Tech Talk for Monday October 5th 2020

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Editor’s Note: Next Tech Talk report will be released on (Canadian Thanksgiving) Monday October 12th

Pre-opening Comments for Monday October 5th

U.S. equity index futures were higher this morning. S&P 500 futures were up 20 points in pre-opening trade.

AT&T slipped $0.23 to $28.45 after KeyBanc Capital downgraded the stock from Sector Weight to Underweight.

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MyoKardia jumped $83.38 to $221.98 and Bristol Myers eased $0.46 to $58.26 after Bristol Myers offered to acquire MyoKardia in a deal valued at $13.1 billion. Bristol Myers will pay $225 per share cash.

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Square advanced $3.69 to $173.30 after Susquehanna raised its target price from $180 to $195.

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Starbucks gained $0.78 to $87.35 after Oppenheimer added the stock to its actionable buy ideas list.

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EquityClock’s Daily Comment

Following is a link:

http://www.equityclock.com/2020/10/04/stock-market-outlook-for-october-5-2020/

Note seasonality chart on U.S. Non-farm Payrolls.

 

The Bottom Line

Most major equity indices around the world mostly moved higher last week. Greatest influences remain growing evidence of a second wave of the coronavirus (negative) and possible approval of a vaccine (positive). Momentum indicators for North American equity markets increased last week from intermediate oversold to intermediate neutral levels. The VIX Index remained elevated. News that President Trump has contacted COVID 19 added to volatility on Friday. Weakest four week period in the year for most equity market indices around the world is between mid-September 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) showing volatility by the S&P 500 Index remained elevated last week. It increased from 26.38% to 27.63%

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Ditto for VXN showing volatility by the NASDAQ 100 Index, up 1.51 to 36.44%.

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The Dow Jones Industrial Average and S&P 500 Index during U.S. Presidential Election years are following their historic trend. They move lower from early September to the third week of October followed by a move higher after the election.

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The TSX Composite Index also is following its seasonal pattern this year. History shows the Index moving lower on a real basis from the beginning of September to the third week of October. On a relative basis, the Index moves lower from the beginning of September to mid-December.

 

S&P/TSX Composite Index Seasonal Chart

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$TSX Relative to the S&P 500
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Seasonal influences turned positive on a real and relative basis near the end of September for the Shanghai Composite Index, the Hang Seng Index, DAX Index, Australia Ordinaries Index, CAC Index, London FT Index (and related ETFs). Last week, Far East equity markets mostly were mixed/slightly lower while European and emerging equity markets mostly were stronger with gains greater than U.S. equity markets.

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Seasonality for the Canadian and U.S. technology sectors and related ETFs turned positive on schedule on a real and relative basis near the end of September. Technology stocks and related ETFs (e.g. XIT.TO and XLK) recorded significant gains last week.

Seasonality for grain prices (Wheat, Corn and Soybeans), Agribusiness equities and related ETFs turned positive on schedule near the end of September. Grain prices and related exchange traded notes recorded significant gains last week.

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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 higher last week. It changed from intermediate oversold to intermediate neutral. See Barometer chart at the end of this report.

Medium term technical indicator for Canadian equity markets also moved higher last week It changed from intermediate oversold to intermediate neutral. See Barometer chart at the end of this report.

More short term short term momentum indicators for U.S. markets/commodities/sectors (20 day moving averages, short term momentum indicators) increased last week.

Short term momentum indicators for Canadian markets/sectors were mostly unchanged last week.

Year-over-year 2020 consensus earnings and revenue declines by S&P 500 companies ebbed slightly again last west. According to www.FactSet.com, third quarter earnings are expected to fall 21.0% (versus previous decline of 21.2%) and revenues are expected to slip 3.6% (versus a previous decline of 3.8% last week). Fourth quarter earnings are expected to drop 12.7% and revenues are expected to decline 1.1% (versus a previous decline of 1.2%). Earnings for all of 2020 are expected to fall 18.0% and revenues are expected to decline 2.7%.

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, but at a slightly lower rate than the previous week. According to FactSet, earnings in the first quarter of 2021 are expected to increase 12.6% (versus previous 12.8% increase) and revenues are expected to increase 3.1%.. Earnings in the second quarter are expected to increase 43.8% (versus previous 44.1%) and revenues are expected to increase 13.7%. Earnings for all of 2021 are expected to increase 25.7% (versus previous 26.0%) and revenues are expected to increase 8.0% (versus previous 8.1%)

 

Economic News This Week

September Non-manufacturing ISM to be released at 10:00 AM EDT on Monday is expected to dip to 56.3 from 56.9 in August

August U.S. Trade Deficit to be released at 8:30 AM EDT on Tuesday is expected to increase to $66.30 billion from $63.60 billion in July.

August Canadian Trade Deficit to be released at 8:30 AM EDT on Tuesday is expected to increase to $2.50 billion from $2.45 billion in July.

FOMC Meeting Minutes are released at 2:00 PM EDT on Wednesday. No change in the Fed Fund rate is expected.

September Canadian Housing Starts to be released at 8:15 AM EDT on Thursday are expected to drop to 220,000 from 262,400 in August.

September Canadian Non-farm Payrolls to be released at 8:30 AM EDT on Friday are expected to increase to 275,000 from 245,000 in August. September Canadian Unemployment Rate is expected to slip to 10.1% from10.2% in August.

 

Selected Earnings News This Week

Four S&P 500 companies are scheduled to release quarterly results this week.

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Trader’s Corner

Daily Seasonal/Technical Equity Trends for October 2nd 2020

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Green: Increase from previous day

Red: Decrease from previous day

 

Commodities

Seasonal/Technical Commodities Trends for October 2nd 2020

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Green: Increase from previous day

Red: Decrease from previous day

 

Sectors

Daily Seasonal/Technical Sector Trends for October 2nd 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 for Friday October 2nd

Crude Oil ETN (USO) moved below $26.27 extending an intermediate downtrend.

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Duke Energy (DUK), an S&P 100 stock moved above $91.14 resuming an intermediate uptrend.

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S&P 500 Momentum Barometer

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The Barometer increased 2.00 on Friday and 18.84 last week to 53.11. It changed from intermediate oversold to intermediate neutral on a recovery above 40.00

 

TSX Momentum Barometer

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The Barometer slipped 1.40 on Friday, but gained 9.31 last week to 46.05. It changed from intermediate oversold to intermediate neutral on a recovery above 40.00.

 

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

MoneyShowNovember62020




5 Responses to “Tech Talk for Monday October 5th 2020”

  1. Larry/ON Says:

    No market drop because of Trump’s illness. It was a one day knee jerk reaction on Friday. The market wants to go up. IMO we have seen the worst of the September-October sell-off and downside is limited. I was buying Friday and this morning.

  2. Jay/Son Says:

    US market up as polls indicate a Trump trounce (53% Biden; 39% Trump + 5/6 Senate Seat flips for Democrats) thereby limiting chances of a court challenge. 2% upside & 15% downside $SPX at current levels. Stability needed to push markets higher

  3. tony Says:

    Good morning,

    Just tought it would be nice to recall previous posts.

    On the September 24th, I said the markets were bearish and kept some dry powder as the market could continue to fall I was suggesting october 16th as turn around.

    On september 30th I said: the market is off to the races so bought some nasdaq.

    Since september 30th indicators have been positive and price movement has been fairly stable looks like the bulls have backed up the trucks and are loading them up.

    will it continue only time will tell but buying here is a pretty safe bet as the 50ma is not to far below.

  4. Larry/ON Says:

    Look at the drop late yesterday on Trump’s stimulus talks suspension and the snap back today when he said “Oh I didn’t mean that. I just meant….” Yeah the usual backtracking. The adults and the market drop convinced Trump that his roid rage decision was a self-destructive mistake and he reversed it. IMO the market is comfortable with a Biden win which continues to be the likely scenario. A contested election will be settled by the courts. I think that bogeyman may be overdone.

  5. Ace Says:

    awfully quiet these days. Almost time to Trump to tweet about stock market strength to signal a top :+)

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