Index extended a Head & Shoulders pattern. Significant technical signs of a bottom have not surfaced yet despite the gain on Friday.

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Volatility in U.S. equity indices spiked mainly due to a combination of Hurricane Michael, breakdown by the Shanghai Composite to a 4 year low and fear of higher interest rates

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European equity indices and related ETFs also completed ominous long term double top/Head & Shoulders patterns last week.

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Preferred strategy for traders is to prepare to invest in North American equity markets and economic sensitive sectors for a seasonal move that could last to the second quarter of 2019. Watch for short term technical indicators for equity markets to show signs of recovery. Currently, short term indicators are trending down and have yet to show sufficient signs of bottoming despite gains on Friday. Be patient. Now is the time to line up potential equity purchase candidates before “pulling the trigger” with most of your purchasing power.

Economic News This Week

September Retail Sales to be released at 8:30 AM EDT on Monday are expected to increase 0.6% versus a gain of 0.1% in August. Excluding car sales, September Retail Sales are expected to increase 0.4% versus a gain of 0.3% in August.

October Empire Manufacturing Survey to be released at 8:30 AM EDT on Monday is expected to increase to 20.00 from 19.00 in September.

August Business Inventories to be released at 10:00 AM EDT on Monday are expected to increase 0.5% versus a gain of 0.6% in July.

September Capacity Utilization to be released at 9:15 AM EDT on Tuesday is expected to increase to 78.2 from 78.1 in August. September Industrial Production is expected to increase 0.2% versus a gain of 0.4% in August.

September Housing Starts to be released at 8:30 AM EDT on Wednesday are expected to slip to 1.221 million units from 1.282 million units in August.

Weekly Initial Jobless Claims to be released at 8:30 AM EDT on Thursday is expected to increase to 215,000 from 214,000 last week.

October Philly Fed Index to be released at 8:30 AM EDT on Thursday is expected to slip to 21.0 from 22.9 in September.

September Canadian Consumer Price Index to be released at 8:30 AM EDT is expected to slip 0.1% versus a drop of 0.1% in August.

August Canadian Retail Sales to be released at 8:30 AM EDT on Friday are expected to increase 0.4% versus a gain of 0.3% in July.

September Existing Home Sales to be released at 10:00 AM EDT on Friday are expected to slip to 5.30 million units from 5.34 million units in August.

 

Earnings News This Week

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Observations

Third quarter reports by S&P 500 companies are a focus this week. Six percent of companies have reported to date. Most beat consensus earnings per share (86%) and sales (68%) estimates. However, responses to reports released on Friday were mixed to negative, notably by the Money Center Banks (JPM, C, WFC, PNC).

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Another 55 S&P 500 companies are scheduled to release results this week (including 7 Dow Jones Industrial companies). Focus is on reports by financial and technology companies.

Technical action by individual S&P 500 stocks was substantially bearish last week. Number of stocks breaking intermediate resistance totaled 23 (including 16 utilities stocks) while number of stocks breaking support totaled 169. The Up/Down ratio dropped last week to (145/263=) 0.55 from 1.38.

U.S. economic focus this week is on September Retail Sales and Housing Starts

Canadian economic focus this week is on Consumer Prices.

Medium term technical indicators for U.S. equity markets (e.g. Percent of stocks trading above their 50 day moving average, Bullish Percent Index) moved significantly lower last week. They are intermediate oversold, but continue to trending down. See charts near the end of this report

Medium term technical indicators in Canada also moved significantly lower last week. They also are intermediate oversold, but continue to trend lower. See charts near the end of this report.

Short term technical indicators for U.S. markets and sectors (20 day moving averages, short term momentum) continued to trend lower last week and have yet to show signs of bottoming.

Short term technical indicators for Canadian markets and sectors also continued to trend lower last week and have yet to show sufficient signs of bottoming.

Short term political concerns remain elevated. Issues include heightened tariff wars with China, the Mueller investigation and ramp up of U.S. mid-term election political rhetoric.

Longer term outlook for S&P 500 company earnings remains positive. According to FactSet, consensus calls for a 19.1% increase in earnings and a 7.3% increase in sales in the third quarter. Consensus calls for a 17.0% increase in earnings and 6.4% increase in sales in the fourth quarter. Consensus calls for a 20.3% increase in earnings and a 8.1% increase in sales for 2018. Consensus calls for a 7.1% increase in earnings and 6.6% in sales in the first quarter 2019. Consensus calls for a 7.3% increase in earnings and 5.0% in sales in the second quarter 2019. Consensus for 2019 calls for a 10.5% increase in earnings and a 5.5% increase in sales.

 

Trader’s Corner

Daily Seasonal/Technical Equity Trends for October 12th 2018

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Green: Increase from previous day

Red: Decrease from previous day

 

Commodities

Daily Seasonal/Technical Commodities Trends for October 12th 2018

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Green: Increase from previous day

Red: Decrease from previous day

 

Sectors

Daily Seasonal/Technical Sector Trends for October 12th 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 10:00: Quiet. No intermediate breakouts. Breakdowns $HCP

Editor’s Note: After 10:00 AM EDT, U.S. equity indices experienced higher than average swings, both up and down. No S&P 500 stocks broke resistance. Breakdowns included BHF, LNC, TXT, MO, KMI, PSX, AMP, CB, RE, MTD, ETN, JCI, ROK, ECL, ESS and FRT.

Coffee ETN $JJOFF is steaming!

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Keith Richards Blog

Keith says, “Yay, the markets are down!” Following is the link:

https://www.valuetrend.ca/acting-like-a-scout /

 

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Seasonal Advantage Portfolio continues to mitigate much of this market weakness. How are you positioned? equityclock.com/about/seaso… $SPX $SPY

 

Hap Sneddon on BNN Bloomberg

Hap is the guest analyst on today’s Market Call at 12:00 Noon.

 

S&P 500 Momentum Barometers

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Percent of S&P 500 stocks trading above their 50 day moving average plunged last week to 15.60 from 49.20. It is deeply oversold, but has yet to show sufficient evidence of bottoming despite strength on Friday.

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Bullish Percent Index plunged last week to 46.00 from 63.80. It changed to intermediate neutral from intermediate overbought and continues to trend down.

 

TSX Momentum Barometers

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Percent of TSX stocks trading above their 50 day moving average dropped last week to 16.75 from 26.05. It remains intermediate oversold, but continues to trend down despite the gain on Friday.

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Bullish Percent Index for TSX stocks dropped last week to 48.57 from 52.65. It remains intermediate neutral, but continues to trend down.

 

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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5 Responses to “Tech Talk for Monday October 15th 2018”

  1. Bernie Says:

    Re: #35 from yesterday: That’s awesome that you have your dividend stocks “trained” to provide your “salary”. If you have a well stocked mix of quality dividend growers you should be fine and sleep well. There’s less volatility in dividend growth than there is in price movement.

  2. Bernie Says:

    Florence, sorry I forgot to include your name in #1.

  3. Ron/BC Says:

    There are a lot of markets very oversold & testing important support presently. EX:XLV, XLY, XSP.to, SPY, XLK, XLI, and many more. Important test here………..You definitely don’t want to see these breakdown from here if long. Also you don’t want to see a dead cat bounce and then see them roll over again!

    https://stockcharts.com/h-sc/ui?s=XLV&p=D&yr=2&mn=0&dy=0&id=p40756798887&a=579408548

    https://stockcharts.com/h-sc/ui?s=XLY&p=D&yr=2&mn=0&dy=0&id=p06793687083&a=579408542

  4. Ana Says:

    Tech Talk

    I have tried to post a chart three (3) times, but it does not post.

    Is there a problem with the link?

  5. Ana Says:

    Once again:

    https://invst.ly/8vq7h

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