Tech Talk for Tuesday February 18th 2020

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Pre-opening Comments for Tuesday February 18th 2020

U.S. equity index futures were lower this morning. S&P 500 futures were down 12 points in pre-opening trade despite a 2.3% combined gain by the Shanghai Composite Index on Monday and Tuesday. The Chinese central bank announced a cut to its one year lending rate in order to support the economy during the coronavirus crisis.

Index futures were virtually unchanged following release of the February Empire State Manufacturing Survey at 8:30 AM EST. Consensus was an increase to 5.00 from 4.80 in January. Actual was an increase to 12.90

Apple dropped $9.65 to $324.95 after lowering guidance due to impact of the coronavirus.

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Wal-mart fell $0.75 to $117.14 after reporting lower than consensus fourth quarter earnings. The company also lowered guidance due to impact of the coronavirus.

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Bombardier (BBD.B $1.65 Cdn.) is expected to open higher after reaching an agreement to sell its rail division in a deal valued at $8.2 billion.

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Air Canada (AC $46.22 Cdn) is expected to open lower after lowering guidance partially due to impact of the coronavirus.

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Franklin Templeton advanced $2.68 to $27.04 and Legg Mason jumped $10.00 to $50.72 after Franklin Templeton offered to acquire Legg Mason for $50.00 per share cash.

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EquityClock’s Daily Market Comment

Following is a link:

http://www.equityclock.com/2020/02/16/stock-market-outlook-for-february-18-2020/

Note seasonality chart on U.S. Retail Trade.

 

The Bottom Line

World equity markets continued their traditional spring rally last week. Most equity markets move into an intermediate uptrend in the second week in February. The spring rally usually continues to May, but frequently is truncated in early April during U.S. Presidential Election years

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Observations

Most major equity indices have a history of reaching an important seasonal low in February for an upside move into spring. History is repeating.

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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 higher again last week and remained in intermediate overbought levels. See end of this report for charts.

Medium term technical indicators for Canadian equity markets were mixed to slightly higher last week and have returned to intermediate overbought levels.. 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 again last week

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

Consensus for fourth quarter earnings by S&P 500 companies improved again last week thanks to slightly higher than consensus results: 77% of companies have released quarterly results to date. According to FactSet, blended fourth quarter earnings on a year-over-year basis are expected to increase 0.9% (versus previous estimate of a gain of 0.7% last week) and fourth quarter revenues are expected to increase 3.6% (versus 3.5% last week).

Beyond fourth quarter reports, year-over-year consensus earnings for S&P 500 companies turn positive and earnings gains accelerate as the year progresses, albeit at a slower rate indicated last week. According to FactSet, first quarter 2020 earnings are expected to increase 2.1% on a year-over-year basis (versus 3.7% last week) and revenues are expected to increase 4.6 %.(versus 4.3% last week). Second quarter 2020 earnings are expected to increase 4.9% (versus estimate of 5.1% last week) and revenues are expected to increase 4.8%. Third quarter earnings are expected to increase 9.7% (versus previous estimate of 9.8%) and revenues are expected to increase 6.1% (versus 6.0% last week). Fourth quarter earnings are expected to increase 11.6% (versus previous estimate of 11.9%) and revenues are expected to increase 6.1%. Earnings for all of 2020 are expected to increase 8.0% (versus a previous estimate of 8.3%) and revenues are expected to increase 5.2%.

 

Economic News This Week

February Empire State Manufacturing Survey to be released at 8:30 AM EST on Tuesday is expected to increase to 5.00 from 4.80 in January.

January Producer Price Index to be released at 8:30 AM EST on Wednesday is expected to increase 0.1% versus a gain of 0.2% in December. Excluding food and energy, January Producer Price Index is expected to increase 0.2% versus a gain of 0.1% in December.

January Housing Starts to be released at 8:30 AM EST on Wednesday are expected to drop to 1.430 million from 1.608 million units in December.

Canadian January Consumer Price Index to be released at 8:30 AM EST on Wednesday is expected to increase 0.3% versus no change in December.

February Philly Fed Index to be released at 8:30 AM EST on Thursday is expected to drop to 12.0 from 17.0 in January.

Weekly Initial Jobless Claims to be released at 8:30 AM EST on Thursday are expected to increase to 210,000 from 205,000 last week.

January Existing Home Sales to be released at 10:00 AM EST on Friday are expected to slip to 5.48 million from 5.54 million units in December

 

Selected Earnings News This Week

Another 51 S&P 500 companies are scheduled to release quarterly results this week (including three Dow Jones Industrial companies). Quarterly reports by major Canadian companies reach a peak this week.

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Trader’s Corner

Equity Indices and related ETFs

Daily Seasonal/Technical Equity Trends for February 14th 2020

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Green: Increase from previous day

Red: Decrease from previous day


Commodities

Daily Seasonal/Technical Commodities Trends for February 14th 2020

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Green: Increase from previous day

Red: Decrease from previous day

 

Sectors

Daily Seasonal/Technical Sector Trends for February 14th 2020

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Green: Increase from previous day

Red: Decrease from previous day

 

Greg Schnell’s Market Buzz

Released on Friday. Greg notes that, ”China stocks start to break out”. Following is a link:

https://www.youtube.com/watch?v=_G73Kw9U9Q8&feature=youtu.be

Canadian investors can participate through ETFs holding Chinese stocks: XCH and ZCH

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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

Expedia $EXPE, a NASDAQ 100 stock moved above $114.28 on higher than expected fourth quarter earnings extending an intermediate uptrend.

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AIG $AIG an S&P 100 stock moved below $49.89 resetting an intermediate downtrend

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Yamana Gold $YRI.CA, a TSX 60 stock moved above $5.54 extending an intermediate uptrend.

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Agnico-Eagle $AEM.CA $AEM moved below $67.86 Cdn and $51.31 U.S. setting an intermediate downtrend.

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Fortis $FTS.CA, a TSX 60 stock moved above $58.05 to an all-time high extending an intermediate uptrend.

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Metro $MRU.CA, a TSX 60 stock moved above $55.99 setting an intermediate uptrend.

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Semiconductor ETF $SMH moved above $150.74 to an all-time high extending an intermediate uptrend.

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Visa $V, a Dow Jones Industrial stock moved above $209.83 to an all-time high extending an intermediate uptrend.

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Technical Scoop

Link to David Chapman’s weekly report compliments of www.EnrichedInvesting.com . Headline reads, “Tireless melt-up, COVID-19 immunity, same themes, inconsequential debt, Greek yields, foreboding spread”.

http://enrichedinvesting.com/wp-content/uploads/2020/02/Tireless-melt-up-COVID-19-immunity-same-themes-inconsequential-debt-Greek-yields-foreboding-spread.pdf

 

S&P 500 Momentum Barometers

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Percent of S&P 500 stock trading above their 50 day moving average increased last week from 63.13 to 67.13. Percent remains intermediate overbought.

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Bullish Percent Index for S&P 500 stocks increased last week from 73.60 to 76.80. 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 59.72 to 63.89. Percent changed from intermediate neutral to intermediate overbought on a move above 60.00.

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Bullish Percent Index for TSX stocks was unchanged last week at 73.71. 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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7 Responses to “Tech Talk for Tuesday February 18th 2020”

  1. Larry/ON Says:

    GLD -I don’t touch the stuff but there is no denying the chart looks very bullish and ready to break to a new high today. The rising 200 and 50 day MA’s are slowly squeezing up against price.

  2. Larry/ON Says:

    $CAD and WTI both turning downward after a very brief reversal off support. In the case of $CAD I am wondering if investors outside of Canada are paying attention to the blockades and their possible effects on the economy. It’s minor at this point. The nation needs to decide whether we are going to capitulate to mob rule. Food is rotting on rail cars, deicer fluid for airports is in limbo, chlorine for water treatment, propane for heating. Is that protest or a knife at the jugular of Canada?

  3. KC Says:

    Hello Ron/Bc,

    Wondering if you’ve ever looked at or traded MDT (Medtronic) ? If you have a few mins, could you please throw up your TA and chart for MDT ?

    Thanks
    KC

  4. KC Says:

    Ron/BC,

    Would also appreciate your thoughts on SYK (Stryker) please

    Thanks,
    KC

  5. Ron/BC Says:

    KC

    MDT obviously must have had a bad earnings report today. Price broke its uptrend and price support and formed a bearish “M” pattern. And price is now well below the 50ema support. Price needs to re-clear $115 to get back in a bullish position. IF it can clear $115 it could double top or more. But as long as price is below the 50ema and $115 it is bearish.

    SYK bottomed out in early 2016 like most stocks did and the 50ema has been above the 200ema ever since other than the late 2018 selloff which it rebounded quickly back above again. But price has been in a sideways consolidation channel for the last 8 months between $197 and $222. Price needs to clear the top of the channel and hold above to suggest a continuation of its uptrend. Would be a better buy at the bottom of the channel than the top. I’m forced to use Google Chrome on my computer rather than Firefox that has been having issues and I don’t care for what I see using Chrome. Not sure what others see on these charts but have been reassured that it would be the same. The links certainly don’t look the same.

    https://stockcharts.com/h-sc/ui?s=MDT&p=D&yr=2&mn=0&dy=0&id=p51081194056&a=722053648

    https://stockcharts.com/h-sc/ui?s=SYK&p=D&yr=5&mn=0&dy=0&id=p94312560243&a=722054113

  6. Bernie Says:

    Ron/BC,

    Re: #9 yesterday
    The “dividend thing” isn’t really complicated, its just a different mindset. That said I don’t think you’ll ever feel comfortable owning a bunch of stocks Ron. Perhaps its best you trend trade a couple of ETFs like BMO Low Volatility Equity ETF (ZLB.TO) and Invesco S&P 500 Low Volatility ETF (SPLV). Both are smart ETFs which focus on the lower volatile stocks on the Canadian and U.S. markets. You won’t find very many “bad or ugly” names in them. Their returns have been exceptional, both pay dividends and have been growing them nicely should you hang on for a while. I own both.

  7. Bernie Says:

    Wayne,

    Re: #10 yesterday
    I don’t disagree with that summation. Its really difficult to find any decent ETFs in the Canadian market to hold long-term. I prefer stocks there for my core holdings but did find a couple of excellent ETFs in Low Volatility (ZLB.TO) and REIT holder RIT.TO. Its a little harder to find decent yielding dividend stocks to hold long term in the U.S. I backed off my stock holdings to just one stock there and added a few ETFs for more diversity. I also decided to add several fixed income ETFs and fixed income proxies. End-all I don’t trust ETFs for their unreliable dividends but feel there is strength in holding several. However, I’ll be watching them more closely than my stock holdings in the next recession.

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