Tech Talk for Monday March 23rd 2020

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Pre-opening Comments for Monday March 23rd

U.S. equity index futures were higher this morning. Equity index futures dropped their regulated limit in overnight trading, but recovered strongly after the Federal Reserve indicated unlimited Quantitative Easing through purchase of U.S. Treasury bonds. S&P 500 futures advanced 32 points in pre-opening trade.

Boeing gained $1.03 to $96.04 after Goldman Sachs upgraded the stock to Buy.

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Visa dropped $3.88 to $142.95 after KeyBanc Capital lowered its target price from $220 to $190.

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McDonald’s fell $4.50 to $143.99 after Deutsche Bank lowered its target price from $199 to $171

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EquityClock’s Daily Market Comment

Following is a link:

http://www.equityclock.com/2020/03/21/stock-market-outlook-for-march-23-2020/

Note seasonality charts on the Consumer Staples sector, the Utilities sector, Existing Home Sales and Canadian Retail Trade.

Technical Scoop

Weekly report compliments of David Chapman and www.enrichedinvesting.com

Headline reads, “Second monster, lifeboat shortage, gold/silver high, widening spread, USD surge, faltering haven, spring sun”. Following is a link:

http://enrichedinvesting.com/wp-content/uploads/2020/03/Second-monster-lifeboat-shortage-goldsilver-high-widening-spread-USD-surge-faltering-haven-spring-sun.pdf

 

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 66.04%, down from a high of 85.47% earlier in the week. Look for more volatility this week. World equity markets are deeply intermediate oversold, but have yet to show significant technical evidence of a bottom.

 

Observations

The VIX Index (better known as the Fear Index) remains elevated.

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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) remain deeply oversold. Significant technical signs of a bottom have yet to appear. See end of this report for charts.

Medium term technical indicators for Canadian equity markets also remain deeply oversold. Significant technical 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) remained low last week and are deeply oversold

Short term technical indicators for Canadian markets and sectors also remained low 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 2.9% (versus a decrease of 1.2% last week) and revenues are expected to increase 2.5% (versus an increase of 3.5% last week). Second quarter 2020 earnings are expected to fall 3.9% (versus a gain of 0.9% last week) and revenues are expected to increase 1.2% (versus 3.2% last week). Third quarter earnings are expected to increase 3.0% (versus 6.2% last week) and revenues are expected to increase 3.1% (versus 4.8% last week). Fourth quarter earnings are expected to increase 7.3% (versus 9.3% last week) and revenues are expected to increase 4.3% (versus 5.1% last week). Earnings for all of 2020 are expected to increase 2.5% (versus a previous estimate of 5.7%) and revenues are expected to increase 3.2% (versus a previous estimate of 4.5%).

 

Economic News This Week

February New Home Sales to be released at 10:00 AM EDT on Tuesday are expected to decrease 3.1% versus a gain of 7.9% in January.

February Durable Goods Orders to be released at 8:30 AM EDT on Wednesday are expected to decline 0.9% versus a drop of 0.2% in January. Excluding Transportation Orders, February Durable Goods Orders are expected to drop 0.4% versus a gain of 0.8% in January.

Next estimate of fourth quarter real GDP to be released at 8:30 AM EDT on Thursday is expected to remain unchanged from the third quarter at 2.1%.

Weekly Jobless Claims to be released at 8:30 AM EST on Thursday are expected to jump to 560,000 from 281,000 last week.

February Personal Income to be released at 8:30 AM EDT on Friday is expected to increase 0.4% versus a 0.6% increase in January. February Personal Spending is expected to increase 0.2% versus a 0.2% gain in January.

March Michigan Consumer Sentiment Index to be released at 10:00 AM EDT on Friday is expected to slip to 89.5 from 95.9 in February.

Selected Earnings News This Week

Quarterly reports released by major U.S. and Canadian companies are sparse this week. Four S&P 500 companies and one Dow Jones Industrial company are scheduled to report.

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Trader’s Corner

 

Equity Indices and related ETFs

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Green: Increase from previous day

Red: Decrease from previous day

 

Commodities

Seasonal/Technical Commodities Trends for March 20th 2020

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Green: Increase from previous day

Red: Decrease from previous day

 

Sectors

Daily Seasonal/Technical Sector Trends for March 20th 2020

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Green: Increase from previous day

Red: Decrease from previous day

 

StockTwits released on Friday @EquityClock

Nil

 

Greg Schnell’s “Market Buzz”

Released on Friday. Greg discusses, “ 4 stops are not a start”. Following is a link:

https://www.youtube.com/watch?v=D2w18Rc-hCg&feature=youtu.be

 

Larry Williams’s Video

Interesting history on U.S. stock market panics during the past 50 years! Larry claims to be “bullish at a time of extreme panic”. The video implies that U.S. equity markets are close to an important bottom. Following is a link:

https://www.youtube.com/watch?v=ztk3Ti-4yO4&feature=youtu.be

 

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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S&P 500 Momentum Barometers

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Percent of S&P 500 stocks trading above their 50 day moving average inched up from 1.00 to 1.20 last week. Percent is deeply oversold, but has yet to show significant signs of bottoming.

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Bullish Percent Index for S&P 500 stocks increased last week from 3.20 to 14.60. The Index remains deeply oversold and shows early signs of bottoming.

 

TSX Momentum Barometers

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Percent of TSX stocks trading above their 50 day moving average was unchanged last week at 0.43. Percent remains deeply oversold, but has yet to show significant technical signs of bottoming.

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Bullish Percent Index for TSX stocks improved last week from 9.13 to 13.48. The Index remains deeply oversold and shows early 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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23 Responses to “Tech Talk for Monday March 23rd 2020”

  1. FishFat Says:

    Things are never so bad that they can’t get worse.

  2. Ron/BC Says:

    The Canadian dollar $CDW is back to the early 2016 low once again.

    https://stockcharts.com/h-sc/ui?s=%24CDW&p=D&yr=10&mn=0&dy=0&id=p00799515309&a=673066495

  3. Ron/BC Says:

    Here is a longer chart of $CDW for more perspective.

    https://stockcharts.com/h-sc/ui?s=%24CDW&p=D&st=1975-08-30&id=p33812927222&a=673066213

  4. Ron/BC Says:

    I don’t tend to be an optimist with markets but try to be down to earth and realistic. BUTTTTTTTTTTTTT I think everyone needs to keep in mind that President Donald Trump is up for re-election this November and with his arrogance and free wheeling business style I can’t see him standing ideally by as the economy goes to hell in a hand basket. I suspect he will find a way to turn things around and boom up until at least the end of the year.

    (Or he and his buddies are short and enjoying the ride down.)

  5. Ron/BC Says:

    Keep an eye on this downtrendline of $SPX ETF:XSP.to.

    https://stockcharts.com/h-sc/ui?s=XSP.TO&p=D&yr=0&mn=6&dy=0&id=p55622281319&a=728025318

  6. Bruce Says:

    Any chance of someone posting Armstrong’s latest blog on the Dow Jones and the slingshot? …..

  7. Rol Lew Says:

    “Or he and his buddies are short and enjoying the ride down”.

    I would say yes.

    Why waste a good sell-off. Plus you get corporate socialism to bail you out. Life’s great!

  8. Ron/BC Says:

    Rol Lew

    Last week it was reported that Trump sent a tweet to his friends that simply said “YOU’RE WELCOME.” He’ll have some very dedicated friends now…………….they’ll be there with bells on for him this November.

  9. Ron/BC Says:

    “””IF””” AAPL can close above $228 over the next day or two that would be very positive as that’s it’s 2018 high breakout point as well as its uptrendline from the late 2018 low. Positive divergence on the RSI 8 and other oscillators as well. Nice volume too….

    https://stockcharts.com/h-sc/ui?s=AAPL&p=D&yr=3&mn=0&dy=0&id=p56986152877&a=673066551

  10. Bernie Says:

    Ron/BC,

    It appears Canadian listing “BMO Long-Term US Treasury Bond Index ETF (ZTL)” is not available on StockCharts.com. Could you possible ask them to add it to their database? Non-members don’t have this option.

  11. Ron/BC Says:

    Bernie

    I just requested the ZTL BMO Bond Index symbol be added to their list. They do have a place for such requests. I personally think there is enough blood in the streets for a descent “rally”.

  12. dutchcanuck Says:

    Got an itchy trigger finger today and bought TNT.UN at the close. Has an unbelievable dividend of 15% annually. Even if they cut it in half it would be 7.5.
    Reason for this purchase is that more than 85% of their office space is rented to government departments or agencies and I don’t think they will suffer in the current environment.
    Having satisfied the “urge” I’ll crawl back into my “hidey” hole.

  13. bruce Says:

    interesting to see strength in a handful of stocks to-day….Amazon Roku Netflix the semis…is this sideline cash getting anxious or just short covering?….

  14. wsto Says:

    Re 4 Ron/BC

    I don’t see Trump wanting to get re-elected and deal with this economic mess. He got his fame and fortune already. Given his selfish nature, I can see him letting this situation get worse and pass it onto the next elected president from the other party.

  15. Canuck2004 Says:

    The VIX also known as the FEAR index seemed to have peaked….meaning the fever has broken…more than likely. In a nutshell: Low VIX = up markets; high VIX = down markets.

    Quotes from Bloomberg article posted below:

    “Record-setting levels of market fear aren’t easily sustained, and the drop in volatility expectations signals the most frenzied days of selling may be behind us.”

    [..]

    “I think we’ve broken the back of the VIX fever,” said Michael Purves…”

    [..]

    “One broad factor at play is that it’s simply difficult for volatility to linger at extreme levels for a prolonged stretch, according to Pravit Chintawongvanich, Wells Fargo’s equity derivatives strategist.

    “Even in 2008, the VIX was able to sustain only six trading days above 70 (so far this year, we’ve had five),” he writes. “Regardless of if stocks continue to grind lower or rebound, there is room for the VIX curve to normalize further.””

    Read article below, don’t bother with the video. See my attached chart posted below article post. On VIX chart: Note the RSI was at 70 overbought is now trending lower; Full stochastic (momentum Indicator) peaked, rolling over and forming a “death cross”, meaning trending lower; MACD a lagging indicator was overbought over 80, trending lower; and note the topping action, several days without making new high, starting to roll over. All Bullish indicators.

    Doesn’t mean it can’t reverse itself…if a new Black Swan event occurs or new extreme bad news breaks, however, all things being equal…. I think we’ve seen the worse.

    BLOOMBERG:

    https://www.bloomberg.com/news/articles/2020-03-23/markets-get-weirder-with-stocks-and-volatility-tumbling-together?srnd=markets-vp

    Markets Get Weirder With Stocks and Volatility Tumbling Together – Bloomberg
    The stock market and volatility are in the midst of an unprecedented synchronized swoon.The S&P 500 Index has fallen more than 7% over the past two sessions while the Cboe Volatility Index, a …
    http://www.bloomberg.com

    VIX CHART:

    https://stockcharts.com/h-sc/ui?s=%24VIX&p=D&b=5&g=0&id=p67899577453

  16. Canuck2004 Says:

    By the way, I forgot to mention that Ross Healy, in one of my previous post said that according to his calculations, support for the S&P500 is twice book, which is around 2175. Very close to that number today. Ross has a long history of being correct in matters pertaining to the BIG picture.

    Also said, if it doesn’t hold at 2175, next support is 1,100; very unlikely in my opinion.

  17. Paula Says:

    RE: ZTL.TO
    I have requested that this symbol be added to Stockcharts list a few times. So far, have not seen it so just use TLT. Maybe this move in higher bond prices/ lower yields is over very soon.

  18. Bernie Says:

    Ron/BC,

    Re: #11
    Thanks. I know the request feature you mention. It doesn’t work with non-members.

    Paula,

    Re: #17 ZTL
    Did you specifically ask for ZTL.TO? Perhaps they couldn’t find it because its not on the TSE. I think the ticker is listed as ZTL.NE. I’ve actually had a small position in TLT since last summer. Its done extremely well in this selloff but would have done even better with ZTL because of the weak $CAD. Its outperformed TLT.

  19. Ron/BC Says:

    Bernie

    I’ll ask them again but for ZTL.NE and see what they say. And I’ll ask about ZLT.to also. So if it’s not listed on the $TSX what exchange is it on?

  20. Paula Says:

    Bernie
    Yes I think I did. Maybe that’s why they didn’t add it.

  21. Ron/BC Says:

    Bernie

    I see the Dow futures is up over 500pts in after hours trading and the $SPX is up over 60 pts. No guarantee it will hold overnight but is a good sign. A big rebound is very overdue.

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

  22. Ron/BC Says:

    Here is a one year chart of AAPL. Nice bounce off support. This does need to hold but looks good for a bounce tomorrow.

    https://stockcharts.com/h-sc/ui?s=AAPL&p=D&yr=1&mn=0&dy=0&id=p69220319394&a=730041435

  23. Bernie Says:

    Ron/BC,

    Re: #19
    Its on the Neo Exchange founded in 2015.
    This per Wikipedia:
    “NEO Exchange is a Canadian stock exchange based in Toronto. Marketed as Canada’s New Stock Exchange, NEO aims to help companies, dealers and investors by creating a better listing experience, eliminating predatory market behaviours such as high-frequency trading, implementing a unique market making program to ensure liquidity, and offering free real-time market data for all NEO-listed securities.”

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