Tech Talk for Wednesday May 13th 2020

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Pre-opening Comments for Wednesday May 13th

U.S. equity index futures were higher this morning. S&P 500 futures were up 18 points in pre-opening trade. Index futures are responding to news that the Democrat controlled House of Representatives has proposed an additional stimulus bill valued at over $3 trillion.

Index futures were virtually unchanged following release of the April Producer Price Index at 8:30 AM EDT. Consensus is that the Index will drop 0.5% versus a slip of 0.2% in March. Actual was a drop of 1.3%. Excluding food and energy, consensus for the Index was unchanged versus a gain of 0.2% in March. Actual was down 0.3%.

NVIDIA added $4.60 to $316.70 after Wedbush raised its target price from $311 to $340.

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Wal-mart gained $0.28 to $124.06 after Deutsche Bank raised its target price from $131 to $134.

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Ingersoll-Rand slipped $0.14 to $27.32 after Deutsche Bank downgraded the stock from Buy to Hold.

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JD.com added $1.22 to $48.25 after Mizuho upgraded the stock from Neutral to Buy. Target was raised from $37 to $58.

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EquityClock’s Daily Market Comment

Following is a link:

http://www.equityclock.com/2020/05/12/stock-market-outlook-for-may-13-2020/

Note seasonality charts on U.S. Real Estate iShares and U.S. Consumer Price Index

Technical Comments

Illumina (ILMN), a NASDAQ 100 stock moved above $324.95 yesterday resuming an intermediate uptrend.

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JD.com (JD), a NASDAQ 100 stock moved above $47.98 yesterday extending an intermediate uptrend.

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Honeywell (HON), an S&P 100 stock moved below intermediate support at $129.58.

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Canadian Crude Oil Index ETF moved below $4.01 extending an intermediate downtrend.

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Trader’s Corner

 

Equity Indices and related ETFs

Daily Seasonal/Technical Equity Trends for May 12th 2020

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Green: Increase from previous day

Red: Decrease from previous day

 

Commodities

Seasonal/Technical Commodities Trends for May 12th 2020

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Green: Increase from previous day

Red: Decrease from previous day

 

Sectors

Daily Seasonal/Technical Sector Trends for May 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 another 7.82 to 61.72 yesterday. It remains intermediate overbought and showing early signs of an intermediate peak.

 

TSX Momentum Barometer

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The Barometer slipped 5.36 to 68.75 yesterday. It remains intermediate overbought and showing early signs of an intermediate peak.

 

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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22 Responses to “Tech Talk for Wednesday May 13th 2020”

  1. Larry/ON Says:

    Amazing how the market refuses to roll over this morning. REITS continue to plunge into the abyss. I am using REK (US Market) to short and there are leveraged bear REIT etfs.

  2. Larry/ON Says:

    Yesterday looks like a one day shake-out move getting investors to part with their quality stocks. Buyers stepped in this morning to put cash to work.

  3. Ron/BC Says:

    The $SPX ran up to the falling 200EMA which was also the Fibonacci 61.8% retracement level of the February through March selloff. And like clock work price stalled out there and is now starting to selloff again. The difference in this pullback so far is note price is breaking below the rising 20ema. And this will cause the 20ema to tag the 50ema and roll over without a crossover. The RSI 8 is also breaking back below its 50 line and the RSI 21 is also about to cross below its 50 line making this indicator bearish again. The entire rally back was on declining volume as well which made it questionable. First support on this pullback should it continue is the Fibonacci 38.2% retracement level of the March to May rally at 2650.

    https://stockcharts.com/h-sc/ui?s=%24SPX&p=D&yr=0&mn=10&dy=0&id=p25155020563&a=725299577

  4. Ron/BC Says:

    Here is a chart of the Equal Weight S&P RSP. Note the ratio chart above and see that in the selloff of late 2018 the RSP Equal Weight S&P which is not weighted with heavy weight stocks held up better than the SPY. And now with the recent selloff note the ratio chart that shows the RSP Equal Weight S&P plunged badly relative to the standard SPY. Big difference and not a good one.

    https://stockcharts.com/h-sc/ui?s=RSP&p=D&yr=3&mn=0&dy=0&id=p01092964603&a=753700958

  5. Ron/BC Says:

    Please tell me what I’m missing here. The SPY or other broad market ETFs that cover “major” indexes occasionally have a poorly performing stock and at some point “they” will dump the losing stock and replace it with a health stock. So you know that ETF will always have a healthy portfolio and you wont be stuck with the losing stock anymore unlike creating your own portfolio and getting stuck with a losing stock till it goes off the board. And those stocks in the portfolio are carefully selected to be the best group they can come up with to reflect the broad U.S. stock market and reasonably diversified. I’ve also read that almost no one including professional portfolio managers outperforms the S&P500 (SPY). So what the hell is everyone doing trying to match or outperform SPY? Why not just buy SPY & perhaps some QQQQ and forget about it?

  6. Mary Says:

    Ron/BC

    I read the tourist (I assume they are referring to foreigners) buying the SPY then selling it off.

    Real Estate in Toronto was down over 60% last month, maybe Vancouver the same, are you still thinking of selling your condo. However, price is still holding well even though number of homes sold down.

  7. wsto Says:

    Re 3 Ron/BC

    Do you have any experience in using ADL or VWAP or some other volume based indicators in your analysis?

  8. Larry/ON Says:

    Online Retail Up SHOP – Up 1.29%, AMZN – UP 0.47%
    NVDA – down 0.29% holding in there with SOXX bouncing off the 200 day on very high vol
    The sectors that have been the place not to be got trashed big time – Banks, REITS, Energy, Utilities – avoid these sectors.

  9. Ron/BC Says:

    Mary

    Sales & new listings are down but prices have not changed much. So inventory is low as well. The data needs more time to make sense I think. But I don’t really care that much as I’ve found over the last 50 some odd years that if prices fall sharply so will the place you wish to buy as well. Ex: you sell your $400K place for $300K and buy that place that’s 50% nicer that was previously worth $600K for $450. It’s always the price that matters not the percentage change just like stocks. I’ve waited before to sell when prices were selling off sharply in Victoria and the buyers were eager to purchase at the lower price. So then armed with cash I would go out and low bid a couple of places and end up getting a very good deal. I’d offer cash and the offer would be good for a day or so only with no subject to’s other than for me to approve the Deprecation Report. Most people want top dollar for their home but then they also have to pay top dollar for their new home. That percentage difference means your mortgage is far greater than you had planned as it’s in “dollars” not percentages. So much for percentages. I’ve always found it odd that so many think in percentages. There is a place for it but not when you are wondering just how much it’s going to actually cost you. But it’s early in this new reality so anything can happen. I’m just finishing having the carpet replaced in both bedrooms now and will soon call my realtor lady to come over and tell me what she thinks. I don’t really want to redo the Kitchen and Bath as that’s very expensive but we’ll see what she has to say. It’s all in a lifetime……………….

  10. Paula Says:

    Ron/BC, Mary
    RE #6 and #7
    Mary, I had trouble understanding what you meant by “tourist”. By “they”, I think Ron is referring to the committee that creates the SPX index. I’m sure Ron and others will correct me if I am wrong.

    I also heard that sales are down ~ 60% in Toronto but price are holding up well. Wonder how long that can keep up if the number of sales keeps declining.

    Ron, I agree with you. Why not buy SPY or QQQ or some other ETF that is outperforming and stop trying to pick stocks. I can’t believe all the people who still inquire about stocks, maybe thinking they have found the magic bean or the golden goose or whatever. I guess it’s just human nature to want to be smarter than everyone else even it can’t really be done. By this I mean over the long term and consistently and without ruining your health. I guess there is the concept of raising capital to build up a company and “giving” the public an opportunity to get in on a “sure thing”. Think of the number of people employed on Wall and Bay Street and the equivalent in other major financial centres. What would they all do if there wasn’t a market of stocks? Which by the way, I keep hearing that now is the time that stock pickers are going to do really well.

  11. Ron/BC Says:

    Wsto

    I used to use a Volume weighted price indicator. It did tell you where most of the action was at a particular price. Here is Accumulation/Distribution indicator. I overlaid it on the price. Don’t use either anymore. There are many more indicators that likely cover them both.

    https://stockcharts.com/h-sc/ui?s=SPY&p=D&yr=1&mn=6&dy=0&id=p86505808093&a=673066097

  12. Paula Says:

    Ron/BC, meant to thank-you for the updated SPX chart as well as the RSP chart. There are so many gaps on SPX. Maybe now on the way to fill some of them.

  13. Paula Says:

    Ron/BC

    (should have read #5 and #6 in my response #10) some more on that subject:

    On the other hand…there is another reason to own individual stocks and that is for the income from the dividends. But then a person has to hold them and not trade them and own a basket so that the losers don’t wreck the basket/portfolio. Once you buy the stocks, there is no cost to owning them, unlike ETFs, which have their MER. But these days a person can buy ETFs that have relatively low cost so I am thinking more and more that is the way to go.

  14. JP/BC Says:

    I have read that index ETFs have distorted the stocks within. Until a stock is removed from an index, it is bought and sold far more times than it would be outside the index simply because of of so many index ETFs involved. I’m not sure how this impacts the price, but assume it magnifies gains and losses.

  15. Ron/BC Says:

    Paula parson my ignorance but doesnt the SPY collect the dividends as well????

  16. Bernie Says:

    Ron/BC,

    I’m fairly sure the constituents of the broad country indexes, ie, the S&P500 and the TSX60 are there based on their market cap and not by way of performance. This means there will always be a cross section of outperformers, underperformers and those in between. I’ve also heard the main reason why so many professional advisors underperform the S&P500 is because of the fees & expenses they charge as all returns are published after those deductions. Another unrealistic thing I’ve seen written before is many index gurus are of the belief that to outperform the index is to beat it every single year. Nobody does that! Its only common sense that individual investors & advisors will beat the index, at least, on occasion. I have no idea what the actual true percentage of S&P500 outperformers is but no one will argue that its not difficult to best long term. I stopped trying many years ago and was content to come close while reaping the rewards of consistent income growth via dividend growth. The latter is something that is rare with index ETFs or any ETFs for that matter. Regardless I won’t go with 100% stock content anymore. I also incorporate ETFs & mutual funds for greater diversity.

    The TSX60 is another ball of wax altogether. I find it quite easy to beat more often than not and long term overall without even trying. I’m not 100% certain as to why this is but the lopsidedness of the holdings might have something to do with it. There’s too much financial, energy and mining content and too little of the other 8 sectors to be anywhere close to diversified. Outperforming the TSX can be as simple as holding the essentials and avoiding the high yielders.

  17. Mary Says:

    Paula #6:

    I was referring to an article I read on the internet about a week ago where a few people were standing on the edge of a road looking up at a mountain. It read tourist are pushing up the SPY…..

    Ron/BC

    “Sales & new listings are down but prices have not changed much. So inventory is low as well”. Exactly whats happening here.

    “Ex: you sell your $400K place for $300K and buy that place that’s 50% nicer that was previously worth $600K for $450.” Makes sense but not so fast. The herd mentality is when the media, friends and family influence buyers and sellers will they take action. Right now they hit the pause button.

  18. Bernie Says:

    Ron/BC,

    I spoke too soon on the qualifications required to be a member of the S&P500. My mistake! Here per Investopedia are the requirents:

    That’s it. The index includes 500 of the largest (not necessarily the 500 largest) companies whose stocks trade on either the NYSE or NASDAQ. Like popes and Oscar winners, the components of the S&P 500 are selected by committee. And, like the College of Cardinals and the Academy of Motion Picture Arts & Sciences, the S&P 500 committee operates within specific criteria. To qualify for the index, a company must have:

    •a market cap of $8.2 billion (as of Feb. 2019 guidance)
    •its headquarters in the U.S.
    •the value of its market capitalization trade annually
    •at least a quarter-million of its shares trade in each of the previous six months
    •most of its shares in the public’s hands
    •at least a year since its initial public offering
    •the sum of the previous four quarters of earnings must be positive as well as the most recent quarter.

  19. Larry/ON Says:

    For NVDA and SHOP Fans – Cramer loves SHOP but implies that it may drop to create a buying opportunity. The biggest bounce off the bottom I have ever seen is OSTK. I would love to hear from anyone who knows OSTK well.

    https://www.cnbc.com/2020/05/13/cramer-charts-show-nvidia-amd-and-qualcomm-have-more-room-to-run.html

    https://www.cnbc.com/2020/05/13/cramer-lightning-round-shopify-is-the-hottest-stock-in-the-market.html

  20. Bernie Says:

    Ron/BC,

    Further to my comment #16 the attached article goes into more detail on what is required to be on the TSX60. Again it is not all decided by market cap. I need to learn to research first before making my assumptions public. I would hope the index gurus do the same. A lot of their facts are skewed to make their arguments appear to be valid. I will shut up now!
    https://www.theglobeandmail.com/globe-investor/investment-ideas/why-does-the-sptsx-60-exclude-some-of-canadas-biggest-stocks/article19057449/

  21. Ron/BC Says:

    Bernie

    Thanks for the article. It doesn’t surprise me. So I guess we just have to deal with what is rather than what should be. What I tend to do is just keep charts of these markets and as long as whatever I’m using as a trend tracker keeps trending I believe I should stay with that trend. If it doesn’t stay bullish I get back into cash. So I do spend a lot of time in cash.

  22. Bernie Says:

    Ron/BC,

    Its usually best to stick with a plan that you’re most comfortable with and then invest within your risk tolerance. You’re really good with what you have been doing so why change things up and take on more risk…unless you really want to.

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