Tech Talk for Monday January 4th 2021

Daily Reports Add comments

Morning Technical Notes for Monday January 4th

Caterpillar (CAT), a Dow Jones Industrial Average stock moved above $183.81 to an all-time high extending an intermediate uptrend.

clip_image001[5]

Blackrock (BLK), an S&P 100 stock moved above $721.82 to an all-time high extending an intermediate uptrend.

clip_image002[3]

Semiconductor iShares (SOXX) moved above $383.27 to an all-time high extending an intermediate uptrend.

clip_image003[5]

Silver equity ETF moved above $47.67 extending an intermediate uptrend. Responding to higher silver prices!

clip_image004[3]

Hecla Mining (HL) led the Silver equity sector higher by moving above $6.78 to a four year high.

clip_image005

Kinross Gold (KGC) , a TSX 60 stock moved above US $7.84 completing a double bottom pattern. Responding to higher gold prices!

clip_image006[1]

Pre-opening Comments for Monday January 4th

U.S. equity index futures were higher this morning. S&P 500 futures were up 16 points in pre-opening trade.

Precious metal prices were sharply higher in overnight trade following extended weakness by the U.S. Dollar. Gold jumped $42.70 to $1938.20 per ounce. Silver advanced $0.99 to $27.40. Platinum advanced $34.20 to a three year high at $1113.40.

clip_image001

clip_image002[1]

Brookfield Property Partners (BPY) advanced $2.03 to $16.50 after receiving an offer to purchase remainder of the company by Brookfield Asset Management for US $16.50 per share in cash or shares. Value of the offer is $5.9 billion.

clip_image003

Centene has offered to acquire Magellan Health for $95 cash per share. Value of the offer is $2.2 billion. Magellan advanced $10.26 to $93.10.

clip_image004[1]

 

EquityClock’s Daily Comment

Following is a link:

http://www.equityclock.com/2020/12/31/stock-market-outlook-for-january-4-2021/

Technical Scoop

Thank you to David Chapman and www.EnrichedInvesting.com for a link to their weekly comment. Headline reads, “Global recession, two gains, debt fuel, liquidity injections, low rates, blow off, election controversy, job gains”. Following is the link:

https://www.enrichedinvesting.com/wp-content/uploads/2021/01/Global-recession-two-gains-debt-fuel-liquidity-injections-low-rates-blow-off-election-controversy-job-signs-.pdf

 

The Bottom Line

Most major equity indices around the world moved slightly higher or slightly lower last week. Greatest influences remain growing evidence of a second wave of the coronavirus (negative) and timing of distribution of a vaccine (positive)

 

Observations

The Dow Jones Industrial Average and S&P 500 Index are following their historic trend after a U.S. Presidential Election. The strongest 12 week period during the four year U.S. Presidential Cycle since 1950 has occurred from U.S. Presidential Election Day to Inauguration Day on January 20th. Since Election Day last year on November 3rd , the Dow Jones Industrial Average has advanced 11.1% and the S&P 500 Index has gained 11.5%%. The TSX Composite Index has increased.9.4%.clip_image002

What about this time? Biden was confirmed as President, Republicans maintained control of the Senate with a smaller majority and Democrats maintained control of the House of Representatives with a smaller majority. Net result is political gridlock for the next two years, a scenario that historically has been mildly bullish for U.S. equity markets

A caveat to this observation! The run off Georgia Senate Elections on Tuesday January 5th for two seats could have a significant impact on U.S. equity prices. After recent elections, the Republicans controlled 50 seats and the Democrats controlled 48 seats. Both Georgia seats currently are held by Republicans. However, recent polls suggest that the battle between the Republican and Democrat candidates remains extremely tight with the Democrats leading in both seats. Latest poll results are available at https://projects.fivethirtyeight.com/georgia-senate-polls/ If Democrats win both seats, the Republicans will control 50 seats, the Democrats will control 50 seats and Vice President Kamala Harris will have the power to break voting ties in the Senate. Effectively, the Democrats will gain control over the Senate and will be able to pursue a “progressive” agenda including higher personal and corporate taxes, more regulations, higher government spending and more control over the economy. U.S. equity markets initially will respond to Democrat control by moving lower and gold price will move higher.

The “Santa Claus rally” is working so far. The rally period normally occurs from the close on December 14th to the close on January 6th. The S&P 500 Index has gained in 22 of the past 30 periods since 1990 for an average return per period of 1.53%. The TSX Composite has gained in 25 of the past 30 periods for an average return per period of 2.13%. This year, the S&P 500 Index has added 2.98% to date and the TSX Composite Index has gained 0.26% to date. Reasons for the Santa Claus rally include yearend “window dressing” by institutional investors, favourable comments by investment dealers about prospects for next year, the end of tax loss selling pressures by individual investors, start of investment of yearend bonuses received by individual investors (frequently placed into RRSPs in Canada and 401K accounts in the U.S.) and a buoyant investment attitude by all investors related to the Christmas/New Year season.

What about the “Santa Claus Hangover? Following is a link to a recent video by Larry Williams that explains the “Santa Claus Rally” as well as the “Santa Claus Hangover” in the U.S. equity market:

Santa Claus Rally Exposed | Larry Williams | Real Trading Special (12.07.20) – YouTube

On average, the S&P 500 Index during the past 20 periods from January 7th to February 14th has dropped 1.5% per period. Effectively, all of the gains recorded during the Santa Claus rally period were lost during the Santa Claus Hangover period. This is the time of year when U.S. consumers and investors are paying down debts accrued during the Santa Claus Rally period.

clip_image004

Note that the “Santa Claus Hangover” normally does not happen in the Canadian equity market. The main reason: Canadian investors focus on contributing to their RRSPs during the first 60 days in the New Year and subsequently invest more funds into the equity market. Strongest period in the year for the TSX Composite Index relative to the S&P 500 Index is from mid-December to the first week in March. As indicated in the chart below, average gain per period for the TSX Composite Index relative to the S&P 500 Index during the past 20 periods was 3.3%.

clip_image006

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 slightly higher last week. It remained extremely intermediate overbought above 80.00%. See Barometer chart at the end of this report.

Medium term technical indicator for Canadian equity markets moved slightly lower last week. It remained intermediate 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 mixed last week and remain elevated. Commodity and commodity equity prices were helped by U.S. Dollar weakness.

Short term momentum indicators for Canadian markets/sectors mainly moved lower from elevated levels last week.

Economic News This Week

November Construction Spending to be released at 10:00 AM EST on Monday is expected to increase 0.9% versus a gain of 1.3% in October.

December Manufacturing ISM to be released at 10:00 AM EST on Tuesday is expected to slip to 56.5 from 57.5 in November.

November Factory Orders to be released at 10:00 AM EST on Wednesday are expected to increase 0.7% versus a gain of 1.0% in October.

November U.S. Trade Deficit to be released at 8:30 AM EST on Thursday is expected to increase to $64.20 billion from $63.10 billion in October.

November Canadian Trade Deficit to be released at 8:30 AM EST on Thursday is expected to ease to $3.50 billion from $3.76 billion in October.

December Non-Manufacturing ISM to be released at 10:00 AM EST on Thursday is expected to increase to 54.7 from 52.7 in November.

December Non-farm Payrolls to be released at 8:30 EST on Friday are expected to drop to 100,000 from 245,000 in November. December Unemployment Rate is expected to increase to 6.8% from 6.7% in November. December Average Hourly Earnings are expected to increase 0.2% versus a gain of 0.2% in November.

Canadian December Employment to be released at 8:30 AM EST on Friday is expected to drop 20,000 versus a gain of 62,100 in November. December Unemployment Rate is expected to increase to 8.6% from 8.5% in November

 

Earnings News This Week

clip_image008

 

Trader’s Corner

Notable equity index gainers last week were Far East and Emerging markets.

Equity Indices and Related ETFs

Daily Seasonal/Technical Equity Trends for December 31st 2020

clip_image010

Green: Increase from previous day

Red: Decrease from previous day

 

Commodities

Daily Seasonal/Technical Commodities Trends for December 31st 2020

clip_image012

Green: Increase from previous day

Red: Decrease from previous day

Sectors

Daily Seasonal/Technical Sector Trends for December 31st 2020

clip_image014

Green: Increase from previous day

Red: Decrease from previous day

 

Please note that seasonality ratings on several equity indices and several U.S. sectors are scheduled to change on January 7th. Most of the changes are downgrades from Positive to Neutral.

 

Changes by Major Equity Indices in 2020

clip_image016

Cdn. Dollar advanced during the year from US 76.82 cents to US 78.51 cents

*According to CNBC, 57% of the gain by the NASDAQ Composite Index in 2020 came from three stocks: Amazon, Microsoft and Facebook

 

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_image018


Technical Notes for Thursday December 31st

Gold ETN (GLD) moved above $177.87 setting a short term uptrend.

clip_image019

‘Tis the season for gold prices to move higher on a real and relative basis to near the end of February!

clip_image021

Loblaw Companies (L), a TSX 60 stock moved below $62.80 extending an intermediate downtrend.

clip_image022

Micron (MU), a NASDAQ 100 stock moved above $74.61 to an all-time high extending an intermediate uptrend.

clip_image023

Bank of New York Mellon (BK), an S&P 100 stock moved above $42.44 resuming an intermediate uptrend.

clip_image024

 

S&P 500 Momentum Barometer

clip_image025

The Barometer added 4.21 on Friday and 4.81 last week to 86.67. It remains extremely intermediate overbought by holding above 80.00.

 

TSX Momentum Barometer

clip_image026

The Barometer slipped 1.90 on Friday and dropped 1.81 last week. It remains intermediate overbought.

 

In this, Our first letter of the New Year, please accept our wishes for a  Happy healthy and prosperous New Year ahead!  

 

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




11 Responses to “Tech Talk for Monday January 4th 2021”

  1. dave/ab Says:

    Happy New years everyone.

    Interesting news this morning with Brookfield Asset Management Inc. BAM-A-T
    has offered US$5.9 billion to buy the remaining stake in Brookfield Property BPY-UN that it does not already own.

  2. Larry/ON Says:

    Base metal miners continue to perform. Overall market direction has no influence today. GLD gapped higher seeming to break the downtrend but I would be wary of a very short-term reversal looking at a hanging man candle stick presently.

  3. Larry/ON Says:

    Batten down the hatches. Tomorrow is election day for the two seats in Georgia. In an overbought market how much upside is there if Congress remains divided and how much downside risk is there if the Dems take both seats?

  4. Ron/BC Says:

    I dumped my XGD.to and IAU with very nice profits. Everyone else can have the rest………I have little to no belief in the markets direction anymore so just take what I can get when it’s on the table…..

  5. Bernie Says:

    Just being the messenger here – Interesting perk battle going on between Questrade & Qtrade:
    https://milliondollarjourney.com/questrade-vs-qtrade.htm

  6. still_learning Says:

    I jumped into XGD.to just before Xmas, so I’m hangin in with it for a while. My indicators show it is gaining some strength. Nice pop today, but ….

  7. Mary Says:

    Ron/BC

    Happy New Year and Congrats! When I saw gold was up today thought of your “homeless money”

  8. Ron/BC Says:

    Mary

    Happy New Year right back at you! Yes, my homeless money found a very brief home for a few days and did well. Need to find another home for it now……….all the best in 2021!

  9. Paula Says:

    Ron/BC
    I was interested to read that you sold your gold stock positions on the rally today. That is what I usually would have done but my new year’s resolution (one of them) is to stay with winning positions and ride the trend. So for now, I am still holding GDX.
    You say you have “little to no belief in the markets direction anymore”. I could be wrong, but I don’t recall you ever having such a belief. LOL

    Happy New Year and good luck to all!

  10. still_learning Says:

    Paula, nice shot at Ron …smile. I’m with you, riding my XGD for a while.

    You might be interested in this guy’s comments on gold?
    https://blog.smartmoneytrackerpremium.com/

    regards, Bernie/Lethbridge

  11. dave/ab Says:

    I like Don’s chart above on Gold futures relative to S&P 500. Here is an excellent article with a chart from the London Bullion Market Association. Gold might have some legs here

    https://seekingalpha.com/article/4391248-gld-buy-dip-in-gold?utm_medium=email&utm_source=seeking_alpha#alt1&mail_subject=gld-gld-buy-the-dip-in-gold&utm_campaign=rta-stock-article&utm_content=link-2

Entries RSS Comments RSS Log in