Tech Talk for Monday March 30th 2020

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Pre-opening Comments for Monday March 30th

U.S. equity index futures were higher this morning. S&P 500 futures were up 19 points in pre-opening trade.

Johnson & Johnson advanced $5.34 to $128.50 after announcing plans to develop a vaccine against COVID-19.

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Abbott Labs (ABT $74.56) is expected to open higher after announcing plans to launch a rapid test for COVID-19.

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Canada Goose gained $0.30 to $20.52 after Wells Fargo upgraded the stock from Equal Weight to Overweight.

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U.S. Steel dipped $0.08 to $5.70 after Deutsche Bank dropped its target price from $8.50 to $4.00.

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EquityClock’s Daily Market Comment

Following is a link:

http://www.equityclock.com/2020/03/28/stock-market-outlook-for-march-30-2020/

Note seasonality charts on the TSX Composite relative to the S&P 500 Index.

Technical Scoop

Thank you to David Chapman and www.EnrichedInvesting.com for a link to the following weekly report. Headline reads, “Secular bear, stunning numbers, lurking debt, overheated housing, gold demand, energy disaster”. Following is a link:

http://enrichedinvesting.com/wp-content/uploads/2020/03/Secular-bear-stunning-numbers-lurking-debt-overheated-housing-gold-demand-energy-disaster.pdf

 

The Bottom Line

Equity markets recovered from the “Black Swan event” last week. Equity markets around the world moved sharply higher: The Dow Jones Industrial Average from the close on Monday to the close on Thursday advanced 21.3%, the largest percent gain for a three day period since 1938. However, spread of the coronavirus remains a major influence on equity prices. The VIX Index remained elevated at 66.54%. Look for more volatility this week. World equity markets remain intermediate oversold and show signs of forming a bottoming process.

 

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 started 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 started to appear. See end of this report for charts.

Most short term short term momentum indicators for U.S. markets and sectors (20 day moving averages, short term momentum indicators) recovered last week from oversold levels, but most remain below their 20 day moving average.

Short term momentum indicators for Canadian markets and sectors also recovered last week from oversold levels, but remain below their 20 day moving average.

Year-over-year consensus earnings for S&P 500 companies were reduced significantly again last week in recognition of a greater impact from the coronavirus. According to FactSet, first quarter 2020 earnings are expected to drop 5.2% (versus a decline of 2.9% last week) and revenues are expected to increase 2.0% (versus an increase of 2.5% last week). Second quarter 2020 earnings are expected to fall 10.1% (versus a drop of 3.9% last week) and revenues are expected to drop 0.4% (versus an increase of 1.2% last week). Third quarter earnings are expected to fall 1.1% (versus an increase of 3.0% last week) and revenues are expected to increase 2.0% (versus a gain of 3.1% last week). Fourth quarter earnings are expected to increase 4.5% (versus a gain of 7.3% last week) and revenues are expected to increase 3.6% (versus a gain of 4.3% last week). Earnings for all of 2020 are expected to decrease 1.2% (versus a previous gain of 2.5%) and revenues are expected to increase 2.0% (versus a previous gain of 3.2%).

 

Economic News This Week

January Canadian GDP to be released at 8:30 AM EDT on Tuesday is expected to grow by 0.1% versus a gain of 0.3% in December.

March Chicago PMI to be released at 9:45 AM EDT on Tuesday is expected to drop to 40.0 from 49.0 in February.

March ADP Employment Report to be released at 8:15 AM EDT on Wednesday is expected to drop 150,000 versus a gain of 183,000 in February.

February Construction Spending to be released at 10:00 AM EDT on Wednesday is expected to increase 0.5% versus a gain of 1.8% in January.

March Manufacturing ISM to be released at 10:00 AM EDT on Wednesday is expected to drop to 44.3 from 50.1 in February.

February Canadian Trade Deficit to be released at 8:30 AM EDT on Thursday is expected to slip to $830,000,000 from $1.47 billion in June.

February U.S. Trade Deficit to be released at 8:30 AM EDT on Thursday is expected to slip to $43.00 billion from $45.30 billion in January.

Weekly Jobless Claims to be released at 8:30 AM EDT on Thursday are expected to slip to 3.000 million from 3.283 million last week.

February Factory Orders to be released at 10:00 AM EDT on Thursday are expected to increase 0.2% versus a drop of 0.5% in January.

March Non-farm Payrolls to be released at 8:30 AM EDT on Friday are expected drop 123,000 versus a gain of 273,000 in February. March Unemployment Rate is expected to increase to 3.9 from 3.5% in February. Average Hourly Earnings are expected to increase 0.2% versus a gain of 0.3% in February.

March Services ISM to be released at 10:00 AM EDT on Friday is expected to drop to 45.0 from 57.3 in February

 

Trader’s Corner

 

Equity Indices and related ETFs

Daily Seasonal/Technical Equity Trends for March 27th 2020

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Green: Increase from previous day

Red: Decrease from previous day

Commodities

Seasonal/Technical Commodities Trends for March 27th 2020

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Green: Increase from previous day

Red: Decrease from previous day


Sectors

Daily Seasonal/Technical Sector Trends for March 27th 2020

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Green: Increase from previous day

Red: Decrease from previous day

 

Greg Schnell’s Market Buzz

Released on Friday. Headline reads, “What to Buy on the Lows”. Following is a link:

https://www.youtube.com/watch?v=zgd2JS6ShWo&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 recovered last week from 1.20 to 1.80. Percent remains deeply oversold and showing early technical signs of bottoming.

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Bullish Percent Index for S&P 500 stocks jumped last week from 14.60 to 70.80. The Index already has returned to an intermediate overbought level.

 

TSX Momentum Barometers

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Percent of TSX stocks trading above their 50 day moving average increased last week from 0.43 to 2.61. Percent remains intermediate oversold and showing early signs of bottoming.

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Bullish Percent Index for TSX stocks jumped last week from 13.48 to 54.78. The Index has moved from intermediate oversold to intermediate neutral.

 

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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8 Responses to “Tech Talk for Monday March 30th 2020”

  1. Canuck2004 Says:

    “Locked-Down Traders Take on Volatile Quarter-End Like No Other”

    “Investors are bracing for the most volatile end to a quarter in more than a decade, in part because many of them will have to handle this crucial period from home.
    [..]
    Quarter-end is always a time of flux for banks and funds seeking to balance their books. Financials typically rein in collateral lending as they shore up balance sheets ahead of regulatory scrutiny, while fund managers rebalance their portfolios to account for changing asset valuations and to implement new ideas.
    [..]
    Meanwhile, JPMorgan Chase & Co. estimates that more than $850 billion is set to flow back into stocks to offset their historic slide this month. Much of that money could come out of bonds, which have benefited from demand for havens, potentially pushing yields higher and spurring an equity rally.”

    https://www.bloomberg.com/news/articles/2020-03-28/locked-down-traders-take-on-volatile-quarter-end-like-no-other

  2. Canuck2004 Says:

    Inter Pipeline slashes dividend 72% as virus, oil price war hit

    That’s why 40 to 50 names in a portfolio, more the better…equal weights for all. None more than 2.5-2% position each. It will recover but this Black Swan event is bad timing as they are building a massive billion dollar gas refining plant in Alberta….. we own it in all accounts and I have owned it for decades in my RRSP. This is a temporary situation….but we may get more. REITS are getting hammered as traders worry tenants will not pay their rents. All this depends how long the lockdown stays…shorter the better.

    https://www.bnnbloomberg.ca/inter-pipeline-slashes-dividend-72-as-virus-oil-price-war-hit-1.1414539

  3. Canuck2004 Says:

    Like I have told my wife often, market values in stocks go up and down all the time, like a balloon that contstantly inflates and deflates….it’s nice to see valuations go up, but it’s all ephemeral… what is really important are the dividends.

    As I have found after over 40 years of investing and trading, if you have an investment portfolio of 40-50 best quality names, with long histories of increasing dividends (more names is better than less) all equal weights, the dividends cash flow will be secure. It is very unlikely that all 40-50 will cut their dividends. If one or two do, no big deal, you won’t feel it, as each position is only 2.5 to 2% of the portfolio.

    As a rule the dividends don’t change in those quality names, but grow every year. In my RRSP, which I haven’t been able to add to since I retired 9 years ago, the dividend growth rate is easily calculated…and my rate is about 8% dividend growth a year, each and every year. If you keep re-investing those dividends, equally across your dividend paying names, the account will grow very well. The dividends will improve and strengthen the base value of the portfolio. The compounding effect of dollar cost averaging into quality dividend growers over time will power your portfolio to success.

    Ignore the market gyrations and focus on quality dividends. Step into it slowly, do not sell.

    This sell-off will pass, like it has always done before. The market will recover.

  4. Roy Says:

    Canuck 2004
    Your posts are very helpful and appreciated.
    Thanks

  5. leon Says:

    Canuck 2004
    Thank you for taking the time and explaining your personal position and offering some
    positive feedback to those ready to jump ship.

  6. Canuck2004 Says:

    I think we will see, as expected, some sideways trading today and tomorrow…with a negative bias tomorrow. Maybe it will be magnified as per panic situation or perhaps not. We will see.

    April 1st is a new month and a new quarter. Traders will be putting fresh funds to work to recoup losses. I suspect the week will end in positive territory. We have seen the worst of it, as per VIX topping metrics as previously discussed, but this is uncharted territory… so one day at a time…

    China is recovering, so we know it takes about 2 months….there is some clarity there. Market hates uncertainty.

    We have seen the abyss, and the market always recovers before the economy bottoms as it looks 6 months ahead to the recovery. One cannot have a recovery without the participation of the financials.

    Watch the financials… it’s the “tell” for a recovery.

  7. Canuck2004 Says:

    Roy and Leon….thank you. I hope to help some people by posting my views…I’m sorry I cannot participate in discussions or chats as I only have very little time…. I am helping others as well….elsewhere.

  8. Roy Says:

    Hello Canuck 2004
    You’ve already done a lot.

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