Tech Talk for Monday July 13th 2020

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Morning Technical Notes for July 13th

Silver equities and related ETFs (SIL) continue moving higher. First Majestic Silver (FR) moved above $14.72 Cdn. extending an intermediate uptrend.

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Equal Weight Global Metals ETF (ZMT) moved above $35.86 Cdn. extending an intermediate uptrend.

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Auto ETF (CARZ) moved above $34.23 extending an intermediate uptrend.

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Check Point (CHKP), a NASDAQ 100 stock moved above $119.67 extending an intermediate uptrend

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Procter & Gamble (PG), a Dow Jones Industrial stock moved above $124.16 extending an intermediate uptrend.

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Pre-opening Comments for Monday July 13th

U.S. equity index futures were higher this morning. S&P 500 futures were up 22 points in pre-opening trade.

Pepsico added $3.85 to $138.31 after reporting higher than consensus second quarter revenues earnings.

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Maxim Integrated jumped $12.88 to $76.97 and Analog Devices added $3.02 to 127.50 on news that Maxim Integrated is in talks to be purchased by Analog Devices in an all-stock deal valued at $21 billion.

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Pfizer gained $1.05 to $34.90 after the FDA gave fast track approval for one of Pfizer’s COVID 19 vaccines to enter into Phase 3 testing.

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Domino’s Pizza advanced $8.68 to $406.99 after RBC Capital raised its target price from $415 to $435.

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EquityClock’s Daily Market Comment

Following is a link:

http://www.equityclock.com/2020/07/12/stock-market-outlook-for-july-13-2020/

Note seasonality chart on Canadian Employment.

The Bottom Line

Most equity indices around the world moved higher last week thanks to strength recorded on Friday. Notably higher were Chinese equity indices, Emerging Markets indices (heavily weighted in Chinese equities) and related Exchange Traded Funds. However, most equity indices for Europe, Japan and North America remain below their peak reached on or about June 9th. Concern about a second wave of the coronavirus (negative) and possibility of approval of a vaccine by early November (positive) continue to influence equity prices. Technical indicators for North American equity markets remain intermediate overbought and past their peak. The VIX Index remains elevated, typical for North American equity markets between late-May and mid-October.

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Observations

The VIX Index (better known as the Fear Index) remained elevated last week.

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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) remained overbought last week and have passed their intermediate peak. See Barometer chart at the end of this report.

Medium term technical indicators for Canadian equity markets remained overbought last week and have passed their intermediate peak. 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) were virtually unchanged last week.

Short term momentum indicators for Cdn. markets/sectors also were unchanged last week.

Year-over-year consensus earnings for S&P 500 companies for the second quarter moved very slightly lower last week, but slightly higher for future quarters in 2020 According to FactSet, second quarter 2020 earnings are expected to fall 44.6% (versus a drop of 43.8% last week) and revenues are expected to drop 10.8% (versus 11.1% last week). Third quarter earnings are expected to fall 24.9% (versus 25.2% last week) and revenues are expected to decrease 5.4% (versus 5.5% last week). Fourth quarter earnings are expected to drop 12.4% (versus 12.7% last week) and revenues are expected to decline 1.7%. Earnings for all of 2020 are expected to decrease 21.5% and revenues are expected to decline 3.8% (versus 3.9% last week).

Summer rally this year? North American equity markets have a history of moving higher from the last week in June to the third week in July in anticipation of strong and improving second quarter corporate results. North American equity markets have followed their traditional pattern to date. However, favourable anticipation of second quarter corporate results will be given a real test starting on Tuesday when major U.S. money center banks begin to report substantial year-over-year declines. Second quarter earnings for all S&P 500 companies are expected to drop 44.6%. Second quarter earnings by TSX 60 companies are expected to drop 20.5%. The current summer rally has a high probability of ending this week.

Consensus estimates for earnings and revenues by S&P 500 companies turn positive on a year-over-year basis in the first quarter of 2021. According to FactSet, earnings in the first quarter are expected to increase 13.0% (versus 13.0% last week) and revenues are expected to increase 2.9%. Earnings for all of 2021 are expected to increase 28.7% (versus 28.2% last week) and revenues are expected to increase 8.5%.

 

Economic News This Week

U.S. June Consumer Price Index to be released at 8:30 AM EDT on Tuesday is expected to increase 0.5% versus a decline of 0.1% in May. Excluding food and energy, June CPI is expected to increase 0.1% versus a decline of 0.1% in May.

July Empire State Manufacturing Survey to be released at 8:30 AM EDT on Wednesday is expected to increase to 7.85 from -0.20 in June.

Cdn. June Consumer Price Index to be released at 8:30 AM EDT on Wednesday is expected to increase 0.7% versus a gain of 0.3% in May.

U.S. June Capacity Utilization to be released at 9:15 AM EDT on Wednesday is expected to improve to 67.4 from 64.8 in May. June Industrial Production is expected to increase 4.3% versus a gain of 1.4% in May.

Bank of Canada releases its Monetary Policy Report at 10:00 AM EDT on Wednesday. Press conference with the new governor is scheduled at 11:15 AM EDT. No change at 0.25% in Overnight Lending Rate to major banks is expected.

Beige Book is released at 2:00 PM EDT on Wednesday.

U.S. June Retail Sales to be released at 8:30 AM EDT on Thursday are expected to increase 4.9% versus a gain of 17.7% in May. Excluding auto sales, June Retail Sales are expected to increase 4.5% versus a gain of 12.4% in May.

July Philly Fed Index to be released at 8:30 AM EDT on Thursday is expected to drop to 20.0 from 27.5 in June.

May Business Inventories to be released at 10:00 AM EDT on Thursday are expected to drop 2.1% versus a decline of 1.3% in April.

U.S. June Housing Starts to be released at 8:30 AM EDT on Friday are expected to increase to 1,150 million units from 0.974 million units in May.

Michigan Consumer Sentiment for July to be released at 10:00 AM EDT is expected to improve to 79.1 from 78.1 in June.

 

Selected Earnings Reports This Week

Focuses this week are on reports by U.S. money center banks. Thirty five S&P 500 companies (including four Dow Jones Industrial companies) are scheduled to report.

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Trader’s Corner

Equity Indices and related ETFs

Daily Seasonal/Technical Equity Trends for July 10th 2020

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Green: Increase from previous day

Red: Decrease from previous day

Commodities

Seasonal/Technical Commodities Trends for July 10th 2020

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Green: Increase from previous day

Red: Decrease from previous day

 

Sectors

Daily Seasonal/Technical Sector Trends for July 10th 2020

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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

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Technical Notes

Waste Connections (WCN), a TSX 60 stock moved above $132.29 extending an intermediate uptrend.

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On Friday, the S&P 500 Index completed a “Golden Cross” when its 50 day moving average moved above its 200 day moving average. Some market analysts consider the Golden Cross as a bullish intermediate indicator. Look for lots of media comment this week on the phenomenon. Back testing of the indicator over a long period of time generates mixed results.

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Alphabet (GOOG and GOOGL) a NASDAQ 100 stock moved above $1532.11 and $1530.74 respectively to all-time highs extending an intermediate uptrend.

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Consumer Discretionary SPDRs (XLY) moved above $132.99 to an all-time high extending an intermediate uptrend.

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S&P 500 Momentum Barometer

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The Barometer dropped last week from 69.94 to 63.53. It remains intermediate overbought and trending down.

 

TSX Momentum Barometer

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The Barometer dropped last week from 74.53 to 66/82. It remains intermediate overbought and 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

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3 Responses to “Tech Talk for Monday July 13th 2020”

  1. Larry/ON Says:

    CNN Market Sentiment Indicator Now At The Low End of Greed 59. SP500 is close to pushing up against the 3233 resistance point and it is trading at the top end of the Bollinger Band. The Bollinger Band, however, is beginning to open up rather than form a flat top resistance line. RSI is not overbought yet at 61. There is a lot of money in “defensive assets” such as T-Bills that has the potential to move into equities supporting higher prices. We could easily continue a sideways zig-zag movement with a drift down to 3000 support followed by another attempt at cracking 3233 or momentum could continue. Place your bets! I have no idea I just stay in tech in companies I know are growing their businesses.

  2. Larry/ON Says:

    AAPL – The magnetic pull of the $400 target is drawing it closer as it hit $397.48 so far today. Maybe it clears $400 tomorrow.

  3. Larry/ON Says:

    AAPL – As Jim Cramer said “Do not trade AAPL.” Hold AAPL.

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