Tech Talk for Monday November 5th 2018

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Pre-opening Comments for Monday November 5th

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

Lowes (LOW $96.82) is expected to open lower after the company announced closure of 20 U.S. and 31 Canadian stores on February 1st. Cost is estimated at $0.28-$0.34 per share.

Exxon Mobil (XOM $81.95) is expected to open higher after JP Morgan raised its target price to $97 from $94.

Under Armour gained $0.59 to $24.29 after Stifel Nicolaus raised its target price to $30 from $27

Baytex Energy (BTE.CA $2.68) is expected to open higher after Raymond James increased its rating to Outperform from Market Perform

EquityClock’s Daily Market Comment

Following is a link:

http://www.equityclock.com/2018/11/02/stock-market-outlook-for-november-5-2018/

Note seasonality charts on Non-farm Payrolls, Average Hourly Earnings, Canada Employment and New Manufacturing Orders.

WALL STREET RAW RADIO

WITH YOUR HOST, MARK LEIBOVIT – SATURDAY, NOVEMBER 3, 2018:

WITH GUESTS: DON VIALOUX, HENRY WEINGARTEN, DINESH D’SOUZA, HARRY BOXER AND SINCLAIR NOE

https://tinyurl.com/yda9a2no

 

Excerpt from Wall Street Raw Radio by Don Vialoux

Equity markets for developed nations around the world turned higher at the beginning of last week. They are following their usual seasonal pattern. On average during the past 50 years U.S. equity indices have reached a seasonal bottom on October 29th. It happened again this year. On average, the strongest season in the year for the U.S. equity market is from October 29th to the first week in January.

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U.S. equity markets were helped last week by stronger than anticipated third quarter reports. Approximately 78% of S&P 500 companies have reported to date. On a year-over-year basis, earnings by S&P 500 companies are up about 25%. Another 15% of S&P 500 companies are scheduled to release results next week.

U.S. equity markets also were helped by news that trade negotiations between the U.S. and China are progressing. Nice pop on Friday by the Shanghai Composite Index by 2.69% and by the Hang Seng Index by 4.21%! Successful negotiations are particularly relevant to commodity prices and commodity related stocks. Spot copper prices rose 5.65% on Thursday and Friday.

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Economic focus next week is news from the FOMC meeting on Thursday. Consensus says that the Federal Reserve will maintain its Fed Fund Rate at 2.25%, but also will signal the likelihood of another 0.25% increase following its December meeting.

Political focus is on the Mid-term election on Tuesday. Strength in U.S. equity markets last week and an encouraging employment report released on Friday will help the Republicans. Equity markets are anticipating the Republican’s maintaining control of the Senate and the Democrat’s taking control of the House of Representatives. Equity markets will track higher if the Republican win both legislatures and will track lower if the Democrats win both legislatures.

 

The Bottom Line

Favourable seasonal influences for major U.S. equity indices finally surfaced 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 (although bottom of the correction was delayed this year). 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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Favourable seasonal influences also finally surfaced for Canadian equities last week. 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, seasonal upturn in the Index was delayed until October 29th

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North American equity markets remain exceptionally intermediate oversold despite their recovery last week. Preferred strategy now is to add to initial equity positions purchased during the past two weeks for a seasonal trade that could last to the first week in January.

Economic News This Week

October Services ISM to be released at 10:00 AM EST on Monday is expected to slip to 59.5 from 61.6 in September.

September Canadian Housing Starts to be released at 8:15 AM EST on Thursday are expected to increase to 200,000 units from 189,000 in August.

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

Fed Fund Rate to be released at 2:00 PM EST is expected to remain unchanged at 2.25%.

November Michigan Consumer Sentiment Index to be released at 10:00 AM EST on Friday is expected to slip to 98.0 from 98.6 in October.

September Wholesale Inventories to be released at 10:00 AM EST on Friday are expected to increase 0.3% versus a gain of 0.3% in August.

 

Earnings News This Week

(Selected reports)

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Observations

Third quarter reports by S&P 500 companies are a focus again this week. Seventy eight percent of companies have reported to date. Most beat consensus earnings per share estimates (78%) and sales (61%) estimates. Another 77 S&P 500 companies are scheduled to release results this week (including 1 Dow Jones Industrial company: DIS).

Technical action by individual S&P 500 stocks was bearish last week. Number of stocks breaking intermediate resistance totaled 19 while number of stocks breaking support totaled 28 with most of the breakdowns occurring last Monday. The Up/Down ratio was unchanged last week at (96/360 =) 0.27.

U.S. economic focuses this week are results of the Mid-term election on Tuesday and on the Fed Fund update to be released on Thursday.

Canadian economic focus this week is on Canadian Housing Starts to be released on Thursday.

Medium term technical indicators for U.S. equity markets (e.g. Percent of stocks trading above their 50 day moving average, Bullish Percent Index) turned higher last week. See charts near the end of this report

Medium term technical indicators in Canada also turned higher last week. 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) also turned higher last week

Short term technical indicators for Canadian markets and sectors also turned higher last week.

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 and sales remains positive and improving. According to FactSet, consensus calls for a 24.9% increase in earnings in the third quarter on a year-over-year basis (up from 22.5% last week) and a 8.5% increase in sales in the third quarter (up from 7.6% last week). Consensus calls for a 15.0% increase in earnings and 6.8% increase in sales in the fourth quarter. Consensus calls for a 20.6% increase in earnings and an 8.6% increase in sales for 2018. Consensus calls for a 6.0% increase in earnings and 6.6% in sales in the first quarter 2019. Consensus calls for a 6.5% increase in earnings and 5.1% in sales in the second quarter 2019. Consensus for 2019 calls for a 9.4% increase in earnings and a 5.4% increase in sales.

An important long term technical indicator shows that U.S. equity markets are intermediate oversold and have started to recover. Following is a chart showing Percent of S&P 500 stocks trading above their 50 day moving average overlaid by the S&P 500 Index. Note that major upside moves by the Index occurred after Percent recovered from below 20%. Percent closed on Friday at 11.00.

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Ditto for Percent of TSX stocks trading above their 50 day moving average overlaid by the TSX Index! Percent closed on Friday at 13.38.

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Trader’s Corner

Equity Indices and related ETFs

Daily Seasonal/Technical Equity Trends for November 2nd 2018

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Green: Increase from previous day

Red: Decrease from previous day

 

Commodities

Daily Seasonal/Technical Commodities Trends for November 2nd 2018

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Green: Increase from previous day

Red: Decrease from previous day

 

Sectors

Daily Seasonal/Technical Sector Trends for November 2nd 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

Technical action by S&P 500 stocks to 10:00: Bullish. Intermediate breakouts: $CBS $SBUX $GS $MSI $VRSN $ALB. Breakdowns: $KHC $CMS $ED

Editor’s Note: After 10:00 AM EDT, no additional breakouts. Breakdowns: NEE, GIS and ARE

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Starbucks $SBUX, a Dow Jones Industrial stock moved above $63.12 to an all-time high extending an intermediate uptrend.

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Saputo $SAP.CA, a TSX 60 stock moved below $32.74 extending an intermediate downtrend.

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Gildan Activewear $GIL.CA, a TSX 60 stock moved above $41.70 to a 3 year high extending an intermediate uptrend.

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Long term Treasury ETF $TLT moved below $112.35 extending an intermediate downtrend.

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Canada Employment up 17,300 (NSA), or 0.1%, in October, inline with average change for the month. $MACRO #CDNecon #CAD

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US Nonfarm Payrolls actually up 1.015M (NSA), or 0.7%, in October, firmly above 0.5% average increase for month. $MACRO #Economy #Employment

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Wages negatively diverged from its seasonal norm in October, alleviating concerns of a hot number by year-end. equityclock.com/2018/11/02/… $STUDY

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S&P 500 Momentum Barometers

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Percent of S&P 500 stocks trading above their 50 day moving average increased last week to 25.60 from 11.00. Percent remains intermediate oversold and showing signs of bottoming.

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Bullish Percent Index for S&P 500 stocks increased last week to 42.00 from 31.80. The Index has recovered to intermediate neutral and showing signs of bottoming.

 

TSX Momentum Barometers

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Percent of TSX stocks trading above their 50 day moving average increased last week to 20.83 from 13.28. Percent remains intermediate oversold and showing signs of bottoming.

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Bullish Percent Index for TSX stocks increased last week to 43.03 from 40.98. The Index remains intermediate neutral and showing signs of bottoming.

 

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 November 5th 2018”

  1. Ron/BC Says:

    For all the true blue glassy eyed believers here is the All World Stock ETF:VEU that is testing long term major support which is the big breakout point over the 2007 & 2014 and 2015 high at the $47 level. After the big breakout in 2017 price ran up another $10 in early 2018 and is now testing this important price point. “caveat emptor”.

    https://stockcharts.com/h-sc/ui?s=VEU&p=D&yr=12&mn=0&dy=0&id=p00920880138&a=579408321

  2. JP/BC Says:

    Re #1. Ron/BC: I hadn’t heard of this index before. What shocks me is how much poorer it has performed compared to the S&P. We are near 10 years into a global bull market and it has had little gain.

  3. Craig Says:

    I often browse over this Site and appreciate the dialogue that goes on by some very seasoned and knowledgeable investors.

    I used to use Globeinvestorgold as a source of information that came to meet my needs quite well as the basics that I was looking for were those below….

    (1) New 52 Week Highs
    (2) New 52 Week Lows
    (3) Top Gainers
    (4) Top Losers
    (5) Fund Performances

    …and a few others

    The Globe and Mail saw fit to change their format and now its a bit of a nightmare finding what previously satisfied my ‘quick view’ needs to allow me to get a spot overview on movements in the market. (Looks like they are somewhat abandoning their Globeinvestor site and attempting to drive that subscriber base to the Globe & Mail News site through which one needs to find their way to get to the Financial & Investing site…..so much for a Paper that once claimed to be Canada’s Biz paper!).

    Can anyone suggest a great Site that might replace what I used in the past which would readily at a glance give me access to the above?

    Your feedback much appreciated.

    Craig

  4. gcg Says:

    #3 Craig
    I don’t know if this fits your need. It’s free.

    https://web.tmxmoney.com/marketsca.php?locale=EN

  5. Paula Says:

    #3. Craig
    I haven’t used Globeinvestor in a long time. I remember recommending it on this site for charting mutual funds (very primitive charting). Maybe they didn’t have enough activity to justify continuing it or they just want to “monetize” it.
    I use StockCharts:
    https://stockcharts.com/freecharts/
    There is a lot of information there. I can see info on the TSX stocks but I don’t know if non-members can. I find the subscription price very reasonable for Basic. I don’t know where you will find Fund Performance.
    #4. gcg
    Thanks for the link.

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