Tech Talk for Monday May 16th 2022

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Pre-opening Comments for Monday May 16th

U.S. equity index futures were lower this morning. S&P 500 futures were down 3 points in pre-opening trade. Index futures responded partially to a continuing slowdown in China’s economy due to efforts to slow COVID 19 infections.

The Wheat continuous futures contract added $50.20 to $1,228.00 after India banned wheat exports.

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McDonald’s slipped $1.04 to $244.00 after the company announced plans to exit operations in Russia. The company is expected to take a non-recurring $1.2-$1.4 billion charge following the exit.

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Netflix added $13.33 to $187.64 after Wedbush upgraded the stock.

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NetEase, Baidu and JD.com moved higher after JP Morgan upgraded selected China based equities listed on U.S. exchanges. NetEase advanced $0.34 to $92.80 after JP Morgan upgraded the stock from Underperform to Outperform.

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EquityClock’s Daily Comment

Headline reads “There are still questions over what the next week may deliver, but the technicals are certainly sufficient to take a stab back in risk (stocks)”. Following is a link:

http://www.equityclock.com/2022/05/14/stock-market-outlook-for-may-16-2022/

The Bottom Line

First technical sign of start of a possible intermediate bottom appeared on Friday in North American equity markets. More base building is needed to confirm start of at least a shallow summer rally that normally occurrs during the second year of the U.S. Presidential cycle from late May to mid-August.

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Observations

The VIX Index remains elevated, but showed early signs of peaking late last week, typical start of an intermediate bottoming phase for broadly based U.S. equity indices.

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The CNN Fear & Greed Index recovered from 6 to 12 on Friday, first signs that “Extreme Fear” is moderating. See Fear and Greed Index – Investor Sentiment | CNN

Strength in North American equity markets was triggered by comments by Federal Reserve Chairman Powell implying that reductions in the Federal Reserve’s balance sheet and increases in the Fed Fund rate by 50 basis points per FOMC meeting will proceed as planned starting on June 1st. North American equity markets responded with the anticipation that no negative surprises to the process are likely to happen. During the next month North American equity markets are likely to respond significantly (one way or the other) to comments by key individual FOMC members when they offer guidelines prior to release of the next FOMC decision scheduled on June 15th.

Consensus earnings estimates for S&P 500 companies on a year-over-year basis in the first quarter of 2022 were unchanged last week. Ninety one percent of companies have reported quarterly results to date. According to www.FactSet.com first quarter earnings on a year-over-year basis are expected to increase 9.1% and revenues are expected to increase 13.4% (versus 13.3% last week)

Consensus earnings estimates for S&P 500 companies beyond the first quarter on a year-over-year basis moved slightly lower again while consensus revenues estimates increased slightly. According to www.FactSet.com second quarter earnings are expected to increase 4.4% (versus 4.8% last week) and revenues are expected to increase 9.9% (versus 9.8% last week). Earnings in the third quarter are expected to increase 10.3% (versus 10.6% last week) and revenues are expected to increase 9.2% (versus 9.0% last week). Earnings in the fourth quarter are expected to increase 9.8% (versus 10.2% last week) and revenues are expected to increase 7.1% (versus 7.2% last week). Earnings on a year-over-year basis for all of 2022 are expected to increase 10.1% and revenues are expected to increase 10.2% (versus 10.0% last week).

 

Economic News This Week

April Retail Sales to be released at 8:30 AM EDT on Tuesday are expected to increase 0.7% versus a gain of 0.7% in March. Excluding auto sales, April Retail Sales are expected to increase 0.3% versus a gain of 1.4% in March.

April Capacity Utilization to be released at 9:15 AM EDT on Tuesday is expected to increase to 78.6 from 78.3 in March. April Industrial Production is expected to increase 0.4% versus a gain of 0.9% in March.

March Business Inventories to be released at 10:00 AM EDT on Tuesday is expected to increase 1.8% versus a gain of 1.5% in February.

April Housing Starts to be released at 8:30 AM EDT on Wednesday are expected to slip to 1.783 million units from 1.793 million units in March.

Canadian April Consumer Price Index to be released at 8:30 AM EDT on Wednesday is expected to increase 1.0% versus a gain of 1.4% in March. On a year-over-year basis, April CPI is expected to increase 6.1% versus 6.7% in March. Excluding food and energy, April CPI is expected to increase 0.5% versus a gain of 1.0% in March. On a year-over-year basis, April CPI is expected to increase 4.2% versus a gain of 5.5% in March.

May Philly Fed Index to be released at 8:30 AM EDT on Thursday is expected to slip to 17.2 from 17.6 in April.

April U.S. Existing Home Sales to be released at 10:00 AM EDT on Thursday are expected to slip to 565.000 units from 577,000 units in March.

April Leading Economic Indicators to be released at 10:00 AM EDT on Thursday are expected to increase 0.3% versus a gain of 0.3% in March.

 

Selected Earnings News This Week

Frequency of quarterly reports slows this week declines once again. Fifteen S&P 500 companies (including three Dow Jones Industrial Average companies) are scheduled to release results.

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Trader’s Corner

Equity Indices and Related ETFs

Daily Seasonal/Technical Equity Trends for May 13th 2022

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Green: Increase from previous day

Red: Decrease from previous day

 

Commodities

Daily Seasonal/Technical Commodities Trends for May 13th 2022

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Green: Increase from previous day

Red: Decrease from previous day

Sectors

Daily Seasonal/Technical Sector Trends for May 13th 2021

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Green: Increase from previous day

Red: Decrease from previous day

All seasonality ratings are based on performance relative to the S&P 500 Index (except TSX

 

Links offered by Valued Providers

Mark Leibovit’s Weekly Comment

Crypto Meltdown Predicted, Now What? – HoweStreet

 

Links from Mark Bunting and www.uncommonsenseinvestor.com

Shopify’s Crash… – Uncommon Sense Investor

 

StockCharts.com Chart School

John Murphy’s Ten Laws of Technical Trading [ChartSchool] (stockcharts.com)

Cognitive Biases [ChartSchool] (stockcharts.com)

 

David Keller comment

This Chart Says More Downside for S&P 500 | The Mindful Investor | StockCharts.com

 

Greg Schnell says “Tech tries to thrust”.

Tech Tries To Thrust | ChartWatchers | StockCharts.com

 

Mish Schneider looks at sectors with hidden momentum

3 Key Sectors to Watch with Hidden Momentum | Mish’s Market Minute | StockCharts.com

 

Tom McClellan notes that “Investors intelligence data at bearish extremes

Investors Intelligence Data at Bearish Extreme | Top Advisors Corner | StockCharts.com

 

Tom Bowley discussed on Thursday “How to spot a market bottom

https://www.youtube.com/watch?v=eJHktYP-pIc

 

David Keller interviews Matt Maley who discusses “Mean reversion plays in May”.

https://www.youtube.com/watch?v=1bIWeyGzPtg

 

Bruce Fraser asks “Is the stock market decline ending”?

https://www.youtube.com/watch?v=rj7pYs4kPVE

 

Jeff Huge asks “Bear Market Bottoming or just getting started”?

https://www.youtube.com/watch?v=j0FAah1G1gc

 

Michael Campbell’s Money Talks for May 14th

May 14th Episode (mikesmoneytalks.ca)

 

Victor Adair asks “Why is the U.S. Dollar is such great shape”?

Perfect Storm Hitting the Stock Market – HoweStreet

 

Technical Scoop from David Chapman and www.Enrichedinvesting.com

https://enrichedinvesting.com/wp-content/uploads/2022/05/1939-precedent-crypto-vapor-depressing-news-possible-low-oily-buoyancy-tenacious-gold.pdf

 

Money Show Canada Virtual Expo:

May 24-26

Free registration

Schnell, CMT, MFTA, Greg (moneyshow.com)

 

More links to follow

 

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

Monster Beverages $MNST a NASDAQ 100 stock moved above $88.03 extending an intermediate uptrend.

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S&P 500 Momentum Barometers

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The intermediate term Barometer gained 4.81 on Friday, but dropped 6.22 last week to 21.64. It remains Oversold. Trend remains down, but an early sign of a possible low was recorded on Friday.

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The long term Barometer added 2.81 on Friday, but dropped 2.61 last week to 32.48. It remains Oversold, Trend remains down, but an early sign of a possible low was recorded on Friday.

 

TSX Momentum Barometers

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The intermediate term Barometer gained 7.05 on Friday, but dropped 3.30 last week to 21.59. It remains Oversold. Trend remains down, but early sign of a possible low was recorded on Friday.

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The long term Barometer added 4.85 on Friday, but dropped 8.17 last week to 34.36. It changed from Neutral to Oversold on a move below 40.00. Trend remains down, but early sign of a possible low was recorded on Friday.

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.




8 Responses to “Tech Talk for Monday May 16th 2022”

  1. Larry/ON Says:

    BIR – Back in March Techtalk highlighted nat gas and specified two names BIR and AAV. BIR just made a new high today clearing 10.53
    Many energy names were overbought and just needed a pull back on the charts and became the last sector to drop when the market made a swoon last week. The fundamental picture has not changed at all for energy and the sector remains undervalued and underowned. XLE is a fraction of a percent from making a new high.

  2. Rol Lew Says:

    https://www.newswire.ca/news-releases/tourmaline-delivers-record-cash-flow-and-free-cash-flow-in-q1-2022-and-announces-special-dividend-889281939.html

    1.50 special divvy payable May 19th. Record date? idk

    Ordinary divvy .80 1.20%

    https://stockcharts.com/h-sc/ui?s=TOU.TO&p=D&yr=0&mn=10&dy=0&id=p26501098768

  3. Larry/ON Says:

    TOU – Rol Lew May 12th was the record date for the special dividend. TOU’s strategy is to keep paying these special dividends each quarter and to go debt free by Q4 2022 as will some other energy companies. It is projected amount to about 7% annualized as I recall mentioned somewhere. You want hold TOU in a registered plan. TOU is one of the best performing energy companies but my beef with them is the huge derivatives loss they booked in Q1 that wiped out about 60% of their earnings for the quarter. My understanding is that they have hedges that will roll off the books each quarter and earnings should rise as the hedges diminish. BIR DOES NOT HEDGE.

  4. Larry/ON Says:

    TOU Special Dividend – If you own calls the strike prices have been reduced by the amount of the special dividend. In taxable accounts its’ a good way to collect as an unrealized gain while not being hit with a taxable event.

  5. dutchcanuck Says:

    Larry/ON
    Was it not CVE with the big loss?

  6. Larry/ON Says:

    Re 6. Hi Dutchcanuck. CVE had a one-time loss Q4 due to an “impairment charge” on their US business and then had a beat on Q1 2022. CVE has a stellar chart which looks the same as DVN. I think it is critical to understand what kind of risks these companies have put on their books with hedging and for the average investor it is unexpected and opaque. Refer to the article below on CVE that says it could face $1.4 billion in hedging losses. These companies make piles of money and blow it all at the derivatives casino. As stated by Seeking Alpha “this is a serious mismanagement of capital.” I listened to TOU’s conference call and there was no mention whatsoever about the single most important line item that affected their quarter and then the analysts had their questions which all started with their congratulations. It was swept under the rug and they quickly wrapped up the call inside 25 minutes.

    https://seekingalpha.com/article/4499978-cenovus-energy-stock-mixed-opportunity-looking-ahead

  7. dutchcanuck Says:

    Larry/On
    Thanks for your reply. Do not meet a person with fundamental knowledge very often on this board. A CNQ executive once told me that O&G cos are forced to hedge by their lenders to guarantee repayment of their loans. You are quite right about the industry mindset, they do have animal spirits. Hence the signs on the wall at Imperial Oil that say God, give us one more chance at high prices and we will try to not mess it up.

  8. Ron/BC Says:

    DutchCanuck
    Re:#7
    This is just one reason I am suspect and not impressed with stock “stories” overall. Way too many variables! I can’t think of another investment that has so many landmines set to blow us up.

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