Tech Talk for Friday March 13th 2020

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Pre-opening Comments for Friday March 13th

U.S. equity index futures were higher this morning. S&P 500 futures were up 126 point limit in pre-opening trade. Investors are anticipating launch of a fiscal stimulus program by the U.S. Congress.

Apple advanced $19.47 to $267.70 after Wells Fargo upgraded the stock from Equal Weight to Overweight.

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Adobe jumped $19.79 to $304.79 after JP Morgan upgraded the stock from Neutral to Overweight.

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Gap Stores jumped $0.83 to $10.90 after reporting higher than consensus fourth quarter revenues and earnings.

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EquityClock’s Daily Market Comment

Following is a link:

http://www.equityclock.com/2020/03/12/stock-market-outlook-for-march-13-2020/

Note seasonality charts on Initial Jobless Claims

 

Observations

TSX Composite Index recorded its largest point drop in history yesterday.

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Ditto for the Dow Jones Industrial Average!

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The VIX Index continues to soar to levels not seen since October 2008

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StockTwits released yesterday @EquityClock

PPI Final Demand for Finished Goods down 0.9% last month, the weakest February print since 2006. On average, the inflation gauge rises by 0.2% in this winter month. $MACRO $STUDY #PPI #Inflation #Deflation

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Technical weakness in U.S. equities/ETFs continues. Another 35 S&P 100/ NASDAQ 100 stocks broke short term support levels set last week.

Surprisingly, TSX Gold equities and related ETF are leading the Canadian equity market on the downside. $XGD.CA

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Trader’s Corner

Equity Indices and related ETFs

Daily Seasonal/Technical Equity Trends for March 12th 2020

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Green: Increase from previous day

Red: Decrease from previous day

 

Commodities

Daily Seasonal/Technical Commodities Trends for March 12th 2020

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Green: Increase from previous day

Red: Decrease from previous day

 

Sectors

Daily Seasonal/Technical Sector Trends for March 12th 2020

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Green: Increase from previous day

Red: Decrease from previous day

 

S&P 500 Momentum Barometer

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The Barometer dropped 2.40 to 1.00 yesterday, the lowest level since 2011. It remains deeply intermediate oversold, but has yet to show signs of bottoming.

 

TSX Momentum Barometer

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The Barometer dropped 2.67 to 0.40 yesterday, the lowest level since its all-time low in 2002. It remains deeply intermediate oversold, but has yet to show signs of bottoming.

 

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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30 Responses to “Tech Talk for Friday March 13th 2020”

  1. Ron/BC Says:

    The $SPX is presently (8:30 Pacific Time) at the lows of the day even though up on yesterday’s close. A test of the Dec, 2018 low would be more convincing that the selloff is over for now and a sizeable bounce back in price and time is underway. Seeing is believing……..

    https://stockcharts.com/h-sc/ui?s=%24SPX&p=D&yr=2&mn=0&dy=0&id=p83826216239&a=693577605

  2. Canuck2004 Says:

    Bounce? Too early yet….takes a few days…..and today is Friday, so traders clear their desks before the week-end and go to cash as no one knows what will happen over the week-end….so don’t expect much today. probably trades sideways. Watch next week, Fed meeting.

    Market needs a catalyst, guidance and reassurance. In 1987, Reagon got on the air and reassured the markets that all was fine….that’s all you need.

    When the big reversal happens in earnest you will see a 50% re-tracement from yesterday’s through to this year’s market peak, then a retest of yesterday’s low once the 50% line (more or less) has been reached….if retest successful and it does not go below the first low, once it crosses the first 50% bounce again, we are in the clear, all up from there. It’s a “dead cat bounce”.

    If the retest drops below the first low, very bad as we are going much much lower….but I don’t think that will happen as the first drop was excessive…30% is a big drop.

    Like a pundit said yesterday on BNN, “with a 12% drop on the TSX today, after a 20% initial drop, a few more days like that and we are at zero for the markets.”….lol

    I expect a “V” recovery, rather than an “L”.

    I suspect the bull market will continue once we recover….why? super low interest rates, good strong economy, 50 year low unemployment, accommodative Fed, rising property values in US, no other place to go but up really.

    Markets clearly irrational operating on total fear and panic. Way oversold to the extreme extreme….will bounce back for sure. When? soon all I can say. Unless a new black swan event occurs, unlikely, but always possible.

    Same thing I see in the store people scrambling for toilet paper…..lol…fear and panic. Hysterical irrational fear.

    As FDR once said at the start of the Great Depression: “we have nothing to fear but fear itself”.

  3. Aj Says:

    Thanks for that Canuck!
    Definitely the sort of reality check I needed today to weed out the nonsense from the doom and gloom crazies at work here.
    Fundamentals remain the same, even if it ends up being a dicey couple of weeks.

  4. Ron/BC Says:

    The DOW ETF:DIA has tested the December 2018 low of 211 and bounced. This level is being watched by many but just below this support is the uptrendline from the 2009 low at 195. Bottom line is this area of support at 195 to 211 needs to hold as support to suggest the selloff low has been seen for some time. As always,draw your own conclusions.

    https://stockcharts.com/h-sc/ui?s=DIA&p=D&yr=12&mn=0&dy=0&id=p99807694452&a=673066452

  5. Canuck2004 Says:

    RRSP- no change, about 50 names, ETFs and Stocks, US and Canadian, equal weight, dividend growth focus as always. Mostly Utilities and Financials. Point here is regular, stable cash flow. Since retired 8 years ago, cannot put fresh money in RRSP as it has to be from earned income, so easy to calculate growth. Dividend growth in this account has been about 8% per year, every year. Average yield 5%.

    Not adding to anything as I am collecting dividends to make a withdrawal soon. Spend the dividends, do not touch the principal.

    Issue: When I have to RRIF, in 4 years, my required yearly withdrawal will double all my yearly pension income giving me a big tax headache. My accountant suggested when I was 60 to start withdrawing from my RRSP, and double that withdrawal after 65, so I would be taxed at a lower rate before I am forced to RRIF.

    Funds withdrawn from my RRSP are going to fund my TFSA, that I see as a replacement for my RRSP and consider it my deep storage money. second wthdrawal is to spend as I see fit.

    TFSA: no change, about 50 names, ETFs and Stocks, US and Canadian, equal weight, dividend growth focus as always. Mostly Utilities and Financials. Point here is regular, stable cash flow. Replicating my RRSP, much easier to manage. Reinvest dividends as soon as I receive them. Cash flow comes in twice a month generally, around the 15th and the end of the month.

    Biggest mistake: putting too much in any one name. Much better to spread risk across many names. If one blows up, or cuts the dividends, you won’t feel it with 50 names at 2% per position.

    For risk management, any name that breached 5% on growth, cut it back down to 2%. Keep the name if it is good, just reduce. Always been a lifesaver and forces one to sell high. Purely mechanical, no brainer.

    Stock doesn’t work out? Sell as soon as possible and replace with better pick. Rare if you pick them right the first time.

    Margin account: pure speculation here. Buy and sell…trade. Right now lots of margin as I have been buying this week and this morning on margin. I do have a line of credit at the same institution and feed borrowed cash to support the margin (also borrowed). Not for everyone, not for the feint of heart. Buying quality names that have been trashed this week. Thet are not going to zero. About 12 names, diversified across sectors and ETFs to boot.

    Cant decide which bank to buy? buy an ETF that has all of them. My choice is ZWB as the covered call overlay generates tons of cash in case I have to wait a while.

    This morning been buying PPL and KEY, as both Iown anyway in every account, and have been effective cut by 50% as of open this morning. Yields are unheard of. Yes dangerous as per Russian?Saudi oil war, who know how far they will go? But piles do not sell or produce oil, they transport it and that is still gonna happen.

    Anyway, that’s it for now. Maybe that helps some people.

  6. Canuck2004 Says:

    Just in:

    “The Bank of Canada cut interest rates by half a percentage point in an emergency move to buffer the nation’s economy from the double hit from the coronavirus and tanking oil prices.

    The Ottawa-based central bank lowered its policy rate to 0.75 per cent and said it “stands ready” to move again if needed. Governor Stephen Poloz, in a joint press conference Friday afternoon with Finance Minister Bill Morneau, also announced a new facility to support funding markets for small- and medium-size businesses “at a time when they may have increased funding needs and credit conditions are tightening.”

    This is going to make yield stocks even more attractive to investors.

  7. leon Says:

    Thanks Canuk2004. You are one of the best posters on this sight. Glad to see you back.

  8. Canuck2004 Says:

    50% retracement target for S&P 500 is 2936.19ish

    50% retracement target for TSX is 15,210.815ish

    Around this point you can take some profits as we should see an attempt to retest Thursday’s low. If successful retest above last low wait until it breaches the 50% targets listed above, and you are free and clear for upside.

    If it breaches Thursday’s low on the downside, get out until it clears.

  9. Paul Says:

    Thanks Ron and Canuck for you replies !

  10. Ron/BC Says:

    For those with U.S.$ in their major account you’ve made some easy cash without lifting a finger lately. I was surprised to look at my RIF balance and see that in comparable Canadian dollars my balance had gone up several thousand dollars as the U.S.$ has gone up sharply lately and the Canadian dollar has sold off sharply. The U.S.$ despite analysts predictions that it was going to selloff badly has done well as it is the world’s reserve currency. The only comparable currency is the Euro which is a basket case. I will stick with my U.S.$ unless I see an opportunity to switch back to CD$. Doesn’t happen often but there have been some great times to switch back and forth but not for awhile now. Some analysts are predicting a resurgence in inflation ahead which would help the CD$ but I wont hold my breath just yet for that. There are lots of ways to make money and what currency you hold is one of the better ways.

  11. Ron/BC Says:

    For those looking for a higher interest rate on their cash with no restrictions on getting it back, Tangerine is once again offering 3% including TFSA accounts and RRSP accounts. Pretty hard to beat that presently with the plunging of most interest rates. The rate is only good until the end of May but they often extend that rate again near the expiry of the offer so they don’t have everyone removing all their funds. And TFSA interest earned is not taxable so amounts to a much better rate of return with no risk. They also have other account types as well including mutual funds. And they are owned by BNS.

  12. PatVic Says:

    Thank you Ron and thanks Canuck..great info

  13. still_learning Says:

    Fed just cut interest rates to zero!!!

  14. Bruce Says:

    And the futures show the Dow down 1250 and s and p down 142…. the fed is now out of bullets…

  15. Ron/BC Says:

    Still_Learning

    Thanks for the info. Don’t think it will help though.
    The Fed’s massive slashing of rates shows you just how scared they really are. Not a good sign with a questionable impact and and sends a very bearish message to everyone. With all the sports and events of all kinds everywhere shutting down, that alone will most likely cause a major recession as you just can’t shut down everything and expect everything to return to normal down the road.

    Also I bent a putter to a perfect 90 degree right angle and it did perform well with far less joint movement putting, but I still prefer my regular White Hot putter. I’ll have to practice with it more to get used to it. Been busy for some time now and just haven’t got a lot of golfing in.

  16. Ron/BC Says:

    Bruce

    Yes,things don’t look rosy for tomorrows opening.

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

  17. Muntazir Janmohamed Says:

    Thanks to all for comments.
    Bought mfi on 26 feb, mfc 4 march ( had sold in 2019) & got put cco on marc 9.
    Looking to buy bmo & add to xiu,xdv,xsp sis & vgro – all of which are below my cost price.

    Canuck ,
    Can you give us some div paying stocks for long term hold esp replacement for drg.un which was taken out by blackrock.

    I encourage others to chime in what they bought.
    Thanks

  18. Roy Says:

    Hello Ron/BC
    The fed lowered the rate again today, yes today to zero and the markets have dropped to their limits. There is a rumor going around that the US stock exchanges might be shut down tomorrow. Makes sense. Perhaps they should shut down for a week or two and open once the virus is beaten.

  19. wsto Says:

    Somewhat confused on why the market react negatively to the news that fed is reducing interest rate to near zero, and injecting 700 billion of liquidity to the economy. In the past few years, the market react positively on most QE rumour/news. What is different this time? Adding more monies to the supply is not good anymore? If so, is there anything else the fed or government can do to support the economy.

  20. Ron/BC Says:

    Roy

    All the Fed is accomplishing is telling the world just how scared they are and how bad things are going to be. Showing that much fear rather than confidence will only make things worse. Hang on to your hat…………………….I’m just glad to be in cash still and U.S.$ mainly and so far I’m doing just fine as is. Only fear now is running out of toilet paper,lol……….Actually that’s not so funny as grocery stores are commonly empty of basic items which makes the general public more fearful and become hoarders themselves. Perhaps it’s time to check your ammo……………..

  21. Roy Says:

    Hello Ron/BC
    Next we’ll see a run on scotch tape and tin foil. Be prepared.

  22. still_learning Says:

    Ron/BC,

    re#15, I haven’t got much golfing in lately either …too busy shovelling snow. Count your blessings? …excuse my sarcasm.
    So putting is as much about feel as logic …hmmm.

    Bernie/Lethbridge

  23. Ron/BC Says:

    Still_Learning NTR

    Well “in theory” standing directly over the ball looking straight down at it with this 90 degree putter head next to the center of the golf ball and arms locked straight down and against your sides, and then just rocking to the left dropping the left shoulder and then rocking back to vertical striking the ball dead center “SHOULD” eliminate all the joint movement that screws up putting right? I was golfing with my partner at the time so couldn’t simply focus on putting so will have to go alone to the practice green and spend some serious time on it. I just thought eliminating all those typical joint movements had to be a plus…………

  24. bruce Says:

    i m concerned sports teams in the nhl and cfl and others may be in financial danger if they have to honour contracts and refund ticket holders….my son-in-law paid for his Stampeder season tickets 2 months ago….does he get a refund if they dont play?…do the players get paid?…..hmmmm….

  25. Aj Says:

    Figured I would provide a heads up – Been hearing some rumours (with very credible sources) that they are going to shut down most government buildings in Ottawa and have employees telework. I suspect this will capture the main news tomorrow and help to lower markets a touch. Figure it is the sort of announcement that will amplify things.

  26. Bernie Says:

    Muntazir Janmohamed,

    Not sure if you saw it or already own the stocks discussed but I linked this 2 1/2 year old video 2 weeks ago. I agree with the originator over his common sense “Canadian Essentials” for long term core holds. I would add REIT CAR.UN to the essentials.
    https://www.youtube.com/watch?v=hQUUqsNqsu8

    You and others might also find this video which originated on Friday interesting for a low risk REIT trade or long term hold.
    https://www.youtube.com/watch?v=sFIZOhcokQ0

  27. Ron/BC Says:

    Bernie

    Here is a chart of NVU.un.to that is in the video you posted the link to. The price action is exceptionally good with breakouts that run up and then come down and successfully test the breakout point and then run up again over and over again. Odd to see such consistency. One could argue that the gap up at about 32.60 is now support but looking at the top of the last channel at 30 is a more realistic support level that will likely get tested like all the other channel tops were. That channel top support is also near its 200ema that has also been tested many times successfully and price is presently stretched out a long ways above it. And below that is its over 4 year uptrendline at 27 that should hold up. And note the M.MACD has remained above the zero line since the early part of 2016. So the stock is something to keep an eye on for sure. Thanks for the video.

  28. Ron/BC Says:

    Bernie
    OH, I guess I should post the chart,lol…………..

    https://stockcharts.com/h-sc/ui?s=NVU%2FUN.TO&p=D&yr=6&mn=0&dy=0&id=p36104654075&a=727486253

  29. rick Says:

    wsto,

    What is Quantitative easing (QE) ?
    “A central bank implements quantitative easing by buying specified amounts of financial assets from commercial banks and other financial institutions, thus raising the prices of those financial assets and lowering their yield, while simultaneously increasing the money supply.”
    https://en.wikipedia.org/wiki/Quantitative_easing
    “The Fed to start buying Treasurys Friday across all durations, starting with 30-year bond”
    https://www.cnbc.com/2020/03/13/the-fed-details-moves-to-buy-treasurys-across-all-durations-starting-with-30-year-bond.html
    What commercial banks and other financial institutions did with the money received Friday from FED ?
    They bought stocks at 20-25 % discount from their recent highs .
    The result ?= SPX 10 % up Friday.
    What will happen next week , next month or next day ? same thing .
    But right now ( Sunday evening) the bond market and stock market is closed in USA.
    This is why now stocks futures are down in Asia .
    Probably the stock market will open lower , than stabilize and maybe , just maybe, will go up in the afternoon .
    Or next day or next week or next month .
    FED cannot buy directly stocks .
    So basically FED will give money to big financial institutions in exchange for their bonds to buy stocks .
    And those big financial institutions will buy stocks with that money.

  30. Bernie Says:

    Ron/BC,

    Thanks for the chart for NVU.UN!

    Everyone,

    Question for you and other traders. Its well known that SPY and TLT are almost polar opposites. Rather than staying in cash why don’t you trend trade with the “hotter” of the two or even just hold 50% of each with an annual rebalance to the 50/50 mix? Take a look at the 3 back test performances below for the period Feb 2003 to Feb 2020.

    Back Test performance 1 – 100% SPY
    CAGR= 9.05% StDev= 13.85% Best Yr= 32.31% Worst Yr= -36.81% Max Drawdown= -50.80%

    Back Test performance 2 – 100% TLT
    CAGR= 7.46% StDev= 13.14% Best Yr= 33.96% Worst Yr= -21.80% Max Drawdown= -21.80%

    Back Test performance 3 – 50% SPY + 50% TLT, rebalanced once annually
    CAGR= 9.22% StDev= 7.96% Best Yr= 22.67% Worst Yr= -3.08% Max Drawdown= -18.17%

    There’s no doubt a good chartist/trader could do even better than the above. However, there’s a lot to be said for buying and holding the low volatility 50/50 mix with one annual rebalancing. I’m naming this one the Rip Van Winkle Portfolio. A dividend growth investor in retirement probably wouldn’t like a buy and hold with SPY and TLT because of the low <2% yields they typically pay out. One would have to sell a portion because most retirees prefer a somewhat higher yield. I suppose the easiest solution would be to remove the annual shortfall at rebalance time if going the 50/50 formula.

    I'd appreciate feedback on this approach.

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