Tech Talk for Monday April 29th 2019

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Pre-opening Comments for Monday April 29th

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

Index futures were virtually unchanged following release of economic news at 8:30 AM EDT. Consensus for March Personal Income was an increase of 0.3% versus a gain of 0.2% I February. Actual was a gain of 0.1%. Consensus for March Personal Spending was an increase of 0.7% versus an increase of 0.1% in February. Actual was an increase of 0.9%.

Restaurant Brands International (QSR.TO $89.49) is expected to open lower after reporting lower than consensus first quarter earnings.

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Walt Disney gained $2.48 to $142.30 after the movie “Avenger Endgame” reported record $1.2 billion global revenues during its debut.

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Gardner Denver gained $7.95 to $36.00 on news that Ingersoll-Rand is considering a merger of its compressor division with Gardner Denver’s pump maker division in a share and cash deal valued at $15 billion.

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Target added $2.26 to $79.38 after Barclays upgraded the stock to Overweight from Equal Weight.

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EquityClock’s Daily Market Comment

Following is a link:

http://www.equityclock.com/2019/04/26/stock-market-outlook-for-april-29-2019/

Note seasonality charts on the Russell 2000 Index and the U.S. Energy sector.

The Bottom Line

U.S. equity markets were mixed again last week despite better than consensus first quarter results released to date by S&P 500 and Dow Jones Industrial companies. Strength in the U.S. Dollar Index continued to dampen enthusiasm for U.S. equities. The TSX Composite Index virtually tracked performance of U.S. equity indices.

Observations

Technical action by individual S&P 500 stocks moved mixed again last week. Number of stocks breaking intermediate resistance totaled 23 while number of stocks breaking support totaled 15. Most of the breakdowns were in the Health Care sector. The Up/Down ratio dropped to (317/100=) 3.17 from 3.04.

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 slightly higher last week, but remain overbought. See charts near the end of this report

Medium term technical indicators in Canada were mixed last week, but remain intermediate overbought. 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) deteriorated slightly last week from overbought levels.

Short term technical indicators for Canadian markets and sectors also deteriorated slightly last week from overbought levels.

Short term political concerns in the U.S. remain elevated. Issues include tariff wars between the U.S. and China and anti-Trump hearings initiated by the Democrat controlled House of Representatives. Release of the Mueller report elevated political rhetoric.

Frequency of quarterly earnings reports peaks this week. Another 164 S&P 500 companies (including 6 Dow Jones Industrial companies) are scheduled to report. To date, 46% of S&P 500 companies have reported quarterly results.

Prospects for S&P 500 earnings in the first quarter improved again last week thanks.to higher than consensus results released to date. However, estimates beyond the first quarter were virtually unchanged. According to FactSet, first quarter earnings are expected to decline 2.3% on a year-over-year basis (versus a decline of 3.9% last week) but revenues are expected to increase 5.1%. Second quarter earnings are expected to slip 0.6% (versus 0.5% last week) and second quarter revenues are expected to increase 4.3% (versus 4.4% last week). Thirty two companies issued negative second quarter guidance and six companies issued positive guidance. Third quarter earnings are expected to increase 1.3% and revenues are expected to increase 4.4%. Fourth quarter earnings are expected to increase 8.1% (versus 8.2% last week) and fourth quarter revenues are expected to increase 4.8%. For all of 2019, earnings are expected to increase 3.6% (up from 3.4% last week and revenues are expected to increase 4.7%.

Seasonal influences in the first and second quarters of a U.S. Pre-Presidential Election Year are favourable. Gains this year already have exceeded average gains in the first and second quarters.

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Additional strength in the U.S. Dollar Index ETN last week dampened enthusiasm for U.S. equities (particularly equities with high international exposure).

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The 5% drop by the Shanghai Composite Index during the past five trading days prior to important bi-lateral trade negotiations with the U.S. this week is disturbing.

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Economic News This Week

March Personal Income to be released at 8:30 AM EDT on Monday is expected to increase 0.4% versus a gain of 0.2% in February. March Personal Spending is expected to increase 0.7% versus a gain of 0.1% in February.

February Canadian GDP to be released at 8:30 AM EDT on Tuesday is expected to increase 0.1% versus a gain of 0.3% in January.

April Chicago Purchasing Managers Index to be released at 9:45 AM EDT on Tuesday is expected to improve to 59.0 from 58.7 in March.

April ADP Private Employment Report to be released at 8:15 AM EDT on Wednesday is expected to show an increase to 180,000 from 129,000 in March.

March Construction Spending to be released at 10:00 AM EDT on Wednesday is expected to increase 0.2% versus a gain of 1.0% in February.

April ISM Manufacturing Index to be released at 10:00 AM EDT on Wednesday is expected to slip to 55.0 from 55.3 in March.

Weekly Initial Jobless Claims to be released at 8:30 AM EDT on Thursday are expected to drop to 215,000 from 230,000 last week.

First Quarter Non-farm Productivity to be released at 8:30 AM EDT on Thursday is expected slip to growth at 1.4% from 2.2% in the fourth quarter.

FOMC Statement on interest rates to be released at 2:00 AM EDT on Thursday is expected to maintain the Fed Fund Rate at 2.50%. Press conference with Fed Chair Powell is scheduled at 2:30 PM EDT.

March Factory Orders to be released at 10:00 AM EDT on Thursday is expected to increase 0.7% versus a decline of 0.5% in February.

April Non-farm Payrolls to be released at 8:30 AM EDT on Friday is expected to slip to 180,000 from 196,000 in March. April Unemployment Rate is expected to remain unchanged from March at 3.8%. April Hourly Earnings are expected to increase 0.3% versus a gain of 0.1% in March.

April ISM Services Index to be released at 10:00 AM EDT on Friday is expected to increase to 57.2 from 56.1 in March.

 

Selected Earnings News This Week

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Trader’s Corner

Equity Indices and related ETFs

Daily Seasonal/Technical Equity Trends for April 26th 2019

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Green: Increase from previous day

Red: Decrease from previous day

 

Commodities

Daily Seasonal/Technical Commodities Trends for April 26th 2019

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Green: Increase from previous day

Red: Decrease from previous day

 

Sectors

Daily Seasonal/Technical Sector Trends for April 26th 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: Quietly bearish. Intermediate breakout: $RSC. Breakdowns: $MHK $STX $MOS.

Editor’s Note: After 10:00 AM EDT, intermediate breakouts included EXR, IDXX, DRI and K. Breakdown: PKI

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ARC Resources $ARX.CA moved below $8.70 setting an intermediate downtrend

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Peyto Exploration $PEY.CA moved below $6.44 extending an intermediate downtrend.

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Cott Corp. $BCB.CA moved above $20.40 setting an intermediate uptrend

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Cineplex $CGX.CA moved above $24.68 setting an intermediate uptrend. Avenger movie launch?

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West Fraser Timber $WFT.CA moved above $68.51 setting an intermediate uptrend. Responding to a 13% spike in lumber prices.

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Schachter Energy Report

The April report has just been released. Josef has a “green light” on Value and Sentiment and an “orange light” on technicals. This paid service is available at www.SchachterEnergyReport.ca

 

Keith Richard’s Blog

Following is a link:

https://www.valuetrend.ca/armchair-canadian-economics/

 

S&P 500 Momentum Barometers

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Percent of S&P 500 stocks trading above their 50 day moving average slipped 2.80 to 71.60 on Friday. Percent remains intermediate overbought and rolling over.

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Bullish Percent Index for S&P 500 stocks slipped 0.40 to 74.80 on Friday. The Index remains intermediate overbought and rolling over.

 

TSX Momentum Barometers

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Percent of TSX stocks trading above their 50 day moving average slipped another 0.59 to 58.65 on Friday. Percent dropped to intermediate neutral from intermediate overbought and continues to trend down.

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Bullish Percent Index for TSX stocks was unchanged at 61.15 on Friday. It remains intermediate overbought.

 

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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13 Responses to “Tech Talk for Monday April 29th 2019”

  1. Larry/ON Says:

    WEED.TO – Had a typical shake-out lower and then whipsawed back to clear resistance at 68.00. Next resistance point way up at 76.68

  2. Canuck2004 Says:

    S&P 500 breaking out to blue sky today…we will see if it closes above.

    BULL camp::

    1) don’t fight the Fed. Rates on hold for foreseeable future, FED dovish stance
    2) never step in front of a moving freight train. Stocks that are making a new 52 week highs have a tendency to keep making 52 week highs…until they don’t
    3) V shape correction and recovery is always bullish
    4) full employment in US, best in 50 years and NO inflation. No Inflation means no reason for FED to rate rates at all. They have been raising rates and implementing QT for other reasons, until the market told them to stop.
    5) TSX, NASDAQ and S&P 500 all making new all time highs.

    A few things that bothers me for the BEAR camp is:

    1) no irrational exuberance in stocks. Retail investors selling stocks and buying bonds, or sitting on the sidelines.
    2) too many bears calling for a recession. When everybody is on one side of the bias, the opposite usually happens.
    3) no bull market in Basic Materials and Energy, typical at cycle tops. Until we see that, I’m doubtful we are at a market top. Time alone isn’t good enough reason to end the Bull cycle. The FED decides when it sees inflationary pressures.
    4) Energy in a Bear for 5 years now, about typical for the Energy bear cycle. Time for an upswing….

    Sector Rotation:

    https://stockcharts.com/school/doku.php?st=sector+rotation&id=chart_school:market_analysis:sector_rotation_analysis

    My brother in law is 50% in cash waiting for a recession so he can buy stocks. Has been for several years now. I asked, did you buy in Jan. 2019 when the market was down ? nope. Did you buy in Jan. 2016 when the market was down? Nope. So you missed the last few years of massive upside? What makes you think you will buy when we get the recession? You won’t…you’ll be too scared.

  3. Green/Ont Says:

    Hi Canuck2004,

    What you say sounds about right. The question is what do you buy in this type of market. You mention energy but unless the economy takes off sharply there is no indication that the basic commodity can move meaningfully higher and as the past few days show it stumbled around these levels. As Larry/Ont highlights, its the stocks like Weed.To and Shop.To that have the wind to their backs. Utilities got a bump due the Fed giveback on rates but there appears to be little more on this now unless the economic stats deteriorate meaningfully. The economy in the US is stronger than Canada – as per usual but investing there exposes one to currency risk.
    Your thoughts are most welcome.

  4. Green/ON Says:

    PS a look at the TSX 52 week high list is instructive – how few companies appear.

  5. Larry/ON Says:

    Canuck2004- Great summation. Love your post.

  6. Larry/ON Says:

    Green/ON – Stick to US equities simply because that is where the best prospects for growth are and $CAD should continue to be weak relative to USD. The FAANG stocks plus MSFT are a must. Have a large part of your portfolio in a simple index fund preferably being QQQ which is more tech oriented and you can buy leveraged ETF variants if you want. I like using TQQQ.

  7. Canuck2004 Says:

    #3- I am not buying Energy, not yet. As old Will Rogers used to say: when it comes to stocks, if it don’t go up, don’t buy it.

    However, we are at the 5 year mark of an Energy Bear that started in 2014… about the usual length…. we should see oil moving up late this year or early next next year…as per usual pattern…but who knows. There are a lot of new things at play, like Green Energy, i.e. electric cars, wind, shale production, etc.. This may skew the O&G cycle a bit.

    It is a purely mechanical issue…when Energy is in a Bear, E&P is the first thing companies cut. Exploration first, Production next. But daily demand for oil has grown exponentially in the past few years, mostly from developing countries. Eventually you get a demand/production squeeze. Happens every time. Exploration takes a long time to find new oil fields, but shale is very quick to production now, so cycle may be stretched out longer. We will see.

    As what to buy? All depends what you are trying to achieve….cap growth? or cash flow?. Trading or investing.

    WEED is not investing, no earnings yet in any of them…maybe revenue but no earnings…doesn’t mean you can’t make money but it is NOT investing, it is speculating…in other words gambling…you are betting and hoping that they will have earnings in the future.

    Investing is putting money to work in a company that has a long track record of steady earnings and long history paying a growing dividends….this means you have an excellent chance of making a profit over the long term. All about risk management.

    I will explain what I do in another post.

  8. Canuck2004 Says:

    #6- You are absolutely right. However when buying US stocks denominated in USD you have to get 2 things right: the direction of the stock and #2, the direction of the currency. Twice the complexity of buying Canadian stocks.

    At a .74 CAD vs the USD…where is the risk? Well the lowest I remember is about .62 CAD to the USD, however the highest I remember is about 1.10 CAD to the USD. Where is the greatest risk? Upside on the CAD is the answer.

    I don’t expect the CAD to rise, but the best bet for profit on the currency side is if the CAD drops to .62 to the USD. Not really an appealing bet. But if Energy takes off in the future, the CAD is sure to follow…and that means a loss as the CAD rises against the USD. Potential for loss on the currency side of the trade is significant.

    The time to buy USD assets was when the CAD was around .80 and higher.

    At this point, unless you are thinking very short term trade to capture a bounce on a specific US stock….today the long trade is perilous..

    I own about 30% or more US stocks, but they were bought when the USD was weak vis a vis the CAD. Right now I would not buy them. I am making more on the currency side of the trade than on the stocks themselves….never mind the growing USD dividends.

    Now one way around that dilemma is to buy an ETF in CAD that has the CAD hedged. This will do fine until the CAD gets stronger, then you switch over to a USD denominated ETF. Example would be the VSP.TO vs the SPY, or the QQC.F vs the QQQ.

  9. Larry/ON Says:

    BDI – What a nice pop today.

  10. Green/ON Says:

    Hi Canuck2004 and Larry/ON,

    Thanks for the insights. My investing is shifting from solely growth to income & growth. I have US holdings (mostly healthcare tied to demographics) and Canadian is where I am looking for a mixture (esp given dividend tax credit benefits). I bought Enbridge and Manulife a few months ago (wish I bought more) but still looking to fill out my portfolio.

  11. dave/ab Says:

    Canuck2004

    I enjoy your commentary. About world oil. I see it more of supply constraints caused by US sanctions and world upheaval. With this inverted yield curve happening it will cut into demand for the black gold. Here is an interesting article.

    https://business.financialpost.com/commodities/energy/why-the-oil-price-spike-will-run-out-of-fuel?utm_medium=Social&utm_source=Facebook&fbclid=IwAR0-QLp-my6ao_2d6Rxd-xTJjoEGWf37RRDvmk-TbJ3zpgslC6gnmoa5ARw#Echobox=1556547642

  12. Canuck2004 Says:

    World wide Energy Demand Growth…..Note demand growth in Renewables….the place to be.

    https://www.eia.gov/todayinenergy/detail.php?id=32912

    https://yearbook.enerdata.net/total-energy/world-consumption-statistics.html

  13. dave/ab Says:

    Hi Canuck2004

    I agree. fossil fuels not going away for a long time and the demand will continue to grow along with the price. But at this moment in time bottlenecks created by trump is part of the use more than demand.

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