Tech Talk for Tuesday September 3rd 2019

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Pre-opening Comments for Tuesday September 3rd

U.S. equity index futures were lower this morning. S&P 500 futures were down 21 points in pre-opening trade. Index futures responded to growing trade tensions.

Snap added $0.34 to $16.17 after Evercore ISI upgraded the stock to Outperform from In Line.

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Bausch Health was unchanged at $28.37 after announcing plans to reduce debt by $200 million.

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Amazon dipped $5.23 to $1,771.06 despite an increase in target price to $2,600 from $2,250 by RBC Capital

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Campbell Soup (CPB $45.00) is expected to open higher after JP Morgan raised its target price to $48 from $41.

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EquityClock’s Daily Market Comment

Following is a link:

http://www.equityclock.com/2019/08/30/stock-market-outlook-for-september-3-2019/

Note seasonality chart on Canadian GDP.

The Bottom Line

The traditional period of summer volatility in world equity markets continued last week, but with a positive bias from a short term technical oversold level. Equity markets have a history of entering into a period of increased volatility at this time of year with a flat/downward bias from mid-July to mid-October. Supplemental concerns this year include an earnings recession by major U.S. companies until the fourth quarter this year (particularly companies with extensive international operations), growing efforts by the Democrats to impeach Donald Trump, growing Middle East tensions and unsettled trade negotiations between the U.S. and China.

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Observations

Seasonal influences on U.S. equity markets tend to be positive in the first half of September and negative in the second half. Seasonal influences for Canadian equity markets tend to peak at the end of August followed by weakness to at least mid-October.

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The VIX Index remained at elevated levels again last week, in line with its historical trend between mid-July and mid-October.

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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 for Canadian equity markets also moved higher last week. See charts near the end of this report.

Most short term technical indicators for U.S. markets and sectors (20 day moving averages, short term momentum indicators) turned higher last week.

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

Analysts continue to reduce earnings estimates for S&P 500 companies. Ninety nine percent of S&P 500 companies have reported second quarter results to date. According to FactSet, second quarter earnings are projected to drop 0.4% on a year-over-year basis and second quarter revenues are expected to increase 4.0%. The drop in second quarter earnings confirms that earnings have declined in two consecutive quarters, the definition of an earnings recession. Third quarter earnings also are expected to drop by 3.5% (down from a previous estimate of a drop of 3.1%) and revenues are expected to increase 3.1%. Seventy nine companies have issued negative third quarter guidance and 30 companies have issued positive third quarter guidance. Fourth quarter earnings are expected to increase 3.5% (down from 3.9%) and fourth quarter revenues are expected to increase 4.0%. For all of 2019, earnings are expected to increase 1.5% and revenues are expected to increase 4.4%. First quarter 2020 earnings are expected to increase 8.2% (down from 8.5%) and revenues are expected to increase 5.7 %. Second quarter 2020 earnings are expected to increase 9.3% (down from 9.9%) and revenue are expected to increase 6.5%

The U.S. Dollar Index spiked higher on Friday to a 27 month high, further dampening third quarter sales and earnings expectations for companies with extensive international operations.

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Economic News This Week

August ISM Manufacturing to be released at 10:00 AM EDT on Tuesday is expected to slip to 51.0 from 51.2 in July.

July U.S. Trade Deficit to be released at 8:30 AM EDT on Wednesday is expected to drop to $53.50 billion from $55.20 billion in June.

July Canadian Trade Balance to be released at 8:30 AM EDT on Wednesday is expected to report a $400 million deficit versus a $140 million surplus in June.

August ADP Private Employment to be released at 8:15 AM EDT on Thursday is expected to slip to 148,000 from 156,000 in July.

Bank of Canada interest rate decision to be released at 10:00 AM EDT on Wednesday is expected to show no change in the lending rate to major Canadian banks.

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

July Factory Orders to be released at 10:00 AM EDT on Thursday are expected to increase 1.0% versus a gain of 0.6% in June.

August Services ISM to be released at 10:00 AM EDT on Thursday is expected to increase to 53.9 from 53.7 in July.

August Non-farm Payrolls to be released at 8:30 AM EDT on Friday are expected to drop to 159,000 from 164,000 in July. August Unemployment Rate is expected to remain unchanged from July at 3.7%. Average Hourly Earnings are expected to increase 0.3% versus a gain of 0.3% in July.

August Canadian Employment to be released at 8:30 AM EDT on Friday is expected to increase 15,000 versus a decline of 24,200 in July. August Unemployment Rate is expected to remain unchanged at 5.7%.

 

Earnings News This Week

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Trader’s Corner

Equity Indices and related ETFs

Daily Seasonal/Technical Equity Trends for August 30th 2019

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Green: Increase from previous day

Red: Decrease from previous day

 

Commodities

Daily Seasonal/Technical Commodities Trends for August 30th 2019

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Green: Increase from previous day

Red: Decrease from previous day

 

Sectors

Daily Seasonal/Technical Sector Trends for August 30th 2019

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Green: Increase from previous day

Red: Decrease from previous day

 

Technical Scoop

Headline reads, “Maybe tsunami, mixed signals, notorious September, topping gold, warning curve, negative yield

Following is a link to David Chapman’s weekly comment courtesy of www.EnrichedInvesting.com

http://enrichedinvesting.com/wp-content/uploads/2019/09/Maybe-tsunami-mixed-signals-notorious-September-topping-gold-warning-curve-negative-yield.pdf

 

Jon and Don Vialoux at the Toronto MoneyShow

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In just three week’s time, we’ll be presenting at the Toronto Money Show on the topic of "Improving Investment Returns by Combining Seasonal, Fundamental, and Technical Analysis."

 

Panel Workshop Details

Sep. 21, 2:45 PM – 3:30 PM EST

Saturday

 

Improving Investment Returns by Combining Seasonal, Fundamental, and Technical Analysis

The end of September is the opportune time to review your investment portfolio prior to start of the traditional period of seasonal strength for equity markets in October. Which markets, sectors and securities have the best technical and fundamental profiles this year? Join the father-and-son team of Don and Jon Vialoux for an update.

 

Attend for free by navigating to the @MoneyShows website:

https://conferences.moneyshow.com/moneyshow-toronto/workshop/991d533c1252427eba49b134bd6d6009/improving-investment-returns-by-combining-seasonal-fundamental-and-technical-analysis/?scode=048217 … $MACRO $STUDYpic.twitter.com/5r5aRNk26H

https://conferences.moneyshow.com/moneyshow-toronto/speakers/fftoms096672/donald-vialoux/?scode=048217

 

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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Weekly comment by Greg Schnell from www.StockCharts.com

Greg asks, “What wall of worry”? Following is the link:

https://www.youtube.com/watch?v=dzQEvKWu4q8&feature=youtu.be

 

StockTwits released on Friday @EquityClock

Seagate Technologies $STX, a NASDAQ 100 stock moved above $50.55 extending an intermediate uptrend.

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Medical Devices iShares $IHI moved above $250.14 to an all-time high extending an intermediate uptrend.

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Norbord $OSB moved above $32.52 completing a double bottom pattern. Benefits from OSB sales triggered by hurricane concerns

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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 43.80 from 30.00. Percent changed to intermediate neutral from intermediate oversold on a move above 40.00.

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Bullish Percent Index for S&P 500 stocks increased last week to 53.40 from 49.80. The Index remains intermediate neutral.

 

TSX Momentum Barometers

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Percent of TSX stocks trading above their 50 day moving average increased last week to 49.36 from 38.46. Percent changed to intermediate neutral from intermediate oversold on a move above 40.00.

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Bullish Percent Index for TSX stocks increased last week to 61.09 from 60.25. The Index 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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3 Responses to “Tech Talk for Tuesday September 3rd 2019”

  1. Larry/ON Says:

    $CAD broke short-term support around 1.3346 with next major support around 1.35-1.355.

  2. Paula Says:

    Ron/BC
    Thanks for #15 on September 2nd. Fibonacci numbers I thought I knew about, but Fibonacci moving averages is a new one for me. I am really starting to appreciate your modified MACDs, especially the Long 50,200,20. (Is this correct? On the chart it shows the last number in this series as “1”.) This is definitely another chart I will save and refer to.

  3. Ron/BC Says:

    Paula

    For the Long Modified MACD I use 50,200,1 and then select a 20ema. I then have to draw in the zero line in blue after. You can get the same signals with MACD 50,200,20 but you’ll have the histogram along with a zero line. I like histograms but prefer to keep them separate. Just a personal choice. And the histograms tend to be a little sensitive and whips saw a little while just the emas lines keep the trend on track and don’t whipsaw enough to be concerned about. And it’s the cross overs of the 20ema that are buy and sell signals. The signals can be slow and seem after the fact of a high or low but if you look at enough charts with it on you’ll see how much it tells you. And it is a trend indicator so isn’t designed to catch tops and bottoms. If it stays on a sell signal while the shorter indicators are giving buy signals don’t expect much of a rally. You can still trade a market with short term indicators but be prepared to exit quickly. That is with the Daily charts. When you change time frames the Short Modified MACD 20,50,1 with a 10ema works well with some time frames. Each time frame needs to be tested for accuracy of the signals. And some ETFs and stocks are too volatile for the M.MACDs too. But they are always worth having on the charts.
    I like the Fibonacci moving averages 8,13,21,34 and still keep the 50ema and 200ema on as well as I like to see price run up or down into them with the major test being the 8ema crossing above the 13ema for a short term warning of change. And then the 13ema crossing above the 21ema etc etc. And in a bullish trend they will all stay above each other in a nice trending pattern with the shorter emas above the longer emas. You know then the trend is your friend. The 50ema and 200ema area always needed to confirm trend as most institutions use both a lot and they are the big buyers and sellers. I also often put on the charts where I use this a 13,34,1 MACD which at a glance shows when the 13 crosses the 34. One can also use the 8,34,1 as well for cross overs of the zero line. No need for a moving average added really as it will whipsaw too much. But you’ll find each market you track is different. I realize we all want one indicator to tell us what we want but with the different volatility and beta that just isn’t going to happen. But with Fibonacci moving averages you can see the significance of the very short term averages crossing each of the longer term ones which is an early heads up of change. Often you’ll just see price run up or down into the group but then back off again with none of the Fib.emas crossing each other. Also when you see price jump way above this group of emas or selloff way below these emas you’ll tend to see price snap back to the group again. If one is nimble one can buy the big pullback from the group or if long sell the big spike in price that’s way above the group of emas and when it pulls back to the group of emas again buy the stock back if you wish to hold it. Makes for a nice cushion of profit for when it sells off at some point. Buying the spike down is riskier as it may plunge for whatever reason too. Check out a bunch of charts with them on and see how often price does this.

    As far a a bottom picking indicator goes put on a MACD Histogram with 50,200,20 and you’ll see after a big selloff for some time the Histogram has been making lower lows steadily for some time and then you’ll see some higher lows regardless of price action. Those points are often price lows. You’d need to back check this with some Daily charts to see how often this occurs but it does occur often. But you do tend to need a steady selloff for some time with a very low Histogram and then see a few higher lows to signal a likely bottom is in. And of course a stop loss in place in case it’s just a pause in the downtrend. But if you mark enough charts with this happening you’ll see you can catch a lot of lows in price. Then buy a partial position and do what you wish after as it reverses back up. Here is an example with RY.to. I marked the improving Histogram with blue dotted lines when it started to improve from its selloff and noticed how it lined up almost perfectly with the Short Modified MACD 20,50,10. Strange how those things happen. And it may only indicate a bounce. Right now it looks like RY.to is going to bounce back. And it did close near the highs of the day. But the Short MACD 20,50,1 hasn’t quite crossed its signal line yet. But look at the Histogram and how low it is. A couple of higher lows with the Histogram would give a bottom picking buy signal. But it’s always best to wait for the actual signal. And there is resistance at $101 as well which isn’t far away. Well those are some things to check out if you’re interested.

    https://stockcharts.com/h-sc/ui?s=RY.TO&p=D&yr=2&mn=6&dy=0&id=p11885993868&a=673066426

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