Tech Talk for Monday March 9th 2020

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Pre-opening Comments for Monday March 9th

U.S. equity index futures were sharply lower this morning. S&P 500 futures were down 145 points to its daily limit in pre-opening trade before trading was halted. Index futures responded to increasing coronavirus concerns and failure by OPEC and Russia to reach an oil production quota agreement. Saudi Arabia slashed prices for its crude oil and announced intentions to increase production. WTI crude oil plunged $9.75 to $31.53 per barrel. Western Canadian Select plunged $4.16 to $27.88 per barrel.

Equity markets around the world were sharply lower. The Nikkei Average dropped 5.07%. The Australia 200 Index plunged 7.33%. The Shanghai Composite Index gave up 3.01%. The Frankfurt DAX Index lost 6.32%.

The energy sensitive Canadian Dollar plunged 1.25 to U.S. 73.25 cents in response to lower crude oil prices.

The Canadian Dollar was virtually unchanged following release of the February Canadian Housing Starts report. Consensus was a drop from 213,200 to 205,000 units. Actual was 210,000 units.

Cruise Line equity prices are expected to open sharply lower after the U.S. State Department warned passengers not to book cruises due to increased risk of infection.

EquityClock’s Daily Market Comment

Following is a link:

http://www.equityclock.com/2020/03/07/stock-market-outlook-for-march-9-2020/

Note seasonality charts on Non-farm Payrolls and Canadian Employment

Watch Jon Vialoux on BNNBloomberg’s Market Call this evening

at 6:00 PM EDT

 

The Bottom Line

The “Black Swan event” continued last week. Equity markets around the world moved higher by mid-week, but fell sharply by Friday to close with relatively small gains or losses for the week. Spread of the coronavirus was a major factor. The exception was the Shanghai Composite Index with a gain of 5.35%. The VIX Index remained elevated at 42%. Look for more volatility this week.

Observations

Equity markets recovered sharply during the last hour of trading on Friday (again). The Dow Jones Industrial Average gained 600 points, similar to the advance recorded in the previous Friday.

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) were flat/slightly lower last week. Significant signs of a bottom have yet to appear. See end of this report for charts.

Medium term technical indicators for Canadian equity markets also were flat/slightly lower last week. Significant signs of a bottom have yet to appear. 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 again last week (notably on Friday)

Short term technical indicators for Canadian markets and sectors also moved lower last week(notably on Friday)

Consensus for fourth quarter earnings by S&P 500 companies was virtually unchanged last week: 98% of companies have released quarterly results to date. According to FactSet, blended fourth quarter earnings on a year-over-year basis increased 0.9% and fourth quarter revenues increased 4.0%.

Beyond fourth quarter reports, year-over-year consensus earnings for S&P 500 companies were reduced significantly last week to include a coronavirus impact. First quarter earnings on a year-over-year basis turned negative once again. Thereafter, gains turned positive and accelerated as the year progresses, albeit at a lower rate than indicated last week. According to FactSet, first quarter 2020 earnings are expected to decrease 0.1% (versus an increase of 0.7% last week) and revenues are expected to increase 3.8%. (versus an increase of 4.2% last week). Second quarter 2020 earnings are expected to increase 3.3% (versus 4.6% last week) and revenues are expected to increase 4.1% (versus 4.6% last week). Third quarter earnings are expected to increase 8.4% (versus 9.1% last week) and revenues are expected to increase 5.5% (versus 6.0% last week). Fourth quarter earnings are expected to increase 10.9% (versus 11.4% last week) and revenues are expected to increase 5.8% (versus 6.5% last week). Earnings for all of 2020 are expected to increase 6.7% (versus a previous estimate of 7.4%) and revenues are expected to increase 5.1% (versus previous estimate of 5.0%).

The U.S. Dollar Index and its related ETN virtually collapsed since start of coronavirus fears two weeks ago, down 3.0%.

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Economic News This Week

February Canadian Housing Starts to be released at 8:15 AM EDT are expected to slip to 205,000 from 213,200 units in January.

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

European Central Bank resets monetary policy at 7:45 AM EDT on Thursday.

February Producer Price Index to be released at 8:30 AM EDT on Thursday is expected to slip 0.1% versus a gain of 0.5% in January. Excluding food and energy, February Producer Price Index is expected to increase 0.2% versus a gain of 0.5% in January.

Weekly Initial Jobless Claims to be released at 8:30 AM EDT on Thursday are expected to slip to 215,000 from 216,000 last week.

March Michigan Consumer Sentiment Index to be released at 10:00 AM EST on Friday is expected to slip to 97.0 from 101.0 in February.

 

Selected Earnings News This Week

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Trader’s Corner

 

Equity Indices and related ETFs

Daily Seasonal/Technical Equity Trends for March 6th 2020

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Green: Increase from previous day

Red: Decrease from previous day

 

Commodities

Daily Seasonal/Technical Commodities Trends for March 6th 2020

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Green: Increase from previous day

Red: Decrease from previous day

Sectors

Daily Seasonal/Technical Sector Trends for March 6th 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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Upcoming BNN Appearance

Get your questions ready… Jon Vialoux will be on BNN’s Market Call Tonight at 6:00pm ET on Monday, March 9th taking your calls on Technical Analysis and Seasonal Investing.  CALL TOLL-FREE 1-855-326-6266,  EMAIL marketcall@bnnbloomberg.ca,  or TWEET @MarketCall.

 

Keith Richards’ Column

Keith says, “Just another end of the world”. Following is a link:

https://www.valuetrend.ca/just-another-ending-of-the-world/

 

Greg Schnell’s “Market Buzz”

Released on Friday. Greg discusses “Testing the lows”. Following is a link:

https://www.youtube.com/watch?v=g6hlk3LzL9E&feature=youtu.be

 

StockTwits released on Friday @EquityClock

Intermediate breakouts/breakdowns:Nil

Editor’s Note: 65 S&P 500 stocks moved below short term support levels set on February 28th

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 3.41 as high as 25.00 before dropping to 14.23 on Friday. It remains intermediate oversold, but has yet to show significant signs of bottoming

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Bullish Percent Index for S&P 500 stocks slipped last week from 22.20 to 20.20. The Index remains intermediate oversold, but has yet to show signs of bottoming.

 

TSX Momentum Barometers

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Percent of TSX stocks trading above their 50 day moving average increased from 15.00 to as high as 30.00 on Wednesday followed by a decline to 25.11 on Friday. It remains intermediate oversold, but has yet to show significant signs of bottoming.

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Bullish Percent Index for TSX stocks dropped last week from 52.81 to 50.43. It remains intermediate neutral and continues to trend down.

 

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




28 Responses to “Tech Talk for Monday March 9th 2020”

  1. Ron/BC Says:

    The $SPX has sold off to the Fibonacci 61.8% retracement level from the Dec/18 low to the Feb/20 high. Doesn’t guarantee the selling is over yet but price often does stabilize at this point and works sideways to higher.

    Of all the investments I’ve ever made in my lifetime from speculative real estate purchases to auctions covering most items,the stock market in my opinion is the most speculative risky investment a person could ever make. Hard to believe so many people think it is a safe, reasonable place to invest all their money.

    https://stockcharts.com/h-sc/ui?s=%24SPX&p=D&yr=2&mn=6&dy=0&id=p84864611854&a=682178007

  2. Ana Says:

    #1. Ron/BC

    Thank you for your comment and chart.

    0 Fib is ?

  3. rick Says:

    Ron/BC showed us this great site : https://money.cnn.com/data/fear-and-greed/

    extreme fear !

    So I bought today : MA,V,ORLY,ROST at 20 % off the recent high and HD at 15 % off the recent high .
    They can go down another 10-15 % but long term , 5-10 years , I think they will perform well .

  4. rick Says:

    Ron/BC ,

    yes , it’s a roller coaster .
    Some people they will not jump in , just watch and laugh .
    But there are people who really enjoying it .
    Depends of their appetite for risk and how strong stomachs they have .
    At least at Disneyland ….

    Well , everybody is different .
    It will be really boring if all of us will be the same .

  5. Ron/BC Says:

    Ana
    Re:#2
    ÷
    I calculated from the Dec/2018 low at 2346.

  6. Ron/BC Says:

    Rick
    Most of my adult life and being self employed I and everyone I knew “traded” the stock market and commodities, not invested in them. I was told investing in stocks was for old retired people. So I never got serious about it. I dont find long term stock investing exciting.

  7. rick Says:

    VIX today reached at 62 .
    Let’s look at similar situations.
    2010 , VIX = 48 , SPX = 1000
    2011 , VIX = 48 , SPX = 1100
    2015 , VIX = 53 , SPX = 1900
    2018 , VIX = 50 , SPX = 2600
    2018 , VIX = 36 , SPX = 2400
    2020 , VIX = 62 , SPX = 2750
    Buying when VIX is high ?
    Is that a good decision for a long term investor ?
    Buying at 1000, 1100, 1900 , 2400 or 2600 look good to me .
    How about buying SPX at 2750 with VIX at 62 ?
    Maybe not today or this week or this month or this year .
    But in 5 years or 10 years ?
    If a long term investor will not buy today when VIX is 62 and SPX is off 20 % from recent high , than when will be a good moment ?
    When VIX will be 12 and SPX will reach a new high ?
    Behind the closed doors , big companies full of cash like AAPL , MSFT and others are doing big buybacks .
    And this companies and other companies are issuing corporate bonds at RECORD low yields . And with that cash will do even more buybacks .

  8. rick Says:

    http://schrts.co/ARJmPpWz

  9. rick Says:

    http://schrts.co/GysqZXNs

  10. rick Says:

    http://schrts.co/qxrIQndx

  11. rick Says:

    https://ycharts.com/indicators/moodys_seasoned_aaa_corporate_bond_yield

  12. rick Says:

    the bottom will be reached when =
    1. the funds coming from long term INVESTORS plus 2. the funds coming from CORPORATIONS with cash and doing BUYBACKS
    will be equal with
    3. the funds coming from TRADERS who are selling stocks
    ( because 1.they want to sell OR 2. because they have to sell because they get a margin call )

  13. Ron/BC Says:

    Ana

    Here is a long term 11 year Daily $SPX chart starting from the March 2009 bear market low. There is a confirmed uptrendline that has been tested as support 4 times since then so is a major established uptrendline that will at some point be tested. Right now that line is at 2600 which is about 146 points lower than today’s close. And just below that is the Fibonacci 38.2% retracment level of the “entire” bull market from that March/2009 low. The Fib 38.2% retracment level is considered a mild selloff within an entire bull market, so while the market is very oversold, the actual selloff low is likely still a long ways from being over. Market snap backs would be typical soon but I don’t think I’d marry anything now.

    https://stockcharts.com/h-sc/ui?s=%24SPX&p=D&yr=20&mn=6&dy=0&id=p91458534039&a=673066391

  14. bobj Says:

    Ron/Bc

    thank you for always providing us with helpful charts.

  15. Ron/BC Says:

    NTR

    To put things in perspective there is an average total of 56,000 people die each year from the common flu. So you can stop panicking and buying out all the toilet paper at all the stores,lol…..

  16. rick Says:

    Ron/BC

    You wrote : “I don’t find long term stock investing exciting.”
    Than trade:
    Buy SPY when VIX is over 40 and sell it when VIX is under 15 or 20 .
    Check on your charts the possible results from the last 10 years .
    There are a lot of people who are enjoying long term investing .
    I am one of them .
    20 years of long term investing in stocks and real estate allowed me to retire at 48 .
    That was 2 years ago . Maybe is not exciting but is good .
    So long term investing is for young people not for old people .

  17. rick Says:

    Ron/BC

    You are correct.
    In USA 22 people died of coronavirus and at least 20.000 died from flu.( that is 1000X more ) and up to possible 50.000 .

    https://www.cdc.gov/flu/about/burden/preliminary-in-season-estimates.htm

    Nobody cares about those 20.000 flu victims but almost everybody get hysterical and state of emergency in California and New York and Oregon for 22 coronavirus victims .
    Sheep mentality .
    And journalists are without scary stories so they have to find something .
    This is a bad social experiment realized with the help of social media .
    Hopefully it will become soon a “Yesterday News “

  18. Ron/BC Says:

    Rick

    When I get more time I’ll spend some time on the VIX signals for the SPY but being an extreme fear indicator I would think your observation of over 40 being SPY price lows is likely correct along with 15 or 20 for price lows. The lag time will be important for signals to be consistent along with the draw down. Should be interesting. The news media thrives on extreme fear as that’s what sells.

    If I was to buy anything right now it would be the XLK right at price support with a positive divergence on the RSI 8. I’m not much good on fundamentals but XLK does tend to outperform the SPY and tends to lead the other sectors of the market. There are a variety of ETFs as well to trade that track the $SPX.

    https://stockcharts.com/h-sc/ui?s=XLK&p=D&yr=1&mn=3&dy=0&id=p89784203880&a=679688710

  19. rick Says:

    XLK=technology
    QQQ= Nasdaq 100 = only 50 % in technology
    but XLK returns are very similar with QQQ returns

    http://www.tickertech.com/cgi/returns.mpl?symbol=QQQ&smonth=01&sday=01&syear=2009&emonth=03&eday=09&eyear=2020&compareto=other&other=xlk

    $VIX is volatility for SPY but $VXN is volatility for XLK
    So I think you can extend $VXN to XLK

  20. rick Says:

    https://stockcharts.com/h-sc/ui?s=%24VXN&p=W&yr=10&mn=0&dy=0&id=p18116832276

  21. rick Says:

    http://schrts.co/pxZSgSPr

  22. rick Says:

    Check on buying XLK when $VXN is over 35 and selling when is under 20 or 15 .
    XLK was 18 in 2010 , VXN =48
    XLK was 19 in 2011 , VXN =47
    XLK was 37,5 in 2015 and 2016 , VXN = 46 and 35
    XLK was 62,5 in 2018 , VXN = 38
    XLK is 82 in 2020 , VXN = 57

    XLK high was 102 and now is 82 , a 20 % correction .

    But holding from 16 in 2009 until 2020 (when XLK dropped from 102 to 82 ) gave a 500 % return

    http://www.tickertech.com/cgi/returns.mpl?symbol=QQQ&smonth=01&sday=01&syear=2009&emonth=03&eday=09&eyear=2020&compareto=other&other=xlk

  23. rick Says:

    at #19 , a correction
    $VXN is volatility for QQQ, Nasdaq 100 not XLK
    But XLK and QQQ results are quite similar .

  24. rick Says:

    You said :The lag time will be important for signals to be consistent along with the draw down.
    In December 2018 , the low for XLK was 56.12
    But extremely few people can say : I bought XLK at 56.12
    So of course will be a draw down after an investor will buy .
    Or the investor can be late a little bit .
    Nobody can expect that exactly after he/she will buy , the price will go straight up .

  25. rick Says:

    From an article from investopedia.com :

    “This is very different from the 2008 crisis, where the backbone of US finance, the banks, had toxic balance sheets and couldn’t provide proper liquidity.

    The issue with the coronavirus crisis is that the markets have never dealt with anything quite like it before.”
    Well , they have a flu epidemic season every year including this year .
    But now the markets have a social media mass hysteria .

  26. Ana Says:

    #13. Ron/BC

    Thank you Ron for your comment and excellent chart!

  27. Ron/BC Says:

    Rick
    The 2008-09 crisis was just the last major one. You can go back decades and there is always a reason for one. It doesn’t matter what the reason is just that the market will always find a reason for a major selloff or a recession or both. It used to be high interest rates along with some related financial disaster. So now it’s a virus along with an Oil battle with Russia and Saudi Arabia. If it wasn’t that it would have been something else. And the news media will always hype it up scaring the public so they are hording toilet paper. Just goes to show you it doesn’t take much.

    As far as buying stocks early and accepting to be in the red until it turns around that is a recipe for financial disaster. I’ve known many that did that as it is very common due to over confidence or pride or both and everyone I’ve known that hung on until they or their spouse couldn’t deal with it anymore emotionally threw in the towel in the end just to put an end to it all. Many of these people don’t every talk about stocks anymore. If one bought at an important price support level that “should have” been bought by investors and price failed to hold that support then the stock should be sold and a loss should be accepted as the cost of doing business. It is never about being right or wrong and losing money on a stock is just an investment or trade that didn’t pan out. It’s never a reflection of success or failure overall. But limiting losses is essential to financial success overall as I’m sure you and others understand. But I do get tired of meeting people that lost a bundle on the stock market all because they believed in the old wives tale: “It’ll come back” or they insist that they are right. Ego is a costly character flaw.

  28. Ron/BC Says:

    The markets are storming back up in after hours trading. Doesn’t mean they will follow through in the morning but with the extreme oversold level and fear in the markets it would be typical to rally from this low point.

    https://www.cnbc.com/pre-markets/

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