Tech Talk for Monday January 27th 2020

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Pre-opening Comments for Monday January 27th

U.S. equity index futures were sharply lower this morning. S&P 500 futures were down 48 points in pre-opening trade. Index futures responded to intensified worries that the coronavirus will spread.

Gold responded to coronavirus fears by gaining $9.80 to $1,581.70 per ounce

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Crude oil responded to coronavirus fears by dropping $1.48 to $52.71 per barrel.

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DR Horton slipped $0.48 to $58.02 despite reporting higher than consensus fiscal first quarter revenues and earnings.

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TDAmeritrade slipped $0.82 to $48.50 despite a target increase by UBS from $39 to $54.

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EquityClock’s Daily Market Comment

Following is a link:

http://www.equityclock.com/2020/01/25/stock-market-outlook-for-january-27-2020/

Note comments on bearish engulfing patterns recorded by the Dow Jones Industrial Average and S&P 500 Index on Friday. Also, note comments on the VIX Index, U.S Healthcare Sector and Canadian Retail Trade

 

The Bottom Line

World equity markets returned to their traditional mid-January to mid-February trends last week. The period is known for higher than average volatility, but little net change. Most equity markets resume an intermediate uptrend following this period.

 

Observations

World equity markets have a history of moving higher after the end of Chinese New Year holiday. Chinese equity markets are closed for most of this week for the holiday.

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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) moved lower last week from an intermediate overbought level and is trending down. See end of this report for charts.

Medium term technical indicators for Canadian equity markets were mixed 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 lower from overbought levels last week

Short term technical indicators for Canadian markets and sectors were mixed last week and remain at overbought levels.

Consensus for fourth quarter earnings by S&P 500 companies improved slightly last week thanks to slightly higher results released to date. According to FactSet, fourth quarter earnings on a year-over-year basis are expected to decline 1.9% (versus previous estimate of a drop of 2.1% last week) and fourth quarter revenues are expected to increase 2.9% (versus 2.7% last week). For all of 2019, earnings are expected to increase 0.2% and revenues are expected to increase 4.1%.

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% on a year-over-year basis and revenues are expected to increase 4.3 % (versus previous estimate last week of 4.2%). Second quarter 2020 earnings are expected to increase 6.5% (versus estimate of 6.4%) and revenues are expected to increase 4.8% (versus previous estimate of 4.9%). Third quarter earnings are expected to increase 10.2% (versus previous estimate at 10.1%) and revenues are expected to increase 5.7%. Fourth quarter earnings are expected to increase 14.7% (versus previous estimate of 15.0%) and revenues are expected to increase 6.0% (versus previous estimate of 5.9%). Earnings for all of 2020 are expected to increase 9.5% and revenues are expected to increase 5.2% (versus previous estimate of 5.4%)

 

Economic News This Week

December New Home Sales to be released at 10:00 AM EST on Monday are expected to increase to 729,000 from 719,000 in November.

December Durable Goods Orders to be released at 8:30 AM EST on Tuesday are expected to increase 0.8% versus a drop of 2.1% in November. Excluding Transportation orders, December Durable Goods Orders are expected to increase 0.3% versus a decline of 0.1% in November.

FOMC statement on interest rates is released at 2:00 PM EST on Wednesday. No change in the Fed Fund Rate at 1.75% is expected. Press conference is held at 2:30 PM EST.

First estimate of Fourth Quarter U.S. real GDP to be released at 8:30 AM EST on Thursday is expected to show growth at a 2.1% annual rate, unchanged from the third quarter.

Weekly Jobless Claims to be released at 8:30 AM EST on Thursday are expected to remain unchanged from last week at 211,000.

December Personal Income to be released at 8:30 AM EST on Friday is expected to increase 0.3% versus a gain of 0.5% in November. December Personal Spending is expected to increase 0.3% versus a gain of 0.4% in November.

November Canadian GDP to be released at 8:30 AM EST on Friday is expected to increase 0.1% versus a decline of 0.1% in October.

January Chicago PMI to be released at 9:45 AM EST on Friday is expected to increase to 48.8 from 48.2 in December.

January Michigan Consumer Sentiment Index to be released at 10:00 AM EST on Friday is expected to remain unchanged from December at 99.3.

 

Selected Earnings News This Week

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Another 147 S&P 500 companies (including 14 Dow Jones Industrial companies) are scheduled to report quarterly results this week.

Trader’s Corner

Equity Indices and related ETFs

Daily Seasonal/Technical Equity Trends for January 24th 2020

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Green: Increase from previous day

Red: Decrease from previous day


Commodities

Daily Seasonal/Technical Commodities Trends for January 24th 2020

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Green: Increase from previous day

Red: Decrease from previous day

 

Sectors

Daily Seasonal/Technical Sector Trends for January 24th 2020

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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

AbbVie $ABBV, an S&P 100 stock moved below $84.17 completing a Head & Shoulders pattern.

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Broadcom $AVGO, a NASDAQ 100 stock moved above $327.88 to an all-time high extending an intermediate uptrend.

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Nickel ETN $JJNTF moved below $15.82 extending an intermediate downtrend

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20 year + Treasury Bond iShares $TLT moved above $141.54 setting an intermediate uptrend.

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Duke Energy $DUK, an S&P 100 stock moved above $96.33 to an all-time high extending an intermediate uptrend

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Biotech ETF $BBH moved below $137.50 completing a double top pattern.

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Another Biotech ETF breakdown $IBB! Units completed a double top pattern on a move below $116.95

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BMO Junior Gas Index ETF $ZJN.CA moved below $29.47 to an all-time high extending an intermediate downtrend.

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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 dropped last week from 83.17 to 67.23. Percent remains intermediate overbought and trending down.

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Bullish Percent Index for S&P 500 stocks dropped last week from 83.00 to 80.40. The Index remains intermediate overbought and showing early signs of rolling over.

 

TSX Momentum Barometers

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Percent of TSX stocks trading above their 50 day moving average dropped last week from 79.82 to 69.72. Percent remains intermediate overbought and trending down.

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Bullish Percent Index for TSX stocks increased last week from 75.21 to 76.50. 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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