Tech Talk for Monday January 7th 2019

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Pre-opening Comments for Monday January 7th 2019

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

General Electric (GE $) is expected to open higher on reports that the company is in talks to sell its jet leasing unit to Apollo.

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Eli Lilly dropped $3.27 to $111.39 and Loxo Oncology gained $90.88 to $230.75 after Eli Lilly offered to purchase Loxo for $235 per share cash. Value of the deal is estimated at $8 billion.

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Celgene (CELG $84.90) is expected to open higher after the company raised its earnings guidance.

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PG& E (PCG $24.40) is expected to open lower on reports that the company is eyeing bankruptcy as well as asset sales.

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EquityClock’s Daily Market Comment

Following is a link:

http://www.equityclock.com/2019/01/04/stock-market-outlook-for-january-7-2019/

Note seasonality charts on U.S. Non-farm Payrolls and Canadian Labour Force.

WALL STREET RAW RADIO

SATURDAY, JANUARY 5, 2019

WITH YOUR HOST, MARK LEIBOVIT.

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

https://tinyurl.com/y7c4dlpf

 

Excerpts from Don Vialoux comments on Wall Street Raw

Volatility in North American equity markets remained high last week. The drop in Apple on Thursday following release of negative first quarter guidance added to the volatility. However, bounces by the S&P 500, Dow Jones Industrial Average and TSX Composite from their lows on December 24th looks similar to bounces from their extremely oversold levels set in 2002, 2008 and 2011 that set the stage for a strong, but volatile upswing. If history repeats, look for a strong, but volatile upswing in North American equity markets well into the first quarter of 2019. Possible unique events this year that could lead to gains include a return to work by U.S. government employees, encouraging trade negotiations with China starting next week and good news from fourth quarter reports by S&P 500 corporations that start to trickle in next week. The good corporate news includes year-over-year earnings gains by S&P 500 companies estimated at 12%, dividend increases and share buybacks. A word of caution! Gains recorded during the early part of the first quarter of 2019 may not last long if the House of Representatives moves to impeach President Trump.

Silver and silver stocks continue to forge ahead. Last week, the Silver Equity ETF (SIL) moved above $25.63 completing a base building pattern. Seasonal influences are positive from mid-December to the end of February.

The U.S. Dollar Index continues to show technical signs of rolling over after completing a double top pattern. Commodity prices have started to move in response to the weaker U.S. Dollar Index including higher lumber, grain, copper and crude oil prices. All have shown strength relative to the S&P 500 Index during the past two weeks. Seasonal influences for commodities and related stocks turn positive next week for a seasonal trade lasting to the end of April. U.S. equity ETFs that already show early technical signs of entering their period of seasonal strength include PICK (base metals), WOOD (forest products), XOP (oil and gas producers) and OIH (Oil services). In Canada, lumber stocks (e.g. Canfor, Interfor, West Fraser Timber, Norbord), selected oil service stocks (e.g. Precision Drilling) and the TSX Energy ETF (XEG) show early technical signs of entering their period of seasonal strength.

 

The Bottom Line

U.S. and Canadian equity markets extended their tradable bear market rally started on December 24th when technical indicators (Bullish Percent Index, Percent of S&P 500 stocks trading above their 50 day moving average) bottomed at extremely oversold levels. Traders with a time horizon of three months or less can take advantage of a recovery from oversold levels by owning equities that have favourable seasonality and positive strength relative to North American equity indices. Focus is on commodity sensitive securities that are responsive to a flat-to-lower U.S. Dollar Index including precious metals, base metals, agriculture and energy related equities and Exchange Traded Funds.

 

Observations

Technical action by individual S&P 500 stocks was quiet last week. Number of stocks breaking intermediate resistance totaled 6 while number of stocks breaking support totaled 5. The Ratio of stocks in an intermediate uptrend/ stocks in an intermediate downtrend increased last week to (89/390 =) 0.23 from 0.22.

U.S. economic focus this week is on December CPI to be reported on Friday.

Canadian economic focus this week is on the Bank of Canada’s statement on monetary policy released on Wednesday. Consensus calls for no change in the Overnight Lending Rate to Banks at 1.75%.

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 higher last week. See charts near the end of this report

Medium term technical indicators in Canada also moved 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) continued moving higher last week.

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

Short term political concerns remain elevated. Issues include heightened tariff wars between the U.S. and China, 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, but lower than previous consensus. According to FactSet, consensus for the fourth quarter of 2018 calls for an 11.4% increase in earnings (down from 12.4%) and a 6.1% increase in sales (down from 6.3%). Consensus for first quarter 2019 calls for a 2.9% increase in earnings and a 7.3% increase in sales. Consensus for second quarter 2019 calls for a 3.7% increase in earnings and a 6.0% increase in sales. Consensus for third quarter 2019 calls for a 4.3% in earnings and a 5.9% increase in sales. Consensus for fourth quarter 2019 calls for a 12.1% increase in earnings and a 6.0% increase in sales. Consensus for 2019 calls for a 7.4% increase in earnings (down from 7.9%) and a 6.0% increase in sales (up from 5.3%).

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 with release of fourth quarter results. Fourth quarter reports by S&P 500 companies start to trickle in this week.

Seasonal influences in the first and second quarters of a U.S. Pre-Presidential Election Year are favourable. 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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Last week, the U.S. Dollar Index extended a double top pattern on a move below 95.93, an encouraging technical sign for commodities and commodity related equities and Exchange Traded Funds (particularly if the U.S. and China are able to reach a trade agreement).

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Economic News This Week

November Factory Orders to be released at 10:00 AM EST on Monday are expected to increase 0.7% versus a drop of 2.1% in October.

December Non-Manufacturing ISM to be reported at 10:00 AM EST on Monday is expected to slip to 59.5 from 60.7 in November.

November Canadian Trade Balance to be reported at 8:30 AM EST on Tuesday is expected to reach a deficit of $1.96 billion versus a deficit of $1.17 billion in October.

December Canadian Housing Starts to be released at 8:15 AM EST on Wednesday are expected to drop to 210,000 from 215,900 in November.

Bank of Canada Statement on Monetary Policy is expected to be released at 10:00 AM EST on Wednesday followed by a Press Conference at 10:15 AM EST. Consensus is that the Bank Rate will remain unchanged at 1.75%.

FOMC Minutes for the December 18-19 meeting are released at 2:00 PM EST on Thursday.

Weekly Jobless Claims to be released at 8:30 AM EST on Thursday are expected to slip to 225,000 from 231,000 last week.

U.S. December Consumer Price Index to be released at 8:30 AM EST on Friday is expected to slip 0.1% versus no change in November (2.1% versus 2.2% year-over-year). Excluding food and energy, December Consumer Price Index is expected to increase 0.2% versus a gain of 0.2% in November (2.2% versus 2.2% year-over-year).

 

Earnings News This Week

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Trader’s Corner

Equity Indices and related ETFs

Daily Seasonal/Technical Equity Trends for January 4th 2019

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Green: Increase from previous day

Red: Decrease from previous day

 

Commodities

Daily Seasonal/Technical Commodities Trends for January 4th 2019

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Green: Increase from previous day

Red: Decrease from previous day

 

Sectors

Daily Seasonal/Technical Sector Trends for January 4th 2019

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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: Nil.

Editor’s Note: After 10:00 AM EST, intermediate breakouts included INCY, XRAY, REGN and PHM. No breakdowns.

Brazil iShares $EWZ moved above $41.41 extending an intermediate uptrend. Units respond to launch of a new corporate friendly government.

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Nice breakout by Pulte Homes $PHM above $27.02 extending an intermediate uptrend.

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‘Tis the season for Home Builders to move higher to the end of April $PHM $XHB $ITB

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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 11.80 from 8.00. Percent continues to recover from its deeply oversold level at 1.20.

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Bullish Percent Index for S&P 500 stocks increased last week to 22.00 from 16.60. The Index continues to recover from its deeply oversold level at 11.00.

 

TSX Momentum Barometers

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Percent of TSX stocks trading above their 50 day moving average increased last week to 32.78 from 24.28. Percent continues to recover from a deeply oversold level at 15.57.

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Bullish Percent Index for TSX stocks increased last week to 35.10 from 33.88. The Index continues to recover from its deeply oversold level at 29.80.

 

2019 World Outlook Financial Conference

Don Vialoux is scheduled to be one of the presenters this year

Tickets Still Available
Feb 1st & 2nd in Vancouver

CLICK to ORDER

 

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

 

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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6 Responses to “Tech Talk for Monday January 7th 2019”

  1. Larry/ON Says:

    If you hold Canadian banks today’s open is shaping up really good. I think a lot of the short Canada trade is now unwinding.

  2. Larry/ON Says:

    I guess I posted too soon. I still like Cdn banks.

  3. Larry/ON Says:

    Laurentian Bank – Very nice short squeeze in progress

  4. Ron/BC Says:

    FishFat

    GE rallied sharply right from the open and closed at $8.74 up .51. Too close to $9.00 resistance for my liking with no pullback first to $8 for a buy unfortunately, but if price can clear $9.00 and hold the next resistance would be the Sept low at $11.20. I wont chase it from here as I prefer sure things but a pullback to $7.98 would get me interested in a trade again.

    https://stockcharts.com/h-sc/ui?s=GE&p=D&yr=0&mn=6&dy=0&id=p6780536091c&a=638662667

  5. Sherri Says:

    Happy New Year!!

    Armstrong today on the DOW:

    “The Daily Bullish Reversals begin at 24089 followed by 25095 and 25510. We still see January as a Directional Change with the next important target shaping up as March. The big target remains as May in 2019, which reflects some potential geopolitical events and the EU elections with rising anti-EU candidates becoming quite popular. In Euro, the Daily Bullish in the Dow stands at 21227.”

  6. bruce Says:

    tnx Sherri…..

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