Tech Talk for Monday May 18th 2020

Daily Reports Add comments

Pre-opening Comments for Monday April 18th 2020

U.S. equity index futures were higher this morning. S&P 500 futures advanced 75 points in pre-opening trade. Index futures responded to encouraging comments last night by Federal Reserve Chairman Jerome Powell about a recovery in the U.S. economy in the second half of 2020.

NVIDIA advanced $12.37 to $352.00 after BMO Capital upgraded the stock from Market Perform to Outperform. Target was raised from $285 to $425.

clip_image001[1]

Moderna jumped $18.78 to $85.40 after announcing early success from its coronavirus vaccine trials.

clip_image002

 

The Bottom Line

Equity markets moved lower last week. North American equity markets remained intermediate overbought. Spread of the coronavirus continues to be a major influence on equity prices. The VIX Index remains elevated.

History is repeating this year. Equity indices of developed nations around the world normally reach a seasonal peak in late April/early May. The exception is the TSX Composite Index that normally reaches a seasonal peak early in June instead of early May. Thereafter, equity indices enter into a period of higher-than-average volatility until mid-October. Returns during the past 70 periods since 1950 from May to October have been either slightly positive or slightly negative and have averaged close to zero.

clip_image001

The phrase “Sell in May and Go away” is misleading. It implies that opportunities for profits in the stock market are not available in the May to October period. Historically, gains during the early May to mid-October period have been recorded consistently by a few select sectors, notably in the Healthcare, Technology and Precious Metals sectors.

clip_image003

clip_image005

 

Observations

The VIX Index (better known as the Fear Index) remained elevated last week and rose slightly by the end of the week.

clip_image006

Seasonal influences for U.S., European and Far East equity indices historically have reached a peak in late April or early May. Canadian equity indices are the exception with a seasonal peak in late May.

clip_image008

clip_image010

clip_image012

clip_image014

Medium term technical indicators for U.S. equity markets (e.g. Percent of S&P 500 stocks trading above their 50 day moving average) moved from intermediate overbought to intermediate neutral last week and have started to trend lower See Barometer chart at the end of this report.

Medium term technical indicators for Canadian equity markets remained intermediate overbought last week and have started to trend lower. See Barometer chart at the end of this report.

Most short term short term momentum indicators for U.S. markets and sectors (20 day moving averages, short term momentum indicators) turned lower last week.

Short term momentum indicators for Canadian markets and sectors were slightly lower lasts week.

Year-over-year consensus earnings for S&P 500 companies were reduced slightly last week in recognition of a greater impact by the coronavirus: 90% of companies have released quarterly results to date. According to FactSet, blended first quarter 2020 earnings have dropped 13.8% (versus a decline of 13.6% last week) and blended revenues increased 0.7% (versus an increase of 0.6% last week). Second quarter 2020 earnings are expected to fall 41.9% (versus a drop of 40.6% last week) and revenues are expected to drop 11.3% (versus a drop of 10.9% last week). Third quarter earnings are expected to fall 23.8% (versus a fall of 23.0% last week) and revenues are expected to decrease 5.5% (versus a decline of 5.2% last week). Fourth quarter earnings are expected to decrease 11.6% (versus a decrease of 11.4% last week) and revenues are expected to decline 1.2%. Earnings for all of 2020 are expected to decrease 19.7% and revenues are expected to decrease 3.4%. Earnings for all of 2021 are expected to increase 27.3% (versus 26.9 last week) and revenues are expected to increase 8.6% (versus 8.5% last week).

 

Economic News This Week

April Housing Starts to be released at 8:30 AM EDT on Tuesday are expected to drop to 908,000 from 1,216,000 in March.

April Canadian Consumer Price Index to be released at 8:30 AM EDT on Wednesday is expected to drop 0.4% versus a decline of 0.6% in March.

May Philly Fed Index to be released at 8:30 AM EDT on Thursday is expected to drop 45.0 versus a decline of 56.6 in April.

April U.S. Existing Home Sales to be released at 10:00 AM EDT on Thursday are expected to drop to 4.30 million units from 5.27 million units in March.

April Leading Economic Indicators to be released at 10:00 AM EDT on Thursday are expected to drop 5.7 versus a decline of 6.7 in March.

March Canadian Retail Sales to be released at 8:30 AM EDT on Friday are expected to fall 10.0% versus a gain of 0.3% in February. Excluding food and energy, March Canadian Retail Sales dropped 5.0% versus a drop of 15.6% in February.

 

Earnings News This Week

Another 26 S&P 500 (including two Dow Jones Industrial companies) are scheduled to report quarterly results this week.

clip_image016

 

Trader’s Corner

Equity Indices and related ETFs

Daily Seasonal/Technical Equity Trends for May 15th 2020

clip_image018

Green: Increase from previous day

Red: Decrease from previous day

 

Commodities

Seasonal/Technical Commodities Trends for May 15th 2020

clip_image020

Green: Increase from previous day

Red: Decrease from previous day

Sectors

Daily Seasonal/Technical Sector Trends for May 15th 2020

clip_image022

Green: Increase from previous day

Red: Decrease from previous day

 

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

clip_image024

 

Technical Notes

WTI Crude oil moved above US$29.13 to US$29.52 on Friday completing a reverse Head & Shoulders pattern.

clip_image025

Silver moved above $16.30 to $17.07 on Friday setting an intermediate uptrend.

clip_image026

Silver stocks responded to the breakout by silver prices. First Majestic Silver moved above US8.70 extending an intermediate uptrend.

clip_image027

Pan American Silver moved above US$22.90 extending an intermediate uptrend.

clip_image028

Silver Miners ETF broke to a three year high.

clip_image029

Gold ETN moved above $164.42 to a seven year high.

clip_image030

Platinum ETN moved above $75.00 setting an intermediate uptrend.

clip_image031

Netflix, a NASDAQ 100 stock moved above $449.52 to an all-time high extending an intermediate uptrend.

clip_image032

 

S&P 500 Momentum Barometer

clip_image033

The Barometer dropped last week from 75.95 to 59.92. It changed from intermediate overbought to intermediate neutral on a move below 60.00 and is trending down.

 

TSX Momentum Barometer

clip_image034

The Barometer dropped last week from 72.32 to 62.50. It remains intermediate overbought and shows early signs of trending down.

 

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

Sponsored By...



6 Responses to “Tech Talk for Monday May 18th 2020”

  1. Tony Says:

    Hi Bernie,

    I will say it like Canuck2000 i want to be 2 feet in the middle. Because i use a 4hour time frame i am more agile and get out sooner and avoid falling off a cliff. Because of this i am able to navigate the storm, as for the news of the virus when i noticed most of my holdings indicators had broken down i simply sold all my holdings. When i bought back i chose to go with stability so i went for the banks convenience stores and nasdaq as they were easy choices. Do my indicators tell me which stock to chose no, but they tell me when to get in or out.

  2. Larry/ON Says:

    Positive Vaccine News and Economic Reopening Driving the Equity Market – Moderna’s positive vaccine trial is stoking the market. Pfizer has a vaccine in development that is being reported in the New England Journal of Medicine that is predicted to be available for use in October. The shorts are quaking in their boots and I think a lot of them are going to throw in the towel driving this market higher. You are getting broad participation this morning in energy and financials which is very positive. IMO just a matter of time for QQQ to take out the Feb high. SPX needs to get above the 200 day which it will now attempt over the next two days.
    NVDA – BMO just put a new $425 target on it and Cramer is predicting blow-out earnings on May 21st. I was hoping for some drop in price to pick up more shares but I doubt that will happen. I looked at the short volume ratio on it and there was no shortage of short selling the last two weeks up to Thursday. Can’t understand it. There is a peak Thursday and a small downtick in the chart Friday. The shorts are now going to stampede out of it

    https://fintel.io/ss/us/nvda

  3. Larry/ON Says:

    Roy – From Friday – I don’t want to offer suggestions on Cramer’s Covid-19 index. These are all new high flyers that I don’t have a proper handle on. It takes some work to figure them out. Some of them are down today which would be logical if we are all sunshine today on economic reopening and a vaccine. Stick with proven, stable, growth and if I was to offer one name it would be MSFT which is going to make a new all-time high soon.

  4. Roy Says:

    Hello Larry/On – Re # 3
    Thanks. You are right. I have owned MSFT for some time. Like what NVDA is doing,but surprised that AMD has not joined in the party today.

  5. Larry/ON Says:

    2955 Resistance Cleared on SPX! It’s so exciting! Gargantuan moves made on some stocks such as US regional banks which would be the most depressed in this Covid-19 world. I’m looking at MS up 7.75%. I stick to my knitting with tech but the value buyers are loading up the truck. CM up 7.42% on US exchange. BNS 8.35%.

  6. Bernie Says:

    Hi Tony,
    Re: #1

    I didn’t think this blog would run today on the holiday. Good to see you comment here, its been awhile!

    Unlike like you I’m just not wired to sell ALL my holdings and sit in cash. I can’t see Canuck2000 selling all either. I’m in this mainly for the growing income stream which provides a part of my retirement funds. My annual income has increased by 6-8% since I started up my RRIF in 2018. In 2015 to 2017 my annual RRSP dividend growth grew to double digits thanks to the double compounding created by reinvesting the dividends. All this without adding in new money since 2012 after retiring the end of 2011. I’ve more than exceeded my retirement goal to make “enough” to fuel my needs and future needs plus pass the legacy on to my wife who will probably outlive me.

    As I said I’m primarily wired for dividend growth but I do monitor my total returns. As for dividend sustainability I’m quite happy with my core holdings and don’t foresee any dividend cuts with them. I am a bit concerned however with my high yield non-core holds. I added them to bump up my overall yield which probably wasn’t such a good idea considering their higher volatility and underperformance in down markets and overall. So far they have maintained their payouts but I don’t feel overly confident with this continuing due to our crazy market volatility. There is a marked difference in performance this YTD between my core holds and my high yielders. As I said earlier the high yielders underperformed my core hold since I purchased them. This year the underperformance has been even more severe than previous. After much thought I’ve decided to sell 12 underperformers, keep my core of 19, hold 1 non-core while its outperforming (a Nasdaq fund), buy 3 more fairly safe mid-yielders and keep the remainder in cash until there is less market uncertainty. My ultimate plan is to hold 20 positions which is down significantly from my current 32.

    Like you I’ve thought about selling all and staying in cash then buy back my core. I just can’t do it (Sell all). There is no certainty that I’ll get my core holds back at cheaper prices. Quite frankly, I don’t care if my portfolio shrinks in capital. I more than reached my goal of enough income and feel the likelihood of a massive hit to the income stream is far less likely than the market falling off the cliff.

Entries RSS Comments RSS Log in