Tech Talk for Monday January 20th 2020

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Pre-opening Comments for Monday January 20th

World equity markets were mixed in quiet overnight trading. U.S. equity markets are closed for the Martin Luther King holiday. European equity indices moved slightly lower. Far East equity indices moved higher, led by a 20.29 point gain by the Shanghai Composite Index to 3,095.79.

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The TSX Composite Index is expected to open slightly higher in quiet trade. Focus at the opening is on the energy sector. WTI Crude Oil added $0.35 to $58.89 in overnight trade following political unrest in Libya. TSX Energy iShares are expected to open higher.

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The Bottom Line

Surprising strength by equity indices around the world last week with the exception of Far East indices! Once again, Apple, Facebook, Google, Netflix and Microsoft led the advance. These stocks have been described as “frothy”, but have yet to show signs of peaking.

Observations

Most equity indices are not following their seasonal trend this January. Historically, indices have paused from the second week in January to the first week in February. This year, indices continued moving higher beyond their traditional Christmas rally period.

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) moved higher last week and remain intermediate overbought. See end of this report for charts.

Medium term technical indicators for Canadian equity markets also moved higher last week, and remain intermediate overbought. See end of this report for charts.

Most short term technical indicators for U.S. markets and sectors (20 day moving averages, short term momentum indicators) moved higher last week and remain at overbought levels.

Short term technical indicators for Canadian markets and sectors also moved higher last week and remained at overbought levels.

Consensus for fourth quarter earnings by S&P 500 companies moved lower again last week. According to FactSet, fourth quarter earnings on a year-over-year basis are expected to decline 2.1% (versus previous estimate of a drop of 2.0%) and fourth quarter revenues are expected to increase 2.7%. For all of 2019, earnings are expected to increase 0.2% and revenues are expected to increase 3.9%. Beyond fourth quarter reports, consensus earnings turn positive and earnings gains accelerate as the year progresses. First quarter 2020 earnings are expected to increase 4.3% (versus previous estimate of 4.5%) and revenues are expected to increase 4.2 % (versus previous estimate of 4.3%). Second quarter 2020 earnings are expected to increase 6.4% and revenues are expected to increase 4.9%. Third quarter earnings are expected to increase 10.1% and revenues are expected to increase 5.7%. Fourth quarter earnings are expected to increase 15.0% and revenues are expected to increase 6.0%. Earnings for all of 2020 are expected to increase 9.5% (versus previous estimate of 9.4%) and revenues are expected to increase 5.4%

 

Economic News and Events This Week

U.S. Holiday on Monday

Impeachment trial starts in the U.S. Senate on Tuesday.

Canada’s December Consumer Price Index to be released at 8:30 AM EST on Wednesday is expected to slip 0.1% versus a decline of 0.1% in November.

December Existing Home Sales to be released at 10:00 AM EST on Wednesday are expected to increase to 543,000 from 535,000 in November.

Bank of Canada’s Monetary Policy Statement is released at 10:00 AM EST on Wednesday. Overnight lending rate to major banks is expected to remain unchanged at 1.75%.

Weekly Initial Jobless Claims to be released at 8:30 AM EST on Thursday are expected to increase to 212,000 from 204,000 last week.

November Canadian Retail Sales to be released at 8:30 AM EST on Friday are expected to increase 0.6% versus a decline of 1.2% in October.

 

Selected Earnings News This Week

Fifty eight S&P 500 companies are scheduled to release quarterly results this week (including six Dow Jones Industrial companies.

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Trader’s Corner

 

Equity Indices and related ETFs

Daily Seasonal/Technical Equity Trends for January 17th 2019

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Green: Increase from previous day

Red: Decrease from previous day


Commodities

Daily Seasonal/Technical Commodities Trends for January 17th 2019

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Green: Increase from previous day

Red: Decrease from previous day

 

Sectors

Daily Seasonal/Technical Sector Trends for January 17th 2019

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Green: Increase from previous day

Red: Decrease from previous day

 

Greg Schnell’s Market Buzz

Released on Friday. Greg asks, “Are there opportunities in Financials”?

Following is a link:

https://www.youtube.com/watch?v=59O6XKiSZ1o&feature=youtu.be

 

Greg Schnell’s Canadian Technician

Also released on Friday. Focus is on “Forestry Pops”. Also, favourable comments on BMO, RY and TD. See:

https://www.youtube.com/watch?v=Nc9hAcSJnkM

 

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

Russell 2000 iShares $IWM moved above $170.07 to an all-time high extending an intermediate uptrend.

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Comcast $CMCSA, an S&P 100 stock moved above $47.02 to an all-time high extending an intermediate uptrend.

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Procter & Gamble $PG, a Dow Jones Industrial stock moved above $126.60 to an all-time high extending an intermediate uptrend.

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Qualcomm $QCOM, a NASDAQ 100 stock moved above $93.39 to an all-time high extending an intermediate uptrend.

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S&P/TSX Financials iShares $XFN.CA moved above $40.73 to an all-time high extending an intermediate uptrend

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Global Base Metal iShares $PICK moved above $30.18 extending an intermediate uptrend.

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Canadian lumber/OSB stocks sharply higher on greater than expected U.S. Housing Starts report. $IFP.CA $WFT.CA $OSB.CA $CFP.CA

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Couche-Tard $ATD.B.CA, a TSX 60 stock moved above $44.51 to an all-time high extending an intermediate uptrend.

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Fortis $FTS.CA, a TSX 60 stock moved above $56.43 to an all-time high extending an intermediate uptrend.

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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 from 74.35 to 83.17. Percent remains intermediate overbought.

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Bullish Percent Index for S&P 500 stocks increased last week from 80.60 to 83.00. The Index remains intermediate overbought.

 

TSX Momentum Barometers

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Percent of TSX stocks trading above their 50 day moving average increased last week from 66.36 to 79.82. Percent remains intermediate overbought.

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Bullish Percent Index for TSX stocks increased last week from 74.79 to 75.21. 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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