Tech Talk for Monday March 16th 2020

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Pre-opening Comments for Monday March 16th

U.S. equity index futures were lower this morning. S&P 500 futures were down the limit of 128.50 points. Index futures responded to rising coronavirus concerns in Europe and North America.

Index futures moved lower despite strong action by the Federal Reserve yesterday. The Fed Fund Rate was slashed 1.00% to 0.00-0.25%.

Consensus for March Empire State Manufacture Survey released at 8:30 AM EDT was a drop to 4.00 from 12.40 in February. Actual was -21.50

WTI crude oil plunged $2.22 to $29.51 in response to a continuing oil production war between Russia and OPEC.

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Susquehanna slashed target prices on U.S. oil and gas producers. Target prices were slashed by two thirds or more on Marathon Oil (MRO $4.53), Noble Energy (NBL $7.19), Apache (APA $8.07) and Occidental Petroleum (OXY $14.26).

Apple plunged $32.50 to $245.47 after France issued a $1.3 billion fine against the company over competition concerns.

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United Airlines lost $6.64 to $35.00 after Stifel Nicolaus downgraded the stock from Buy to Hold.

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EquityClock’s Daily Market Comment

Following is a link:

http://www.equityclock.com/2020/03/14/stock-market-outlook-for-march-16-2020/

The Bottom Line

The “Black Swan event” continued last week. Equity markets around the world moved sharply lower. Spread of the coronavirus was a major factor. The VIX Index remained elevated at 58%. Look for more volatility this week. Early signs of a short term bottom appeared in U.S. equity markets on Friday.

Observations

Major U.S. equity indices responded favourably to President Trump’s news conference at 3:15 PM EDT on Friday. Dow Jones Industrial Average, S&P 500 Index and NASDAQ Composite gained 9.3% by the close, their largest one day advance since October 2008. The Dow Jones Industrial Average recorded its highest one day point gain in history.

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 sharply lower last week and are deeply oversold. Early signs of a bottom appeared on Friday. See end of this report for charts.

Medium term technical indicators for Canadian equity markets also moved sharply lower last week and are deeply oversold. 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 and are deeply oversold

Short term technical indicators for Canadian markets and sectors also moved lower last week and are deeply oversold.

Year-over-year consensus earnings for S&P 500 companies were reduced significantly again last week to include a greater coronavirus impact. According to FactSet, first quarter 2020 earnings are expected to decline 1.2% (versus a decrease of 0.1% last week) and revenues are expected to increase 3.5% (versus an increase of 3.8% last week). Second quarter 2020 earnings are expected to increase 0.9% (versus 3.3% last week) and revenues are expected to increase 3.2% (versus 4.1% last week). Third quarter earnings are expected to increase 6.2% (versus 8.4% last week) and revenues are expected to increase 4.8% (versus 5.5% last week). Fourth quarter earnings are expected to increase 9.3% (versus 10.9% last week) and revenues are expected to increase 5.1% (versus 5.8% last week). Earnings for all of 2020 are expected to increase 5.7% (versus a previous estimate of 6.7%) and revenues are expected to increase 4.5% (versus previous estimate of 5.1%).

 

Economic News This Week

February Retail Sales to be released at 8:30 AM EDT on Tuesday are expected to increase 0.2% versus a gain of 0.3% in January. Excluding auto sales, February Retail Sales are expected to increase 0.2% versus a gain of 0.3% in January.

February Industrial Production to be released at 9:15 AM EDT on Tuesday is expected to increase 0.4% versus a decline of 0.3% in January. February Capacity Utilization is expected to increase to 77.0 from 76.8 in January.

February Housing Starts to be released at 8:30 AM EDT on Wednesday are expected to slip to 1.502 million units from 1.567 million units in January.

February Canadian Consumer Price Index to be released at 8:30 AM EDT on Wednesday is expected to increase 0.2% versus a gain of 0.3% in January.

The Federal Reserve releases its Interest Rate Decision at 2:00 PM EDT on Wednesday. The Fed Fund rate is expected to remain unchanged.

March Philly Fed Index to be released at 8:30 AM EDT on Thursday is expected to slip to 10.0 from 36.7 in February.

Weekly Initial Jobless Claims to be released at 8:30 AM EDT on Thursday are expected to increase to 215,000 from 211,000 last week.

January Canadian Retail Sales to be released at 8:30 AM EDT on Friday are expected to increase 0.3% versus a gain of 1.1% in December. Excluding auto sales, January Retail Sales are expected to increase 0.4% versus a gain of 0.5% in December.

February Existing Home Sales to be released at 10:00 AM EST on Friday are expected to slip to 5.52 million units from 5.46 million units in January.

 

Selected Earnings News This Week

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Trader’s Corner

Equity Indices and related ETFs

Daily Seasonal/Technical Equity Trends for March 13th 2020

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Green: Increase from previous day

Red: Decrease from previous day


Commodities

Daily Seasonal/Technical Commodities Trends for March 13th 2020

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Green: Increase from previous day

Red: Decrease from previous day

 

Sectors

Daily Seasonal/Technical Sector Trends for March 13th 2020

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Green: Increase from previous day

Red: Decrease from previous day

 

Technical Scoop

Thank you to David Chapman and www.enrichedinvesting.com for a link to their weekly report. Headline reads, “Record crash, recovery phase, dominant fear, tradeable rally, swift bear, stalking plague, rising sun”

https://www.enrichedinvesting.com/wp-content/uploads/2020/03/Record-crash-recovery-phase-dominant-fear-tradeable-rally-swift-bear-stalking-plague-rising-sun.pdf

 

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

Gold and its related ETN $GLD virtually collapsed in anticipation of Congressional action to offset the coronavirus

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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 14.23 to 1.00. Percent is deeply oversold

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Bullish Percent Index for S&P 500 stocks dropped last week from 20.20 to an all-time low of 1.40 before recovering on Friday to 3.20. Percent is deeply oversold and showing early signs of bottoming.

 

TSX Momentum Barometers

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Percent of TSX stocks trading above their 50 day moving average dropped last week from 25.11 to an all-time low of 0.44. Percent is deeply intermediate oversold.

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Bullish Percent Index for TSX stocks plunged last week from 50.43 to 9.13. The Index is deeply intermediate oversold.

 

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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19 Responses to “Tech Talk for Monday March 16th 2020”

  1. Canuck2004 Says:

    Nice open today…another great buying opportunity on the market’s sheer hysterical panic!

  2. wsto Says:

    Market down around 10% and cruise lines are up (RCL, CCL, NCLH) – maybe an indication the bottom is near?

  3. Canuck2004 Says:

    As Buffet has always said: “Fear is your friend; Greed is your enemy”.

  4. Canuck2004 Says:

    Extraordinary Popular Delusions and the Madness of Crowds is an early study of crowd psychology by Scottish journalist Charles Mackay, first published in 1841.

    The book remains in print, and writers continue to discuss its influence, particularly the section on financial bubbles.

    https://en.wikipedia.org/wiki/Extraordinary_Popular_Delusions_and_the_Madness_of_Crowds

    A classic to be read by all investors. Only need to read the first 3 chapters to get the idea. As applicable today, especially this day in 2020, as it was then. Humans are humans and subject to irrational folly.

    Famous quote:

    “Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one.”

  5. rick Says:

    the mantra is : don’t fight the FED

  6. Ron/BC Says:

    The $SPX and $INDU (DOW) are presently testing their long term uptrendlines. This line needs to hold to suggest the long term trend is still up. Testing a long term uptrendline is usually a cheerful time with investors buying stocks but due to the dramatic drop from over extended prices it is a shocking drop. And with this dramatic selloff most investors will not be eager to buy the market as they are spooked and have lost a lot of money on this selloff. So the uptrendline is not as strong as it would typically be. It is always important to be aware of “over exuberance” as Greenspan once said and realize the risk at stretched out prices. You don’t have to marry stocks until death due you part. They can be simply a good trading vehicle too from one price level to the next.

    https://stockcharts.com/h-sc/ui?s=%24SPX&p=D&yr=20&mn=6&dy=0&id=p01836821614&a=673066391

    https://stockcharts.com/h-sc/ui?s=%24INDU&p=W&yr=20&mn=0&dy=0&id=p08230787694&a=673066175

  7. Ana Says:

    $SPX Futures Monthly Chart

    https://invst.ly/q4uzk

  8. Canuck2004 Says:

    Well, I’ve been buying since this started, in increments and was buying again this morning on open….in all my accounts…..this sell off is a great gift!

    I’m not worried about about the upside or the downside as I am buying quality YIELD….I buy as usual growing dividends from profitable companies…40 to 50 names in RRSP and TFSA, equals weight, spreading my risk and strengthening my cash flow. The market will repair itself, it always does.

    100 years average total return on the S&P 500 is about 7%, this includes the Great Depression, all major recessions and corrections. Long term trend is always up.

    I was saving cash in my RRSP to make a withdrawal in a couple weeks but instead bought a nice 10% monthly paying ETF. I’ll just start over again saving for my withdrawal. Just boosted my yearly income in that account.

  9. wsto Says:

    #6 Ron/BC

    Eyeballing your S&P chart, the S&P index dropped 55% from the 07 high to the 09 low, which took almost 18months. That would be my guess for the absolute worst case scenario for the current market, which will bring the index to the 1500 level in Sept 2021.

  10. Ron/BC Says:

    Wsto

    Well presently major markets are testing their uptrendlines from 2009 or the Dec 2018 low support along with several other ETFs. So if those areas break down and hold I won’t be interested in playing their reindeer games until things clearly stabilize. I don’t hold losing positions for long as I’m just not a believer.

  11. Bernie Says:

    I’m not worried about my dividend stock income as I have quality names, dividend cuts are rare with them. Its the ETF income that has always puzzled me. They’re lumpy & irregular at the best of times and you can’t even predict if they will go up or down like you can with their holdings.

    FYI: For those into total return this year’s total performance returns for SPY & TLT follows:

    SPY: 1-Day= -10.94% 1-Week= -12.54% 1-Month= -28.95% 3-months= -24.56% YTD= -13.50%
    TLT: 1-Day= +6.48% 1-Week= -4.31% 1-Month= +13.56% 3-Months= +19.52% YTD= +21.37%

  12. Ron/BC Says:

    Well you know things have gone to hell in a handbasket when they close all the Tim Hortons seating areas with only drive through available.

    Over the decades I have experienced various influenza and flu episodes breaking out all over but I don’t recall everything being shut down because of it.

  13. still_learning Says:

    Ron/BC,

    Next thing you know they will be sending golfers out as singletons to comply with the social distancing? That ought to lower a lot of handicaps …grin.

  14. Canuck2004 Says:

    Bernie

    I don’t know what kind of ETFs you own, but I never had trouble with lumpy and irregular earnings or income. You have to spend more time researching good ones…very odd.

    I use ETFs to enhance or support certain sectors. For example, I own one of each S&P 500 and the NASDAQ 100 ETFs, equal weight to all holdings, as a diversifier to my other individual US holdings. Another example would be a Canadian Financial ETF, which has all the financials holdings, big and small, to support my big 5 Canadian Banks. Some of the stocks in the basket I would not want to own individually for various reasons, but I like to own them in a basket to enhance my big 5. Same with Utilities, etc. Yes, some duplication, but I get all of them as well with less risk. Some have covered calls to enhance income.

    ETFs are only a very small part of my holdings, maybe 10-15%…to enhance the diversification and breadth of the portfolio. Bottom line: the cash flow.

    Ron/BC

    Yep, I don’t recall anything like this crazy panic. In 2010 we had H1N1 or Swine Flu and over 17,000 American died, 500,000 world wide, and I certainly don’t recall a panic like this, selling stocks and buying toilet paper in a mad hysterical panic. The only thing I recall was a run on coffee once and a similar run on sugar in the early 70s, about 1971-72. Back then nobody had coffee for a few weeks then later nobody had sugar, shelves were bare everywhere. Maybe I just wasn’t paying attention in 2010…lol.

  15. Bernie Says:

    Canuck,

    Good to see you back here on a more regular basis especially talking dividends. It seems very few on here want to discuss dividend strategies and those that used to have exited the room. Then again this is predominantly a trade focussed group.

    as for my comment on lumpy irregular ETF distributions it is pretty much a given stateside and it has been for many years. If you look at a long term dividend distribution history of a U.S. domiciled ETF, pick one, you might see a gradual rise in the long term trend but the ride there is quite volatile. This volatility isn’t the norm with the individual holdings and their dividend historicals. I know the ETF managers change up their company holdings on occasion and they may very well pay out slightly different distributions depending on the quarters their holdings pay the fund but the differences shouldn’t be as significant as they are. You would think these quarter irregularities would even out if measured on an annual basis but that is not necessarily the case. David van Knapp on Seeking Alpha wrote an excellent article on the dividend growth of 20 popular U.S. dividend ETFs, well actually 19 and the broad market ETF SPY. Its quite surprising to see all the annual dividend “cuts” with this bunch. Even NOBL, which holds the dividend aristocrats (companies which have increased their dividend for at least 25 consecutive years) cut its annual dividend twice in 8 years. SCHD & DGRO were the only ETFs without an annual cut.
    Here is the link to DVK’s article: https://seekingalpha.com/article/4319124-no-dividend-strategy-etfs-are-dividend-champions-is-one-contender
    Here is a link to a popular ETF (VIG) dividend history in bar graph view. Select “all” to show all quarterly dividends back to mid 2006.
    https://seekingalpha.com/symbol/VIG/dividends/history

    As for Canada’s 3 major ETF providers BMO does a really good job of smoothing out the distibutions. iShares Canada has a policy of paying the same dividend for every 3 payment periods and then its a crap shoot on the amount paid the following 3 month period. Take a look at the dividend historicals link for XDIV. I personally find it ridiculous to see a 12% cut on the Oct 31, 2018 payment followed by a 12% raise 3 months later, followed by an 11% cut 3 months after that. http://ca.dividendinvestor.com/historical.php?no=396925
    Vanguard Canada’s ETFs are as irregular and lumpy in Canada as they are in the U.S.
    Take a look at popular VDY’s distributions in the link. It is often a very wild ride from month to month. http://ca.dividendinvestor.com/historical.php?no=168648

  16. Bernie Says:

    Ron/BC, still_learning (Bernie) and others,

    It is craziness personified out there but please be careful! Covid-19’s mortality rate is a bit higher for some of us old(er) farts.

  17. dave/ab Says:

    Bernie

    NTR

    You are correct. Us old farts need to be diligent with covid 19 and flu’s especially if we have a preexisting condition. We need to stay fit and ward off diabetes. Some people don’t recognize how interconnect other health conditions exit due to diabetes.

  18. dave/ab Says:

    Bernie

    I love your post on TLT versus SPY. I have been back checking there is a correlation to this for sure. I will look for this as a trade.

  19. Ron/BC Says:

    Dave/ab & Bernie

    If I was wise enough to fully understand Bernies SPY/TLT theory I’d check out the charts etc myself………..It seemed like asking me to start up the spaceship and I couldn’t find the keys,lol.

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