Tech Talk for Monday December 17th 2018

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Pre-opening Comments for Monday December 17th

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

Nutrien (NTR $62.87 Cdn) is expected to open higher after the company announced an addition to its share repurchase program.

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Abbott Labs (ABT $70.76) is expected to open higher after the company announced a 14% increase in its dividend.

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Northern Trust (NTRS $86.37) is expected to open lower after Raymond James lowered its target price to $105 from $115.

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Costco slipped $0.06 to $207.00 after JP Morgan lowered its target price to $240 from $252.

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EquityClock’s Daily Market Comment

Following is a link:

http://www.equityclock.com/2018/12/14/stock-market-outlook-for-december-17-2018/

Note seasonality charts on Retail Sales, Industrial Production, Business Sales and Business Inventorires.

WALL STREET RAW RADIO

SATURDAY, DECEMBER 15, 2018 – WITH YOUR HOST, MARK LEIBOVIT

SPECIAL GUESTS: DON VIALOUX, HARRY BOXER AND HENRY WEINGARTEN

https://tinyurl.com/y9rbk2df

 

Excerpts from Don Vialoux’s comments on Wall Street Raw

North American equity markets went on a roller coaster ride last week. The Dow Jones Industrial Average, S&P 500 Index and TSX Composite Index broke below their October lows on Monday, bounced back by mid-week and tested their lows again on Friday.

North American equity markets enter the Santa Claus rally period next week. This year, the period is from December 17th to January 4th. On average since 1990, the S&P 500 Index has advanced 21 out of 28 periods. Average gain per period was 1.8% per period. Performance by the TSX Composite Index was better. It advanced in 24 of the past 28 periods. Average gain per period was 2.4%.

Lots of reasons for the Santa Claus rally: Private investors are in a jolly mood during the Christmas season, particularly if they received a year-end bonus. Institutional investors are on holidays. Tax loss selling pressures have abated. Most investment dealers release favourable reports for the next year, including their top picks.

Precious metals and precious metal stocks have entered their best period of seasonal strength on schedule this year. Their period of seasonal strength runs from early December to the end of February. Nice breakouts last week by gold equity ETFs including GDX, GDXJ and SIL in the U.S. as well as XGD in Canada. ETFs significantly outperformed gold and silver bullion, a confirming technical signal that both will move higher during their period of seasonal strength.

Base metal stocks and related ETFs also entered their period of seasonal strength last week. Their period of seasonal strength is from the second week in December to the end of April. Base metal prices are responding to increasing demand at a time when inventories in the London Metal exchange have reached a five year low. China is the largest consumer of base metals. Look for a spike in demand if/when China and the U.S. reach a trade agreement. On the charts, selected base metal stocks such as Teck Resources and Lundin Mining and already have completed base building patterns. Ways to invest in Base Metals Equity ETFs include PICK, COPX in the U.S. and XBM.TO and ZMT.TO in Canada.

 

The Bottom Line

Favourable seasonal influences from late October to the first week in January for major U.S. equity indices are not working so far this year. They had another real test last week. The S&P 500 Index and Dow Jones Industrial Average broke through their October 29th lows early last week, recovered in mid-week and tested their lows again on Friday. Lows set on December 10th were 2,583 for the S&P 500 Index and 23,881 for the Dow Jones Industrial Average.

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Favourable seasonal influences for Canadian equities also are not working so far this year. On Friday, the TSX Composite Index continued to move below its October 29th low

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Recent weakness by broadly base North American equity indices has returned them to Intermediate Oversold levels. The Huawei incident and its impact on U.S./China relations pushed equity indices deeper into intermediate oversold levels.

Preferred strategy is to add to seasonally favoured equity securities in a wide variety of markets when short term technical signs of a bottom surface for a seasonal trade expected to last to the first week in January. Short term technical signals have not appeared yet.

Observations

Technical action by individual S&P 500 stocks was strongly negative last week. Number of stocks breaking intermediate resistance totalled 7 while number of stocks breaking support totalled 72.The Ratio of stocks in an intermediate uptrend/ stocks in an intermediate downtrend decreased last week to (174/277 =) 0.63 from 0.80.

U.S. focus this week is on the FOMC announcement on Wednesday. A 0.25% increase to 2.50% in the Fed Fund rate is widely anticipated. Markets will respond to guidance.

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

Medium term technical indicators in Canada moved lower last week also were mixed 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) moved lower last week.

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

Short term political concerns remain elevated. Issues include heightened tariff wars between the U.S. and China, possible shut down of Congress related to extension of government deficit limits and the Mueller investigation.

Longer term outlook for earnings and sales by S&P 500 companies remains positive, although analysts have reduced expectations slightly. According to FactSet, consensus calls for a 12.8% increase in earnings (down from 13.4%) and 6.5% increase in sales in the fourth quarter (down from 6.8%. Consensus calls for a 20.5% increase in earnings and a 8.9% increase in sales for all of 2018. Consensus calls for a 4.3% increase in earnings and 7.0% increase in sales in the first quarter 2019. Consensus calls for a 4.8% increase in earnings and 5.7% increase in sales in the second quarter 2019. Consensus calls for s 5.2% increase in earnings and 5.4% increase in sales in the third quarter 2019. Consensus calls for an 12.0% increase in earnings and a 6.1% increase in sales in the fourth quarter 2019. Consensus for all of 2019 calls for an 8.3% increase in earnings and a 5.5% increase in sales.

Major U.S. companies are seeking places to invest their new found cash flow following changes in U.S. tax laws. Look for anticipation of news about share buybacks, increased dividends, take overs, employee bonuses and wage increases prior to release of fourth quarter results. “Santa Claus is coming to town”.

Seasonal influences in the first and second quarters of a U.S. Pre-Presidential Election Year are the second and fourth strongest quarters in the U.S. Presidential Cycle. Average gain per period for the Dow Jones Industrial Average since 1929 is 5.2% in the first quarter and 4.5% in the second quarter.

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Economic News This Week

November New Home Starts to be released at 8:30 AM EST on Tuesday are expected to increase to 1.234 million units from 1.228 million units in October.

Canadian November Consumer Price Index to be released at 8:30 AM EST on Wednesday is expected to increase 0.1% versus a gain of 0.3% in October (2.2% year-over-year in November versus 2.4% year-over-year in October).

November Existing Home Sales to be released at 10:00 AM EST on Wednesday are expected to slip 0.5% versus a gain of 1.4% in October (5.15 million units versus 5.22 million units).

FOMC’s monetary statement is released at 2:00 PM EST on Wednesday. The Fed Fund rate is expected to increase to 2.50% from 2.25%. Press conference is offered at 2:30 PM EST.

Initial Jobless Claims to be released at 8:30 AM EST on Thursday is expected to increase to 225,000 from 204,000 last week.

December Philly Fed Index to be released at 8:30 AM EST on Thursday is expected to slip to 12.0 from 12.9 in November.

November Durable Goods Orders to be released at 8:30 AM EST on Friday are expected to increase 1.2% versus a drop of 4.3% in October. Excluding transportation orders, November Durable Goods Orders are expected to increase 0.2% versus a gain of 0.2% in October.

Next estimate of Annualized Third Quarter Real GDP to be released at 8:30 AM EST on Friday is growth at a 3.5% estimate, unchanged from previous estimate.

Canadian October Retail Sales to be released at 8:30 AM EST are expected to increase 0.1% versus a gain of 0.2% in September.

December Michigan Consumer Sentiment Index to be released at 10:00 AM EST on Friday is expected to slip to 97.4 from 97.5 in November.

November Personal Income to be released at 10:00 AM EST on Friday is expected to increase 0.3% versus a gain of 0.5% in October. November Personal Spending is expected to increase 0.3% versus a gain of 0.6% in October.

 

Earnings News This Week

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Trader’s Corner

Equity Indices and related ETFs

Daily Seasonal/Technical Equity Trends for December 14th 2018

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Green: Increase from previous day

Red: Decrease from previous day

 

Commodities

Daily Seasonal/Technical Commodities Trends for December 14th 2018

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Green: Increase from previous day

Red: Decrease from previous day

 

Sectors

Daily Seasonal/Technical Sector Trends for December 14th 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: Bearish. No intermediate breakouts. Breakdowns: $COST $PM $FITB $FBHS $PWR $INFO $RHI $DXC $HPQ.

Editor’s Note: After 10:00 AM EST, no breakouts. Breakdowns: FTV, JNJ, JKHY, ABC, ALXN, CNC, MCK, IT and SNPS

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Wheaton Precious Metals $WPM $WPM.CA, a TSX 60 stock moved above $18.03 U.S. setting an intermediate uptrend.

Editor’s Note: The Company won a tax case in Canada

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Johnson & Johnson $JNJ, a Dow Jones Industrial stock moved below $131.39 setting an intermediate downtrend on news of asbestos in baby powder.

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Fairfax Financial $FFH.CA moved below $591.00 extending an intermediate downtrend.

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US #Industrial #Production essentially unchanged (NSA) in November, better than 0.8% decline that is average for the month. $MACRO #Economy

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US #Retail Trade up 4.4% (NSA) in November, more than double the 2.0% average increase for the month. $MACRO #Economy

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http://www.equityclock.com/about/seasonal-advantage-portfolio/

 

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 31.00 from 27.20. Percent remains intermediate oversold.

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Bullish Percent Index for S&P 500 stocks dropped last week to 36.80 from 45.20. Percent changed to Intermediate Oversold from Intermediate Neutral on a move below 40.

 

TSX Momentum Barometers

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Percent of TSX stocks trading above their 50 day moving average slipped last week to 32.23 from 33.88. Percent remains Intermediate Oversold.

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Bullish Percent Index for TSX Composite stocks dropped last week to 35.92 from 41.06. The Index changed to Intermediate Oversold from Intermediate Neutral on a move below 40.

 

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 December 17th 2018”

  1. Ana Says:

    $SPX

    Bounced off the bottom of bollinger band at 2568.

  2. Ron/BC Says:

    Every analysis I come across is saying the U.S. Fed will raise rates this week for sure but in the future will not be so aggressive. I’ve seen this ‘set up’ many time before and don’t be surprised if they don’t raise rates this week at all which would see the U.S.$ likely selloff and inverse markets rally. If they do in fact raise rates it would be considered a fully ‘expected’ move and wouldn’t help the U.S.$. Seems like a no win situation for those holding U.S.$ positions. Perhaps an Option Straddle or Strangle on affected markets would be the ticket.

  3. rocketdave Says:

    I’m thinking of taking a small position on HQD.to

  4. Ana Says:

    #3. rocketdave

    Throw up a simple $SPX Chart with indicators.

    Your entry is not optimal.

  5. rocketdave Says:

    Well I took a small position in hqd.to
    8:12$

  6. Ana Says:

    “Ana Says:
    December 14th, 2018 at 3:23 pm
    $SPX $ES

    The head and shoulder target was complete at 2612.

    I am trying to calculate the target from the triangle now, an approximate 2527.”

    Close enough. 2533

  7. rocketdave Says:

    Thanks Ana
    I’m thinking that it is going to go deeper in the red as well.
    There is blood out in the street
    When people become more scared out there and realize that the market has turned
    From bull to bear it’s going to go sown fast

  8. bruce Says:

    Sherri
    Have you seen any comments from Armstrong recently?

  9. Ana Says:

    #7. rocketdave,

    I closed my bear position at the end of the day, after making a few trades today.

    I usually trade on formations, so the triangle formation had reached my approximate target.

    My goal is to make $ on each trade, so I do not open a trade unless I think it will be profitable. That is the result of needing the profit of each trade.

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