Tech Talk for Tuesday September 8th 2020

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Morning Technical Notes for September 8th

Crude Oil ETN (USO) moved below $26.82 extending an intermediate downtrend.

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Energy SPDRs (XLE) moved below $34.24 completing a Head & Shoulders pattern.

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Chevron (CVX), a Dow Jones Industrial stock moved below $80.35 completing a Head & Shoulders pattern.

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S&P Oil and Gas Exploration SPDRs moved below $47.19 completing a Head & Shoulders pattern.

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First Trust Natural Gas ETF (FCG) moved below $6.80 completing a Head & Shoulders pattern.

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KraftHeinz (KHC), an S&P 100 stock moved below $32.98 completing a double top pattern.

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Vertex (VRTX), a NASDAQ 100 stock moved below $261.30 completing a Head & Shoulders pattern.

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AutoDesk (ADSK), a NASDAQ 100 stock moved below $226.55 completing a double top pattern.

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ASML (ASML), a NASDAQ 100 stock moved below $350.74 completing a double top pattern.

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KLA Tencor (KLAC), a NASDAQ 100 stock moved below $186.34 extending an intermediate downtrend.

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Gold ETN (GLD) moved below $179.04 completing a double top pattern.

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Franco-Nevada (FNV), a TSX 60 stock moved below US$141.26 setting an intermediate downtrend

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Pre-opening Comments for Tuesday September 8th

U.S. equity index futures were lower this morning. S&P 500 futures were down 45 points in pre-opening trade. Index futures responded to comments by pharmaceutical companies that a vaccine for COVID 19 is expected to be delayed until early 2021.

Crude oil dropped $2.09 to $37.68 in pre-opening trade. Energy equities and related Exchange Traded Funds are expected to follow.

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Tesla dropped $52.26 to $364.20 after the stock unexpectedly was not added to the S&P 500 Index.

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General Motors moved above $31.66 to $32.36 extending an intermediate uptrend after the company took an 11% stake and a $2 billion equity interest in Nikola, an electronic truck manufacturer.

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EquityClock’s Daily Comment

Following is a link:

http://www.equityclock.com/2020/09/06/stock-market-outlook-for-september-8-2020/

Note seasonality charts on U.S. Non-farm Payrolls and Canadian Employment.

 

Technical Scoop

Thank you to David Chapman and www.EnrichedInvesting.com for a link to the following weekly report. Headline reads, “Highs reversed, verification needed, cruel September, president’s fed, jobs lost, gold caught, negative yields” Following is the link:

http://enrichedinvesting.com/wp-content/uploads/2020/09/Highs-reversed-verification-needed-cruel-September-president%E2%80%99s-fed-jobs-lost-gold-caught-negative-yields.pdf

 

The Canadian Technician

Greg Schnell discusses “The Big Guns at 50”. The comment discusses the importance of holding the 50 day moving average by major U.S. stocks.

Editor’s Note: Many major U.S. equities will break below their 50 day moving average at the opening today. Following is the link:

https://stockcharts.com/articles/canada/2020/09/the-big-guns-at-50-899.html

 

Major equity indices around the world (except Japan) moved significantly lower last week.

Greatest influences remain a possible second wave of the coronavirus (negative) and possible approval of a vaccine (positive). Momentum indicators for North American equity markets remained intermediate overbought and past their peak. The VIX Index remained elevated and moving higher. It typically moves higher between now and early October. Seasonal influences for most equity markets around the world tend to be slightly negative between now and mid-October (particularly the TSX Composite Index and U.S. equity indices during U.S. Presidential election years). Look for volatile, choppy equity markets between now and at least mid-October.

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Observations

The VIX Index (better known as the Fear Index) moved sharply higher last week in line with seasonal trends. It moved above its 20, 50 and 200 day moving averages.

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The Dow Jones Industrial Average during U.S. Presidential Election years has a history of moving lower from early September to the end of October and moving higher after the election.

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The TSX Composite Index has a history of moving lower on a real and relative basis from the beginning of September to at least the middle of October.

S&P/TSX Composite Index Seasonal Chart

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$TSX Relative to the S&P 500
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Medium term technical indicator for U.S. equity markets (e.g. Percent of S&P 500 stocks trading above their 50 day moving average) moved lower last week. It remains intermediate overbought. See Barometer chart at the end of this report.

Medium term technical indicator for Canadian equity markets slightly also moved lower last week. It remains overbought. See Barometer chart at the end of this report.

Short term short term momentum indicators for U.S. markets/commodities/sectors (20 day moving averages, short term momentum indicators) moved substantially lower last week

Short term momentum indicators for Canadian markets/sectors also moved substantially lower last week.

Year-over-year 2020 consensus earnings declines by S&P 500 companies have ebbed slightly last week’s report. Third quarter earnings are expected to fall 22.4% (versus previous 22.5%) and revenues are expected to decrease 4.1%. Fourth quarter earnings are expected to drop 13.0% (versus previous 13.1%) and revenues are expected to decline 1.4%. Earnings for all of 2020 are expected to fall 18.5% (versus previous 18.6%) and revenues are expected to decline 2.9%.

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 of 2021 are expected to increase 13.2% (versus previous 13.1%) and revenues are expected to increase 3.1%. Earnings for all of 2021 are expected to increase 26.3% (versus previous 26.2%) and revenues are expected to increase 8.1%.

 

Economic News This Week

Bank of Canada updates its Overnight Lending Rate for major Canadian banks on Wednesday at 10:00 AM EDT. No change in its 0.25% rate is expected.

August U.S. Producer Price Index to be released at 8:30 AM EDT on Thursday is expected to increase 0.2% versus a gain of 0.6% in July. Excluding food and energy, August Producer Price Index is expected to increase 0.2% versus a gain of 0.5% in July.

August U.S. Consumer Price Index to be released at 8:30 AM EDT on Friday is expected to increase 0.3% versus a gain of 0.6% in July. Excluding food and energy, August Producer Price Index is expected to increase 0.2% versus a gain of 0.6% in July

 

Selected Earnings News This Week

Two S&P 500 companies are scheduled to release quarterly earnings this week.

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Trader’s Corner

Equity Indices and related ETFs

Daily Seasonal/Technical Equity Trends for September 4th 2020

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Green: Increase from previous day

Red: Decrease from previous day

Commodities

Seasonal/Technical Commodities Trends for September 4th 2020

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Green: Increase from previous day

Red: Decrease from previous day

Sectors

Daily Seasonal/Technical Sector Trends for September 4th 2020

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Green: Increase from previous day

Red: Decrease from previous day

The Canadian Technician

Greg Schnell discusses “Changes in the Dow” Following is a link:

https://stockcharts.com/articles/canada/2020/09/changes-in-the-dow-775.html

 

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 for Friday

Technology stocks on both sides of the border recorded significant technical damage on Friday.

Shopify (SHOP), a TSX 60 stock moved below $1285.00 completing a double top pattern.

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CGI Group (GIB.A), a TSX stock moved below $90.17 completing a double top pattern.

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Open Text (OTEX), a TSX 60 stock moved below US$43.23 completing a double top pattern.

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Canadian Technology iShares (XIT) moved below $39.88 completing a double top pattern.

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Illumina (ILMN), a NASDAQ 100 stock moved below $339.29 completing a Head & Shoulders pattern.

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Cadence (CDNS), a NASDAQ 100 stock moved below $104.68 setting an intermediate downtrend.

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Activision (ATVI), a NASDAQ 100 stock moved below $78.70 completing a double top pattern.

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CoStar Group (CSGP), a NASDAQ 100 stock moved below $803.80 completing a double top pattern.

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Citrix Systems (CTXS), a NASDAQ 100 stock moved below $135.36 completing a Head & Shoulders pattern.

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PayPal (PYPL), a NASDAQ 100 stock moved below $186.33 completing a double top pattern

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Check Point (CHKP), a NASDAQ 100 stock moved below $118.40 completing a double top pattern.

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T-Mobile (TMUS), a NASDAQ 100 stock moved below $113.28 completing a double top pattern.

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IDEXX Labs (IDXX), a NASDAQ 100 stock moved below $372.18 completing a double top pattern.

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Seattle Genetics (SGEN), a NASDAQ 100 stock moved below $143.95 extending an intermediate downtrend

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BlackRock (BLK), an S&P 100 stock moved below $560.63 setting an intermediate downtrend

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Franco-Nevada (FNV), a TSX 60 stock moved below Cdn$187.58 setting an intermediate downtrend.

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S&P 500 Momentum Barometer

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The Barometer slipped 1.40 on Friday and 10.02 last week to 72.34. It remains intermediate overbought and rolling over.

 

TSX Momentum Barometer

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The Barometer plunged 9.88 on Friday and 21.41 last week to 54.07. It changed from intermediate overbought to intermediate neutral on Friday on a drop below 60.00. Its intermediate downtrend has been established.

 

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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