Tech Talk for Tuesday October 30th 2018

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Pre-opening Comments for Tuesday October 30th

U.S. equity index futures were higher this morning. S&P 500 futures were up 12 points in pre-opening trade.

Coca Cola (KO $46.46) is expected to open higher after reporting higher than consensus third quarter sales and earnings.

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Under Armour advanced $1.81 to $20.00 after reporting higher than consensus third quarter sales and earnings. The company also raised guidance for the fourth quarter.

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Pfizer dropped $1.53 to $41.70 after reporting lower than consensus third quarter sales. The company also lowered its fourth quarter guidance.

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General Electric fell $0.25 to $10.91 after reporting lower than consensus third quarter sales and earnings. The company also cut its quarterly dividend to $0.01 from $0.12 per share and announced plans for a restructure.

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EquityClock’s Daily Market Comment

Following is a link:

http://www.equityclock.com/2018/10/29/stock-market-outlook-for-october-30-2018/

 

StockTwits Released Yesterday @EquityClock

Brazil iShares $EWZ responded favourably to election of a new “right leaning” president.

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Technical action by S&P 500 stocks to 10:00 AM EDT: Quietly bullish Intermediate breakouts: $TSCO $RHT $IFF $JWN. No breakdowns.

Editor’s Note: Wild and crazy day by U.S. equity indices yesterday! The Dow Jones Industrial Average initially moved sharply higher (more than 350 points, subsequently moved sharply lower (down over 550 points) followed by a 320 point gain in the last 20 minutes of trade. Trading range was in excess of 900 points. Additional breakouts after 10:00 AM EDT included MO, WMT and CBOE. Breakdowns (mostly technology stocks) included AAPL HRS, MSI, TSS, ADBE, AKAM, SNPS, INTU, HPQ, HUM, RIG, ANTM, SYMC, ATVI, FLT, LMT and XOM

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More Canadian gold producer stocks break intermediate support: $YRI.CA $IMG.CA

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Much of market weakness early this afternoon attributed to a drop by Apple $AAPL below $212.32 completing a short term Head & Shoulders pattern.

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Editor’s Note: Slightly offsetting among Dow Jones Industrial stocks was strength in Wal-Mart in late trading.

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Chile iShares $ECH moved below $41.50 extending an intermediate downtrend. Influenced by falling copper prices $JJCTF.

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Trader’s Corner

Equity Indices and related ETFs

Daily Seasonal/Technical Equity Trends for October 29th 2018

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Green: Increase from previous day

Red: Decrease from previous day

 

Commodities

Daily Seasonal/Technical Commodities Trends for October 29th 2018

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Green: Increase from previous day

Red: Decrease from previous day

Sectors

Daily Seasonal/Technical Sector Trends for October 29th 2018

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Green: Increase from previous day

Red: Decrease from previous day

 

Technical Scoop

Link to David Chapman’s weekly report (Compliments of Enriched Investng):

http://www.enrichedinvesting.com/PDF/Social-Order-Breakdown-Unravelling-Debt-Bubble-Four-Year-Cycle-Low-Gold-Stealth-Rally.pdf

 

S&P 500 Momentum Barometer

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The Barometer gained 5.20 to 16.20 yesterday thanks to a recovery during the last 20 minutes of trade. The Barometer remains intermediate oversold. Despite the gain, more technical evidence of an intermediate bottom is needed.

 

TSX Momentum Barometer

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The Barometer dropped another 1.24 to 12.03 yesterday. It remains deeply intermediate oversold, but has yet to show technical signs of a bottom.

 

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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14 Responses to “Tech Talk for Tuesday October 30th 2018”

  1. rick Says:

    JP/BC , re #5 from yesterday

    You said at the end : I would love to be proven to be “just a fear monger”.

    I will try .

    While you enjoy your coffee think about = you are the president of US and you have some problems : ( the issues that you raised yesterday )
    1. We have aging demographics. As the baby boomers age, the cost to social programs rises. As they leave the workforce to retire they pay less tax while they require more government services, especially as they approach their final years. New technologies are extending our lives, but they come at an increased financial cost. Who will pay for that?
    2. many countries/states/provinces/cities have huge unfunded pension liabilities
    3.An increasing number of catastrophic natural disasters are occurring. This disrupts production, causes individuals to spend their savings (or borrow) for recovery, leaving them with less to spend in the future and not enough or retire on, and costs large amounts of borrowed money to governments as they rebuild infrastructure.
    For all these you need money .

    So you ( the president of US ) pick up the phone and call the United States Department of the Treasury and you said : I need money. Give me money .

    The Department of the Treasury is an executive department and the treasury of the United States federal government. Established by an Act of Congress in 1789 to manage government revenue, the Treasury prints all paper currency and mints all coins in circulation through the Bureau of Engraving and Printing and the United States Mint, respectively; collects all federal taxes through the Internal Revenue Service; manages U.S. government debt instruments.

    They have 2 options to have more money for the government spending :
    1. raise taxes
    2.issue Treasuries

    option 1 : if you will raise taxes = you will kill the economy = more unemployment = instead to collect income taxes from workers ,the government will have to pay more for social assistance
    You better have 100 workers than 100 people on social assistance .

    option 2. issue treasuries

    There are four types of marketable treasury securities: Treasury bills, Treasury notes, Treasury bonds, and Treasury Inflation Protected Securities (TIPS)

    So you need 2 things :
    1. institutions to buy treasury securities
    2. to pay a low yield for them

    1. who will buy treasury securities ?
    In January 2008, The Economist reported that Morgan Stanley estimates that pension funds worldwide hold over US$20 trillion in assets, the largest for any category of investor ahead of mutual funds, insurance companies, currency reserves, sovereign wealth funds, hedge funds, or private equity.

    In Canada : In 1997, the CPP fund was 100% invested in government bonds, but it has since diversified not only by asset class, but also internationally.

    In USA : As a universal system, Social Security generally operates as a pipeline, through which current tax receipts from workers are used to pay current benefits to retirees, survivors, and the disabled. When there is an excess of taxes withheld over benefits paid, by law this excess is invested in Treasury securities (not in private equities) !
    Social Security cannot “prefund” by investing in marketable assets such as equities, because federal law prohibits it from investing in assets other than those backed by the U.S. government.
    So , by federal law ,US government forces Social Security to buy ONLY treasury securities.

    for 2. to pay a low yield for them : the answer is QE
    What is QE ?
    Quantitative easing (QE), also known as large-scale asset purchases, is an expansionary monetary policy whereby a central bank buys predetermined amounts of government bonds or other financial assets . A central bank implements quantitative easing by buying specified amounts of financial assets thus raising the prices of those financial assets and lowering their yield, while simultaneously increasing the money supply ( basically a manipulation )

    So :
    1. governments will always have money for social
    assistance
    2. at low yield with the help of QE which is a manipulation of prices and yield.

    The winners : the governments and their customers = the voters , me and you
    The losers : pension funds , mutual funds, insurance companies, currency reserves, sovereign wealth funds, hedge funds, or private equity.

    At least pension funds , currency reserves , banks , insurance companies are forced by law to buy government bonds
    But private equity = naive investors who believe that lending money to the government by buying government bonds is a better investment than buying shares of a company who actually make profit = like aapl , msft, googl ,amzn , fb

    So : you need money ?
    All you need is a sucker to give it to you
    your right hand ( US treasury department) will create these bonds and your left hand ( the central bank = FED) will buy a big portion of those bonds = and that will push the prices higher and yields lower .
    If the suckers doesn’t want to buy government bonds , the government will force them by law( social security for example ). At the end of 2014, the Social Security Trust Fund contained (or alternatively, was owed) $2.79 trillion, up $25 billion from 2013. The Trust Fund is required by law to be invested in non-marketable securities issued and guaranteed by the “full faith and credit” of the federal government of US.

    Clearly the bubble is in bonds and not in stocks .

  2. rick Says:

    https://en.wikipedia.org/wiki/Quantitative_easing

    https://en.wikipedia.org/wiki/United_States_Department_of_the_Treasury

  3. rick Says:

    JP/BC ,re #5

    You wrote :

    All of the above are factors we haven’t seen in the past.

    https://en.wikipedia.org/wiki/Institutional_investor#Pre-industrial_Europe

    So government of Venice issued bonds in 15 century and government of France and Dutch government issued bonds in 17 century .
    Old problems = old solutions

  4. rick Says:

    JP/BC

    you wrote :

    extreme concentration of wealth and tax avoidance (think Panama Papers)

    So extreme concentration of wealth.
    A good example of extreme concentration of wealth is this : emperor Nero throwed his enemies and slaves and prisoners of wars inside Collosseum arena ( in Rome – Italy ) to be eaten by lions for the amusement of roman empire citizens .
    or in that time you could buy a slave to do the garden work for you or clean the house .
    I gave you these examples just to make you feel good that we are not living in that era anymore.
    look at the working hours :United States
    In 2016, the average man employed full-time worked 8.4 hours per work day, and the average woman employed full-time worked 7.8 hours per work day.

    https://en.wikipedia.org/wiki/Working_time#United_States

    How about 100 years ago ?

    Records indicate that work schedules as long as twelve to sixteen hours per day, six to seven days per week were practiced in some industrial sites

    https://en.wikipedia.org/wiki/Working_time#History

    I think is better now . What do you think ?

    tax avoidance (think Panama Papers)

    You make a confusion between tax avoidance and tax evasion ( and you are not the only one )
    The big difference :
    Tax avoidance is legal – tax evasion is not legal
    when you say tax avoidance you should think :
    RRSP , TFSA ,RESP , RDSP ,in Canada
    401K , ROTH IRA ,HSA in US ,
    ISA , Junior ISA in UK
    not panama papers

    If you want to move in Panama , you can move all your money there if you want to .
    It is legal , is your money .
    Every winter thousands and thousands of Canadians are leaving Canada and moving to US , Mexico , Costa Rica , Panama , Bahamas .
    Having a bank account in those countries = perfectly legal !
    Having a company in those countries = perfectly legal !

    What is not legal then ?
    to make money and not paying tax .
    Canadians have to pay tax on world wide income .
    So : is it legal to have a bank account in Switzerland ? yes
    but you have to pay taxes on the interest ,
    you don’t pay tax on that interest = not legal = tax evasion

    Why CRA did not prosecute any Canadian that have a bank account in Switzerland ?
    Because
    1. is legal to have a bank account there
    2. Canadians are declaring those funds with T1135
    3. the interest for swiss francs is negative ! actually you have to pay the bank to hold your money .
    https://www.investing.com/rates-bonds/european-government-bonds?maturity_from=10&maturity_to=310

    Look at Switzerland !
    Overnight is minus 1 % !
    The yield for 10 years bond is negative too!
    Of course the Switzerland government has money for pensions and other problems , they are borrowing with 0 % interest for next 10 years .
    So if you have money in Switzerland = you will declare 0 interest and you will pay 0 $ in taxes (for swiss francs )

  5. rick Says:

    buy and hold ?

    http://www.tickertech.com/cgi/returns.mpl?symbol=SPY&smonth=01&sday=01&syear=1995&emonth=10&eday=30&eyear=2018&compareto=none&other=

    from 10.000 to 69.765 $ in 23 years

    if you can handle volatility:
    from 10.000 to 168806 $ in 23 years
    http://www.tickertech.com/cgi/returns.mpl?symbol=NDX&smonth=01&sday=01&syear=1995&emonth=10&eday=30&eyear=2018&compareto=none&other=

  6. rick Says:

    Nikkei index ?

    Its about buyback shares !
    It was not legal in Japan until 1995 .
    They tend to keep a lot of cash inside the company.( less dividends and buyback shares than US companies )
    Even now Japanese companies are not buying back shares like US companies .
    After a company buy back those shares they have to retire them -( the shares) .
    The Japanese are not doing that , they keep them on their balance sheet so is not a real buyback . When the earnings are divided by the number of shares ( EPS ) for japanese companies the number of the shares is the same so no increase in EPS !
    For example, a company that earns $10 million in a year with 100,000 outstanding shares has an EPS of $100. If it repurchases 10,000 of those shares, reducing its total outstanding shares to 90,000, its EPS increases to $111.11 without any actual increase in earnings.

    Why they do that ?

    Think about dividends . They pay dividends but a part of those dividends are going back to them because they own a part of those shares .So they just re-circulate the profits .
    And the investors get less and less dividends , part of the profit .
    No investor want those kind of companies .
    Japanese capitalism is not the same with American capitalism.

    How about dividends ?

    Many investors , when they receive the dividends they are:
    1.buying back the same stocks (DRIP) or
    2. other stocks = so is still buying back stocks but is done by the investor and when the investor decide to that ( outside RRSP for example , the investor will pay tax first )
    When a company do the buy back shares , the company decide when ( but the investors will not feel the tax burden so is more money available and more upward pressure ).

    The Japanese companies keep a lot of cash or their own stocks inside the companies .
    There is no reward for investors so investors avoid them .

    Shareholders demand returns on their investments in the form of dividends which is a cost of equity – so the business is essentially paying for the privilege of accessing funds it isn’t using. Buying back some or all of the outstanding shares can be a simple way to pay off investors and reduce the overall cost of capital.

    Downside of Buybacks:
    A stock buyback affects a company’s credit rating if it has to borrow money to repurchase the shares. Many companies finance stock buybacks because the loan interest is tax-deductible. However, debt obligations drain cash reserves.
    How about companies with a lot of cash like aapl , msft, googl , fb ?

    https://www.investopedia.com/ask/answers/042015/why-would-company-buyback-its-own-shares.asp

  7. rick Says:

    Japan is an interesting country !
    https://en.wikipedia.org/wiki/List_of_countries_by_public_debt

    Look at their debt/GDP ratio :

    Is higher than Greece !

    223 % comparative with 180 % for Greece , or 98 % for Canada ,or 86 % for Europe and 82 % for USA
    and look at Russia = 11 % China 18 %
    And they are OK ( Japan ) with that debt !?
    I am just wondering which way is better 223 % debt like Japan , 82 % like US or 11-18 % like Russia and China ?

  8. KC Says:

    Hi Ron/BC,

    If you have a few mins, I’d be happy to hear your thoughts and TA on CWB.TO please.

    Thanks,
    KC

  9. Ron/BC Says:

    KC

    CWB.to has sold off and is presently testing the late 2016 high support at $30. Price is also oversold like most stocks. This test of 30 is an important one and needs to hold there. The falling 20ema is below the falling 50ema and the falling 50ema is below the falling 200ema. So trend indicators are bearish. But price is king and this test of $30 is important. This stock is also underperforming BMO and likely TD and others. TD is the better looking bank stock technically here but no short term buy signals present.

    https://stockcharts.com/h-sc/ui?s=CWB.TO&p=D&yr=2&mn=0&dy=0&id=p03811297511&a=579408540

  10. Polish1 Says:

    Jeff Bezos
    Jeff Bezos, the world’s richest person, has scored a new kind of wealth target: The Amazon CEO lost the most ever in two days, $19.2 billion. A selloff in shares of big tech companies that began Friday following disappointing quarterly sales results at the e-commerce giant and Google continued into Monday, leaving Bezos with $128.1 billion. That keeps him ahead of No. 2 Bill Gates for now.

  11. D.M. Says:

    Re #16 from October 29th
    If DOW “wants” to end up October at or above September low it would have to rise tomorrow for 895.32 or more points.

  12. gcg Says:

    #7 Rick
    Japan’s national debt $10,445 billion(2015)
    monetary assets $ 5,740 billion
    assets overseas $ 3,660 billion
    household assets $17,000 billion
    treasuries are yen denomination and 96% domestic consumption
    You will see why Yen is called safe heaven.

  13. kam Says:

    ALTA GAS
    “Shares in AltaGas fell by as much as 17 per cent or $3.44 to $16.43 per share on the Toronto Stock Exchange by Tuesday afternoon, a reaction analyst Patrick Kenny of National Bank Financial linked to its decision to cancel by year-end its premium dividend reinvestment plan that gave stockholders access to discount-priced shares.”

    Can any of dividend guys please explain what does that mean “cancel dividend reinvestment” plan in layman’s language? I had a client coming into to my work place today and was sad saying that he lost lots of $$ . I asked if he is short market so he said he actually down 12k in this stock with plunge today. 🙁 too many eggs in one basket but can’t do much now. Asking me if he should sell tomorrow and buy back later or double down for which I said I have no idea but I will let it stabilize before deciding anything as I never looked at this stock.
    https://www.theglobeandmail.com/business/article-altagas-shares-plunge-as-it-eyes-15-billion-in-asset-sales-cancels/

  14. Bernie Says:

    kam,

    Sorry to hear of your clients dilemma. I owned ALA between Nov 2015 and Feb 2018. As it turned out cutting my losses and bolting was a good move on my part. Their DRIP program which is being canceled is explained in this link. https://www.altagas.ca/invest/share-information/drip
    In essence the program allowed the dividend to be reinvested into more stock at a 3% discount to the average market price on the monthly payment date. I preferred to take my dividends in cash to do with as I pleased rather than DRIP so I never exercised that option.

    I haven’t paid close attention to ALA since selling but its obvious the stock is out of favour with the public. I believe the company took on too much of a load with their purchase of WGL Holdings and have had difficulties in servicing the debt. The massive price drop today post earnings miss and DRIP cancelation notice has the yield now sitting at a scary high 13%. Just my opinion, I’d suggest your client sell now and take the capital loss. Tax loss season is approaching and I suspect a dividend cut as well. This will probably lead to further decline in the price.

    Perhaps Dutch Canuck can chime in with his take. I believe he owned or followed the stock.

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