Pre-opening Comments for Tuesday October 11th
Volume for major equity markets was significantly lower than average yesterday where markets were open:
![clip_image002[7]](http://www.timingthemarket.ca/techtalk/wp-content/uploads/2022/10/clip_image0027.png "clip_image002[7]")
Chinese equity indices dropped after the U.S. announced restrictions on distribution of semi-conductors chips to China.
U.S. equity index futures were lower this morning. S&P 500 dropped 2 points in pre-opening trade.
Qualcomm dropped $1.70 to $112.90 after KeyBanc Capital lowered its target price from $220 to $170.
![clip_image001[1]](http://www.timingthemarket.ca/techtalk/wp-content/uploads/2022/10/clip_image0011-3.png "clip_image001[1]")
Bank of America eased $0.26 to $30.40 after JP Morgan lowered its target price from $40.50 to $35.50.
Citigroup dropped $0.28 to $41.32 after JP Morgan lowered its target price from $60 to $49.
![clip_image002[1]](http://www.timingthemarket.ca/techtalk/wp-content/uploads/2022/10/clip_image0021-3.png "clip_image002[1]")
EquityClock’s Daily Comment
Headline reads “The slope of the average trend of the equity market over the next three months is the steepest of the year”.
http://www.equityclock.com/2022/10/10/stock-market-outlook-for-october-11-2022/
The Bottom Line
Additional technical evidence of an intermediate low by U.S. and Canadian equity markets surfaced last week despite weakness on Friday. Ironically, weakness on Friday was triggered by a better than expected U.S. September Employment Report. The report surprisingly included a drop in the Unemployment Rate from 3.7% in August to 3.5%. Wall Street predicted that the better than expected news on employment will add upside pressure on wages which in turn will add to higher consumer prices. U.S. equity indices responded accordingly: The Federal Reserve now is expected to wait longer before “pivoting” from its current monetary tightening policy.
Focuses this week are on the September CPI report on Thursday and third quarter earnings reports by major U.S. banks on Friday. Both have the potential to move U.S. equity markets significantly. The CPI report is expected to show another drop in the annual rate. The ETF for U.S. large cap financials recently has outperformed the S&P 500 Index, a technical sign that a positive surprise is possible. Seasonal influences also are positive for the industry between now and the second week in January.
Consensus for Earnings and Revenues for S&P 500 Companies
Analysts lowered earnings estimates significantly again last week. According to www.factset.com third quarter earnings on a year-over-year basis are expected to increase 2.4% (versus previous estimate at 2.9%) and revenues are expected to increase 8.5%.(versus previous estimate at 8.7%) Fourth quarter earnings are expected to increase 3.6% (versus previous estimate at 4.0%) and revenues are expected to increase 6.0% (versus previous estimate at 6.2%). For 2022 earnings are expected to increase 7.3% (versus previous estimate at 7.4%) and revenues are expected to increase 10.6% (versus previous estimate at 10.7%.
Preliminary estimates for 2023 also moved lower. According to www.factset.com first quarter 2023 earnings are expected to increase 6.2% (versus previous estimate at 6.5%) and revenues are expected to increase 5.8% (versus previous estimate at 5.9%). Second quarter 2023 earnings are expected to increase 5.1% (versus previous estimate at 5.5%) and revenues are expected to increase 3.2% (versus previous estimate at 3.3%). For all of 2023, earnings are expected to increase 7.9% and revenues are expected to increase 4.3% (versus previous estimate at 4.4%).
Economic News This Week
September Producer Price Index released at 8:30 AM EDT on Wednesday is expected to increase 0.2% versus a drop of 0.1% in August. On a year-over-year basis, the Index is expected to increase 8.4% versus 8.7% in August. Excluding food and energy September PPI is expected to increase 0.3% versus a gain of 0.4% in August. On a year-over-year basis, core September PPI is expected to increase 7.3% versus a gain of 7.3% in August.
September Consumer Price Index released at 8:30 AM EDT on Thursday is expected to increase 0.2% versus a gain of 0.1% in August. On a year-over-year basis, September Consumer Price Index is expected to increase 8.1% versus a gain of 8.3% in August. Excluding food and energy, September Consumer Price Index is expected to increase 0.5% versus a gain of 0.5% in August. On a year-over-year basis, September core is expected to increase 6.5% versus a gain of 6.3% in August.
September Retail Sales released at 8:30 AM EDT on Friday is expected to increase 0.2% versus a gain of 0.3% in August. Excluding auto sales, September Retail Sales is expected to increase 0.1% versus a drop of 0.3% in August.
August Business Inventories released at 10:00 AM EDT on Friday are expected to increase 0.6% versus a gain of 0.6% in July.
October Michigan Sentiment released at 10:00 AM EDT on Friday is expected to increase to 58.9 from 58.6 in August.
Earnings News This Week
Trader’s Corner
Equity Indices and Related ETFs
Daily Seasonal/Technical Equity Trends for October 7th 2022
Green: Increase from previous day
Red: Decrease from previous day
Commodities
Daily Seasonal/Technical Commodities Trends for October 7th 2022
Green: Increase from previous day
Red: Decrease from previous day
Sectors
Daily Seasonal/Technical Sector Trends for October 7th 2021
Green: Increase from previous day
Red: Decrease from previous day
Links offered by valued providers
Mark Leibovit comments on October 7th
Could Stock Markets Test March 2020 Lows? – HoweStreet
Greg Schnell discusses “Why this rollover is so important”.
Why This Rollover Is So Important | The Canadian Technician | StockCharts.com
Mish Schneider discusses “The battle of Supply and Demand: Oil, Gold and the market”.
The Battle of Supply and Demand, Oil, Gold and the Market | Mish’s Market Minute | StockCharts.com
Links offered by Mark Bunting and www.uncommonsenseinvestor.com
Fed Pivot is a "BS Narrative" – Uncommon Sense Investor
Investing vs. Speculating – Uncommon Sense Investor
Michael Campbell’s Money Talks for October 8th
Michael Campbell’s MoneyTalks – Complete Show (mikesmoneytalks.ca)
Victor Adair’s Trading Desk Notes for October 8th
https://victoradair.ca/trading-desk-notes-for-october-8-2022/
Technical Scoop from David Chapman and www.EnrichedInvesting.com
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
Technical Notes from Friday
Utilities SPDRs $XLU moved below $63.39 extending an intermediate downtrend.
Paychex $PAYX a NASDAQ 100 stock moved below $109.80 extending an intermediate downtrend.
Southern Companies $SO an S&P 100 stock moved below $64.22 extending an intermediate downtrend.
Energy stocks on both sides of the border responded to higher crude oil prices. Crude oil ETN $USO moved above $25.86 extending an intermediate uptrend.
Conoco Phillips $COP an S&P 100 stock moved above $119.19 to an all-time high extending an intermediate uptrend.
Cenovus $CVE.TO a TSX 60 stock moved above $25.86 extending an intermediate uptrend.
Canadian Natural Resources $CNQ.TO a TSX 60 stock moved above $75.18 extending an intermediate uptrend.
Toronto Dominion Bank $TD.TO a TSX 60 stock moved below intermediate support at $82.29
Commerce Bank $CM.TO a TSX 60 stock moved below $58.23 extending an intermediate downtrend.
S&P 500 Momentum Barometers
The intermediate term Barometer dropped 6.20 on Friday, but gained 9.00 last week to 12.20. It remains Oversold and has bottomed.
The long term Barometer dropped 3.40 on Friday, but gained 4.80 last week to 17.00. It remains Oversold and has bottomed.
TSX Momentum Barometers
The intermediate term Barometer dropped 11.86 on Friday, but gained 8.05 last week to 29.24. It briefly moved to Neutral (over 40.00), but closed on Friday at Oversold. It bottomed at 7.20
The long term Barometer dropped 6.78 on Friday, but gained 5.51 last week. It remains Oversold. It bottomed at 16.95
Disclaimer: Seasonality ratings 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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October 11th, 2022 at 8:31 am
Hi Canuck2004
Re: 9# Canuck2004 Says:
October 8th, 2022 at 8:23 pm post
Thanks for sharing and nice to see you posting more again.
My RRSP is down around 10% and that is only because I sold a fair chunk. I’m only a bit concern because of the RRIF withdrawal schedule. Especially if this is a prolong retraction or stagflation. Are doing anything or not to concern about the schedule withdrawal ?
Anyone else with ideas please share your ideas. Open for discussion.
October 11th, 2022 at 10:51 am
Hi Dave,
I would not worry about stagflation or a long lived Recession. Historically, 6-18 months is the range for a Bear market, and Bull markets are always much longer that Bear Markets. Nothing we can control anyway, so no use fretting about it. Eventually markets always recover. Not something I worry about. I worry about my stable cash flow, that’s why I have 40-50 names, equal weights, well diversified across sectors, to ensure the stability of the cash flow. I am always 100% in equities in the RRSP, since 1994. I am no longer trading in this account.
I am not RRIFing yet, another year to go. When I do I will not have to sell anything for a few years as my cash flow is greater than the scheduled withdrawals, for now. Was much better when Income Trusts were around….lol…but no more. There are Covered Call ETFs out there that pay 7-8-10% that are relatively safe. Won’t get much capital gains, but will have steady cash flow to feed the RRIF withdrawal schedule. Not a bad idea to have a few, but not too many, 10-20% of the portfolio max, no more. We still need growth.
I don’t worry about capital gains in my RRSP or anywhere else, as the market always recovers eventually, and goes beyond. However when I do have to sell in my RRIF, and I will eventually about 5 years into RRIF, then I plan to sell a little bit here and there rather than sell a whole position. Trimming to cover the schedule. I plan to save the cash flow about 6 to 12 months before I RRIF, to have the monthly cash flow available in the account, no matter how I schedule, be be ahead of the curve. Haven’t decided how yet, a few months to go.
My biggest concern right now is how I will schedule my RRIF withdrawal. Either I take the full amount in one shot at the start of the year, take it quarterly, or take it monthly, like on the 15th, as all my pensions come in at the end of the month. I have to talk to the brokerage about it. My wife started RRIF this year, so I know that the first bite they don’t take taxes off, unless you request it in advance, in writing. She takes it in 2 bites, start of the year, in part to cover her TFSA contribution and mid year, the extra to spend mostly for vacations. Her choice.
The problem of course is that my broker charges 50 bucks a withdrawal, plus GST. So if I were to take it monthly, that would cost me over 600 bucks a year, kinda a waste of money for the pleasure of getting paid like a regular mid-month pay cheque, which would be very nice. So…have to think about it. It won’t make any difference to my RRIF as the cash flow continues to grow at a rate of 8% a year, so more than covers the $600 cost, but it is a waste of money in broker fees….600 bucks is still 600 bucks, I can do something else with that….buys a few nice lunches.
I can only talk about what I do and what I am thinking about. Don’t have much else for information on this topic.
October 11th, 2022 at 11:12 am
CORRECTION: I just phoned my broker to verify, and when I RRIF, there will be NO fee for withdrawals, unlike the RRSP withdrawals, so that’s one less worry. Still have to decide which way I will take it. Monthly is very attractive.
All equities get transferred into the RRIF, so no change there. Cash flow intact…and I will have to accumulate the cash flow ahead of time IF I want to take it all on the first bite at the start of the year, and then manage the funds myself outside the RRIF for the rest of the year…but I still have to be ahead of the curve.
The only issue is tax withholding, I have to decide how much over the minimum as I do have other income and the minimum may not be enough to cover taxes for the year.
Since my birthday is in February, I will be taking it early in my 72nd year.
October 11th, 2022 at 11:30 am
One more thing on RRIF, I talked to the bank at Scotia, and I assume everywhere else, they count RRIF income as salaried income for the purpose of getting a mortgage, but they don’t count RRSP withdrawals. So for retirees who want to renew or get a new mortgage, that’s a plus. Gives us leverage when negotiating for a loan or mortgage, if needed.
October 11th, 2022 at 12:49 pm
Interesting reversal today from down at the open. IF SPX closes above yesterday’s high we will have a Key Day Reversal. Place your bets!
October 11th, 2022 at 12:57 pm
Dave/AB
I was self employed most of my life before retirement and I always brought everything to my accountant to work out. He will know what’s the best way to deal with taxes of all kinds. Even now I still take everything to the accountant and if revenue Canada calls I just say call my accountant. Things change and if there is something new to use he will know this and even claw back some money from previous years. Just can’t go wrong……………….
October 11th, 2022 at 1:07 pm
The $SPX has tested the Fibonacci 50% retracement level and is oversold with extreme pessimism in the broad market. This is an important price point and despite being bearish overall has the potential to bounce back over 500 points to the downtrendline. Especially if it can clear 3800.
https://stockcharts.com/h-sc/ui?s=%24SPX&p=D&yr=3&mn=0&dy=0&id=p06224033329&a=1131926615
October 11th, 2022 at 1:24 pm
Bought an ETF I had my eye on this morning, against what I said last week….lol….Hit my low ball price so just could not resist. Inflation numbers coming out Thursday and Friday, extreme pessimism in market, oversold, potential reversal in the works…..Market seems to have bounced back since open, so far….We will see.
October 11th, 2022 at 3:27 pm
Not looking too good.
October 11th, 2022 at 3:47 pm
Can’t believe the weakness of the $SPX. There isn’t even any sustained short covering going on. This is a very sick market.The June low is now resistance. Here is a longer term chart.
https://stockcharts.com/h-sc/ui?s=%24SPX&p=W&yr=20&mn=0&dy=0&id=p39592374179&a=673066405
October 11th, 2022 at 6:20 pm
Taxes: I used accountants for decades, until I moved to the Island. I was too busy before while I worked… 7 days a week.
The first I one hired on the Island, was incompetent, screwed up my taxes….So I fired him. The second did a good job, but charged me double what my old accountant of 30 years in Vancouver used to charge me. So I fired him too. He is no longer in business. Unfortunately my old Vancouver accountant retired as I was leaving the Mainland.
Since I have been retired for 11 years, I have the time. I used to do my own taxes back in the 70’s when I was self employed and ran my own business but by the 1980s I was way too busy.
Now, I have been using TurboTax.ca for a few years. Piece of cake. Buy it online, and it downloads all info from the CRA into the program and populates all the slots. I double check with all my receipts and still do a spreadsheet for my trades to make sure the info is 100% correct. Do both the wife and mine at the same time. A monkey could do it, it’s so easy.
I buy the better package so I can talk virtually with an accountant who double checks all my entries as we walk through it. Then I ask prepared questions on tax planning, which I do every time. This system works best for me, as I am out of the country at tax time, so now I don’t have to hurry back before the end of April to do my taxes. I can do them anywhere. I can take my time, start in March, save my entries, etc. It is much cheaper than my old accountant and makes my life way easier.
I am leaving for my winter home in AZ on November 1st, coming back 180 days later, April 30th 2023. Just under the 182 days maximum. Been busy shutting down this place, and getting the other place set up, car insurance, Cable/Internet, etc. Will be very busy the first week, turning on water, hosing down the patios and setting up patio furniture, cleaning up, washing windows, buying groceries, etc. lots to do at transition time, twice a year. On this end got to fit in all the doctor and dentist appointments during the summer.
We are organized, we do this every year, so we have a check list, one for each place.
October 11th, 2022 at 7:30 pm
Dave/AB
I’ve known many people including self employed ones that do their own taxes to save a buck. Not a good idea. Everyone thinks it’s all about saving a buck by doing your own and that’s not really the point. Revenue Canada knows if you do your own taxes you will do what you can to keep your tax owed down. So they see you as a likely cheater regardless and someone they should audit. An accountant has credibility that the average person doesn’t have and that’s the point of getting an accountant. I know in the past the odd time Revenue Canada would question my tax file and my accountant would fight tooth and nail to defend me. You just can’t beat that type of protection. Don’t be a cheapskate and try to save on accounting fees as they aren’t that much anyways. And you’d be surprised at what an accountant can do with previous years payments as well.
October 11th, 2022 at 10:44 pm
TurboTax will represent me if there is an issue, they guarantee it as I pay for it. Plus I have been audited in the past when a chartered accountant did my taxes…so that argument has no validity as I had to hire a second independent accountant to represent me.
I have 4 university degrees, 3 of them first class from UBC, so I can read, in multiple languages too. I taught HS for 20 years plus university level courses as well.
I sat on the Board of many organizations for decades, was elected president of one every year for 25 years, had hundreds of employees, managed multi-million dollar budgets for decades, kept many people working for decades, created dozens of grant applications, received millions of dollars a year in grants, entertained MPs and MLAs for funding., fought off take-over attempts in court, etc. Yep, I think I know what I am doing….lol. Taxes are not that complicated for me.
October 11th, 2022 at 11:03 pm
Thanks Canuck2004 for all the information you share with us. I learn and enjoy a lot from your detailed messages and experiences. Wish you all the best for your upcoming trip to AZ.