Tech Talk for Monday January 6th 2020

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Pre-opening Comments for Monday January 6th

U.S. equity index futures were lower this morning. Index futures are responding to increasing tensions between the U.S. and Iran. S&P 500 futures were down 17 points to 3,222 in pre-opening trade.

Gold jumped $24.50 per ounce to $1,577.00 per ounce on increasing Middle East tensions. Gold moved above $1,566.40 to a seven year high. Also, Goldman Sachs upgrade gold to Buy.

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Crude Oil also responded to Middle East tensions. WTI Crude Oil advanced $0.64 to $63.69 per barrel.

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Citigroup slipped $0.51 to $79.19 after Deutsche Bank lowered its rating to Hold from Buy.

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Apple slipped $2.27 to $295.16 despite a target increase by Deutsche Bank to $280 from $235.

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EquityClock’s Daily Market Comment

Following is a link:

http://www.equityclock.com/2020/01/03/stock-market-outlook-for-january-6-2020/

Note seasonality charts on Crude Oil Days of Supply, Natural Gas Storage and Construction Spending.

 

The Bottom Line

The intermediate uptrend in world markets stalled on Friday on news of rising conflict in the Middle East.

 

Observations

Seasonal influences this year continue to follow their historic pattern. Note seasonal charts below showing that most equity markets have a history of weakening from early January to early February. Given the current intermediate overbought levels for equity markets falling fourth quarter earnings on a year-over-year basis for S&P 500 companies and rising tensions in the Middle East, history is likely to repeat in early 2020. Many individual investors have large unrealized profits in 2019 that were deferred for tax purposes until the New Year. Their profit taking is likely to cause short term weakness in equity markets into January.

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Medium term technical indicators for U.S. equity markets (e.g. Percent of S&P 500 stocks trading above their 50 day moving average, Bullish Percent Index) remain intermediate overbought and show early signs of peaking.

Medium term technical indicators for Canadian equity markets also remain intermediate overbought. Percent of TSX stocks trading above their 50 day moving average show early signs of peak while Bullish Percent Index continues to move higher.

Most short term technical indicators for U.S. markets and sectors (20 day moving averages, short term momentum indicators) moved lower last week from overbought level and show signs of peaking.

Short term technical indicators for Canadian markets and sectors also moved lower last week from overbought levels and show early signs of peaking.

Consensus for earnings by S&P 500 companies was virtually unchanged from estimates offered two weeks ago. According to FactSet, fourth quarter earnings on a year-over-year basis are expected to decline 1.5% (versus previous estimate of a drop of 1.4%) and fourth quarter revenues are expected to increase 2.6%. For all of 2019, earnings are expected to increase 0.3% and revenues are expected to increase 3.8%. First quarter 2020 earnings are expected to increase 5.0% and revenues are expected to increase 4.4 %. Second quarter 2020 earnings are expected to increase 6.6% and revenues are expected to increase 4.9%. Earnings for all of 2020 are expected to increase 9.6% and revenues are expected to increase 5.4% (versus previous estimate at 5.5%).

 

Economic News This Week

November U.S. Trade Deficit to be released at 8:30 AM EST on Tuesday is expected to drop to $44.00 billion from $47.20 billion in October.

November Canadian Trade Deficit to be released at 8:30 AM EST on Tuesday is expected to narrow to $1.00 billion from $1.08 billion in October.

November Factory Orders to be released at 10:00 AM EST on Tuesday are expected to drop 0.8% versus a gain of 0.3% in October.

December Services ISM Index to be released at 10:00 AM EST on Tuesday is expected to increase to 54.4 from 53.9 in November.

December ADP Employment to be released at 8:15 AM EST on Wednesday is expected to increase 165,000 versus a gain of 67,000 in November.

Canadian December Housing Starts to be released at 8:15 AM EST on Thursday are expected to increase to 205,000 units from 201,300 units in November.

Weekly Initial Jobless Claims to be released at 8:30 AM EST on Thursday are expected to remain unchanged at 222,000.

December Non-farm Payrolls to be released at 8:30 AM EST on Friday are expected to drop to 165,000 from 266,000 in November. December Unemployment Rate is expected to remain unchanged from November at 3.5%. December Average Hourly Earnings are expected to increase 0.3% versus a gain of 0.2% in November.

December Canadian Employment to be released at 8:30 AM EST on Friday is expected to increase 20,000 versus a drop of 71,200 in November. December Unemployment Rate is expected to slip to 5.8% from 5.9% in November.

 

Earnings News This Week

Four S&P 500 companies are scheduled to report quarterly results this week, including one Dow Jones Industrial company.

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Trader’s Corner

Editor’s Note: Many equity markets, commodities and sectors have a history of moving sideways/slightly lower from the first week in January to the first week in February, followed by strength into spring.

Equity Indices and related ETFs

Daily Seasonal/Technical Equity Trends for January 3rd 2019

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Green: Increase from previous day

Red: Decrease from previous day


Commodities

Daily Seasonal/Technical Commodities Trends for January 3rd 2019

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Green: Increase from previous day

Red: Decrease from previous day

Sectors

Daily Seasonal/Technical Sector Trends for January 3rd 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

 

Greg Schnell’s latest “Market Buzz” Comment

Greg offers interesting comments on Gold, U.S. Dollar and the Fear & Greed Index. Following is a link:

https://www.youtube.com/watch?v=jPK3xGl9PO4&feature=youtu.be

 

Changes Last Week

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StockTwits released on Friday @EquityClock

Chevron $CVX, a Dow Jones Industrial stock moved above $121.74 setting an intermediate uptrend.

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Alexion Pharma $ALXN, a NASDAQ 100 stock moved below $106.13 setting an intermediate downtrend.

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Lockheed Martin $LMT, an S&P 100 stock moved above $397.53 to an all-time high extending an intermediate uptrend.

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Aerospace & Defense ETF $PPA moved above $78.18 to an all-time high extending an intermediate uptrend.

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Crude Oil ETN $USO moved above $13.16 extending an intermediate uptrend.

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CGI Group $GIB.A.CA, a TSX 60 stock moved below $108.10 completing a double top pattern.

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George Weston $WN.CA, a TSX 60 stock moved below $101.59 extending an intermediate downtrend.

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TSX Energy iShares $XEG.CA moved above $9.44 extending an intermediate uptrend.

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Magna International $MG.CA $MGA moved below $70.08 Cdn. completing a double top pattern.

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VeriSign $VRSN, a NASDAQ 100 stock moved above $198.57 resuming an intermediate uptrend.

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General Electric $GE, an S&P 100 stock moved above $11.83 extending an intermediate uptrend.

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Jeff Parent on BNNBloomberg’s Market Call Tonight

Market Comment

https://www.bnnbloomberg.ca/video/jeff-parent-s-market-outlook~1868157

Past Picks

https://www.bnnbloomberg.ca/video/jeff-parent-s-past-picks~1868186

Top Picks

https://www.bnnbloomberg.ca/video/jeff-parent-s-top-picks~1868212

 

S&P 500 Momentum Barometers

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Percent of S&P 500 stocks trading above their 50 day moving average dropped last week from 80.76 to 75.35. Percent remains intermediate overbought and showing early signs of a peak.

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Bullish Percent Index for S&P 500 stocks increased last week from 77.80 to 78.00. The Index remains intermediate overbought.

 

TSX Momentum Barometers

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Percent of TSX stocks trading above their 50 day moving average dropped last week from 72.56 to 66.82. Percent remains intermediate overbought and showing early signs of a peak.

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Bullish Percent Index for TSX stocks increased last week from 72.29 to 74.68. 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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21 Responses to “Tech Talk for Monday January 6th 2020”

  1. rick Says:

    Monday mornings are always difficult .

    http://schrts.co/ETSIHhrG

    On a weekly chart :
    bulls are still in charge = 10EMA is above 20EMA , both are above 50 EMA and all three are above 200EMA .
    a correction to 10EMA or 20 EMA is absolutely normal .
    50EMA provided support last year.

    so :

    https://www.google.ca/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&ved=2ahUKEwij8ej5ru_mAhVVrJ4KHdOCB5kQjRx6BAgBEAQ&url=https%3A%2F%2Fkeepcalms.com%2Fp%2Fkeep-calm-and-stay-invested-diversify-and-let-it-compound%2F&psig=AOvVaw3L8e0NiilTXs52DeGprGYz&ust=1578413170635181

  2. Ron/BC Says:

    Here is an $SPX chart showing the huge “stretch” price has had above its 200ema with the previous 4 times shown. As always draw your own conclusion. Just don’t be blind to what you’d like to see……………..oink,oink.

    https://stockcharts.com/h-sc/ui?s=%24SPX&p=D&yr=2&mn=6&dy=0&id=p56578149340&a=682178007

  3. rick Says:

    Ron/BC ,
    http://schrts.co/BmXVbbJM

    I agree with you .
    In a blink of the eye SPX can go to EMA 50 ( on daily charts ) .
    You blink twice and SPX can reach EMA 200 .
    But I did not said to buy at this level , I said stay invested for long term if you are an investor for long term .
    If you are an investor for short term than yes, you can try to time the market and sell now and buy later .
    If an investor has cash ready to be invested , than maybe he/she should put an order to buy AT 50 EMA or 200 EMA or half at 50 EMA and half at 200 EMA .
    Or an investor can wait for PPO to become negative and than turn around .
    But if a long term investor has capital invested for long term I will not sell at first ugly news from mass media .
    Because is Normal to have 5-10 % corrections .
    We cannot expect nice results every month and every day .
    We just had 3 great months .

  4. bruce Says:

    rick
    excuse my ignorance but what is PPO?

  5. Ron/BC Says:

    Rick
    My post wasn’t in response to your #1 post as I was copying the chart and starting to post before I saw your post. I just post this chart now and again when I see the chart is stretched out to the point where price is likely to come back to the 200ema like it always does when overdone. One can see the Daily $SPX has a lot of respect for the 200ema and while it has occasions when it plunges through it on a major selloff it tends to be a good place to get long. That’s what I’d wait for if wanting to invest some cash long term as I don’t hold losing positions. And January is often a ver volatile month with major repositioning. But I do like the $SPX type ETFs for their diversity and world wide status that even the top politicians pay attention to. Kind of like what Quebec is to the Federal Government.

  6. Ron/BC Says:

    Here is a line chart (closing prices) of $GOLD (Friday close) once again. One can see price has rallied up to significant resistance at the $1560 area which is not only price resistance but close to the Fibonacci 61.8% retracement level of the 2011 through 2015 selloff. This level needs to clear AND hold above 1560 to suggest a run to the 1800-1900 area again. Price is overbought with the RSI 8 over 91 on Friday’s close but the chart pattern is a bullish Flag complete with a Flag Pole. This pattern suggests if the top of the Flag at 1560 is cleared it could quickly run up to the 1800 and likely 1900 double top.

    Of concern for weakness is the flat relationship of the Gold Stock ETF:GDX to $GOLD along with the very weak $SILVER:$GOLD ratio chart as well. $GOLD stocks and Silver are typically stronger in major uptrends. Notice today with a strong $GOLD price (so far) Gold stocks aren’t doing much and neither is $Silver.

    https://stockcharts.com/h-sc/ui?s=%24GOLD&p=D&yr=10&mn=0&dy=0&id=p80562827618&a=673066139

    https://stockcharts.com/h-sc/ui?s=GDX&p=D&yr=8&mn=0&dy=0&id=p08200049306&a=673066134

  7. rick Says:

    Bruce ,

    PPO is almost MACD.
    the only difference is this :
    MACD calculates the difference between 2 EMAs in net points while
    PPO calculates the difference between 2 EMAs in percentage %.
    On daily charts on short term , 1 year ,there is no difference .
    On long term charts ,10 years , is different .
    Look at RON/BC chart at #2 .
    200 points in SPX today , when SPX is at 3000 , is not the same with 200 points in SPX 10 years ago when SPX was 1000.
    200 points than was 20 % , now 200 points is just 6,6 %
    A correction of 6,6 % is normal while a 20 % correction is raising questions and is raising the level of stress hormones .
    I am just used with PPO on weekly charts ( long time charts )
    So PPO and MACD is almost the same .

  8. still_learning Says:

    Ron/BC re#6

    I was just about to ask if anyone could explain why ‘my’ ABX and XGD are flat, or slightly down, and gold is up quite a bit?
    When something doesn’t make sense, I suspect a game going on? What kind of manipulation that us little guys don’t know about?

  9. Ron/BC Says:

    Bruce

    Here is a visual link and comments about both MACD and PPO. I prefer absolute differences as that’s what is viewed on charts and what people respond to in the present time frame. But using such a short term exponential moving averages with both MACD and PPO you will see constant whipsaw crossovers back and forth. It is used for short term trading a lot. This is why I use a Modified MACD using the 20ema/50ema and 50ema and 200ema combinations in place of the standard short term numbers. It’s much like putting your headlights on bright instead of low beams.

    But I don’t get caught up with percentage gains and losses in anything as that is very deceiving. I know for the past few years I was scoffed at for making 2% to 3% on my cash. That was because the scoffers only see things in percentages. But I had over $600,000 in the bank so was making $12,000 to $18,000 per year guaranteed with no risk or pressure. And $60,000 of it was TFSA money so not taxable. The ones criticizing me had an average of $60,000 invested and would have needed to make 20% to 30% gains to match my 2% to 3% gains. I didn’t care what percentage it was, only how much I was making and what the risk was. So you can see why I don’t care what percentage points I make.

    https://stockcharts.com/articles/mailbag/2012/12/what-is-the-difference-between-macd-and-the-ppo-indu.html

  10. Ron/BC Says:

    Bruce

    Correction: The interest made on my $600K was all taxable income. The $60K TFSA cash was in a 4% 33 month GIC with Coast Capital Credit union along with another $40K that was taxable.

  11. Ron/BC Says:

    Still_Learning

    Here is a chart of XGD.to with a group of Fibonacci moving averages. You can see price is back up to the August highs in that $16 area. That’s a double top and where I’d get off the train. And I’ve found when price ‘stretches’ way past those group of Fib moving averages it tends to snap back to them much like a rubber band. The major technicals are bullish but overbought. With all the craziness in the world going on price could do most anything. But until price clears that $17 area it is at price resistance. And you have to wonder what will price of the Gold stocks do when $GOLD isn’t having a strong day. So you can say I’m being cynical I guess,lol……………Seen too many washed up investors in my life. There aught to be a memorial for them.

    https://stockcharts.com/h-sc/ui?s=XGD.TO&p=D&yr=1&mn=0&dy=0&id=p05428070817&a=674185261

  12. still_learning Says:

    Thanks Ron,

    Nice to have someone to bounce questions off. Our ‘friend’ Gary Savage is predicting a pull back in Gold before another run up. May take some ABX profits before they disappear.

    regards Bernie/Lethbridge

  13. bruce Says:

    rick and ron
    tnx for your lengthy explanations of PPO…..i’ve been investing for over 60 years and have never come across PPO….never too old to learn….

  14. rick Says:

    Ron/BC,

    I agree with almost all of your posts.
    Just almost because while you are in cash 100 % ,I am invested 100 % .
    This is why we have different opinions in some situations, just some situations .
    I have no cash to buy anything .

    95 % of my invested capital is in Nasdaq 100 for long term and I am happy with my results in last 8 years .
    A correction of 5-10 % will not change my view and is normal such a correction from time to time .
    This is why I said “stay invested for long term” .
    I did not said “buy today” because I agree that the market is overbought after 3 great months.

    Regarding percentages and “the scoffers ” I am sure you were not referring to me because I know you are a gentlemen , a 100 % gentlemen .

  15. Larry/ON Says:

    Re 2 – RON/BC has cut to the chase and posted the most relevant chart. It’s looking a little like Jan/18. At the moment nothing can bring down this market. Sometimes the most important skill in a market is patience. Selling into strength is a good thing to do right now.

  16. Paula Says:

    Ron/BC,
    To answer your question in #25 yesterday: No, that link did not go to Howestreet.com. Here is the link I think you meant to send:

    https://www.howestreet.com/2020/01/gold-oil-real-estate-resource-juniors-this-week-in-money/

    I listened to something from that site earlier today but I think it was the week before this link. So I heard Ross Clark and thought his comments were interesting and I might tune in again but since it is only audio, I have to fill in the visual gaps. I did not care for Boby Hoye and will not be listening to him again.

    Did you ever listen to Ciovacco? I like his charts and long term perspective; definitely not for short term trading.

    Re your #11 today: I was thinking the same thing: what would it take to get gold stocks to go up if they couldn’t get off the couch when the price of gold has had such a move up over the last two day? It really is all about sentiment, perception, psychology, as reflected in the charts – fundamentals, logic, even common sense do not matter.

    Rick- I appreciate your comments and perspective. You might enjoy the weekly Ciovacco podcast:

    https://www.ccmmarketmodel.com/short-takes

  17. rick Says:

    2 reasons why I invested my capital for long term .
    First : inflation .
    Our return has to be above inflation .
    Look at this link :https://www.taxtips.ca/stocksandbonds/investmentreturns.htm
    At Canadian Consumer Price Index , 70 years , we have this number 11,186 .
    So , the products and services that we bought in 1949 with 1,000 $ = we need today 11,186.00 $ to buy the same products and services .
    The value of Canadian dollar is 91 % lower than in 1949 .
    100,000 $ in cash from 1949 until now = 8940 $ today in 1949 dollars .
    Inflation is destroying the value of cash .
    Even if we place those money in a GIC , the interest of that GIC has to be higher than inflation = consumer price index .
    Otherwise we are losing the value of our money .
    Grandma , do you remember those 1000 $ that you put under mattress for me ? now they value around 90 $ Thank You Grandma.
    Second reason : I don’t want to work anymore for money , I want my money to work for me .
    On the same webpage : 1000 $ invested in SPX in 1949 = now they value 2,410,627 $ in 2019 $ or , adjusted for inflation = 215,503 $ in 1949 $ .
    2410627 divided by 11186 = 215593
    In 70 years , 1 $ invested became 215 $ today in adjusted for inflation $ , 215 times !.
    Of course , in 70 years .
    Grandpa , remember those money that you spent on booze and cigarettes ? , those money could have made your grandson rich . Thank You Grandpa .

  18. rick Says:

    Let’s suppose I have 250.000 $ in cash.
    I have 2 options :
    First : buy a Ferrari : https://www.dupontregistry.com/autos/results/ferrari/488–gtb/2017/?extcolors=yellow

    Probably all my relatives , friends , coworkers and neighbors will become yellow with envy like the car .

    Second : buy Ferrari shares = in last 4 years , Ferrari shares jumped 3,65 times with dividends re-invested
    http://www.tickertech.com/cgi/returns.mpl?symbol=NDX&smonth=01&sday=04&syear=2016&emonth=01&eday=31&eyear=2020&compareto=other&other=race

    so those 250.000 $ will be now 912.500 $

    Which option is best ? buying a Ferrari or buying Ferrari shares ?
    If you buy a car = you will make profits for the Ferrari company
    If you buy Ferrari shares = the profits from other buyers will come to you in form of dividends and capital appreciation .

    I promised my wife that I will not buy a Ferrari car with my next OAS check.

  19. Ron/BC Says:

    Paula

    Well one thing that could cause $GOLD to rally past $1560 and run to $1800-$1900 that the chart pattern suggests is a possibility is a falling U.S.$. It has rolled over and looks like that is going to continue. See price break below the 200ema and bounce back to it but instead of clearing it after a brief selloff the 200ema served as resistance and price sold off again to a lower low. First time price stayed below the 200ema since May 2018. And note the ratio chart of $USD:$XEU start its downtrend in early September. And see the Fibonacci moving averages group upside down now. So that is a help for $GOLD to rally. But resistance is resistance and all the b.s. in the world can’t change that. Price must clear AND HOLD above $1560 to suggest a rally to $1800 to $1900.
    And I do have lot of respect for Ross Clark but not Bob Hoye and don’t like that Ciovacco guy as he just doesn’t sound believable. I think he just tries too hard and juggles a lot of financial data to make his points. Bob Hoye is far to casual about his analysis and wings it too much. He’s likely good with the charts but not a good speaker.

    https://stockcharts.com/h-sc/ui?s=%24USD&p=D&yr=2&mn=0&dy=0&id=p03961839318&a=673066460

  20. Bernie Says:

    Re: #19
    Ron,BC,
    In my case I prefer to invest in the long term in mostly dgi stocks because: (1) DGI has been my most successful strategy, by far. I’ve studied and/or tried several over the years. (2) Once you have your portfolio put together there is very little monitoring involved. Less monitoring = less stress. (3) There is very little volatility in dividend returns. Its pretty much small steps upward and to the right. (4) I can live off the dividend income I generate without the need to sell anything. Yes every withdrawal reduces my capital but my share count and income remains the same. Had I sold shares my income and dividend growth would be reduced and my budget would need to be adjusted. (5) There’s less fuss over taking profits. (6) I wish to pass on my legacy to my wife. She’s a lot younger than me so “long term” means “really long term”. lol I hope your new strategy works out for you! It should, you’re very adept with sticking to a plan and exiting quickly.
    I’m more of a fair weather golfer but, at least, there is potential to play when its raining instead of snowing like it does around here. Be happy you don’t have to shovel rain in the winter! That would cut into your playing time. Its also makes an old guy like me want to nap more.

    Re: #20 yesterday
    Paula,
    I’m like you. Its much easier and less physical to invest in REITs than it is in real estate. That sector has done really well yet I have only 7% total content in it, 1 U.S. REIT, 1 Cdn REIT and 1 REIT ETF.
    I have owned them long term but wish I had! The youngest of my REIT holdings is CI First Asset Canadian REIT ETF (RIT.TO). Going back to inception in 2004-11-04 the ETF has returned 366.5% in total return, that’s an annualized 10.7%. My Cdn REIT holding is Canadian Apartment Property REIT (CAR/UN.TO). It has returned 734.2% TR or 15.01% annualized over the same period. My U.S. REIT is Realty Income Corp (O) its returns were 545.9% TR, 13.1% annualized. I know its wishful thinking on my part to look back this way but I wonder how many real estate investors did as well over the past 15 years.

  21. Ron/BC Says:

    Bernie

    Is there a DGI ETF that would ‘basically’ cover your DGI stocks? I’d prefer to diversity with an ETF rather than buy a bunch of individual stocks that see some rocket up and others crash and burn for some reason. I’m game for a mix of investments as I have a nice chunk of cash profit from my condo sale so overall I have no excuse not to do something that brings in more income. And unlike most people I didn’t buy a more expensive & better condo with the extra money I made selling the last one but bought an older but larger condo for about $85K cheaper and still on the top floor. So I should get into an income generating ETF if there is one that is sound.

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