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Tech Talk for Monday October 21st 2019

 

The Bottom Line

World equity markets continued moving higher last week after entering a period of seasonal strength that normally lasts to early January. Recent concerns have been discounted including an earnings recession by major U.S. companies until the fourth quarter this year, growing efforts by the Democrats to impeach Donald Trump, continuing trade uncertainties between China and the U.S. and growing Middle East tensions.

 

Observations

Seasonal influences this year continue to follow their historic pattern. Seasonal influences on U.S. and Canadian equity markets tend to turn positive in the second half of October. Seasonal influences for equity markets in other developed nations also tend to turn positive in early October.

U.S. Dollar completed a double top pattern last week on a move below 97.56. Weakness in the U.S. Dollar Index is bullish for U.S. equity prices (It helps sales and earnings for U.S. companies with international operations) and is particularly bullish for commodity prices and related equities.

The U.S. Dollar Index has a history of moving lower relative to the S&P 500 Index between now and yearend

Medium term technical indicators for U.S. equity markets (e.g. Percent of stocks trading above their 50 day moving average, Bullish Percent Index) moved higher last week.

Medium term technical indicators for Canadian equity markets were slightly lower last week.

Most short term technical indicators for U.S. markets and sectors (20 day moving averages, short term momentum indicators) moved higher again last week.

Short term technical indicators for Canadian markets and sectors were mixed last week

Third quarter corporate reports start to flood in this week: Another 126 S&P 500 companies are scheduled to report this week including 12 Dow Jones Industrial companies.

Analysts continue to reduce earnings and revenue estimates for S&P 500 companies. According to FactSet, third quarter earnings on a year-over-year basis are expected to drop by 4.7% (down from a drop of 4.6% last week) and revenues are expected to increase 2.6% (down from 2.7% last week). Fourth quarter earnings are expected to increase 1.5% (down from 2.3% last week) and fourth quarter revenues are expected to increase 3.2% (down from 3.5% last week). For all of 2019, earnings are expected to increase 0.7% (down from 1.1% last week) and revenues are expected to increase 4.0% (down from 4.1%). First quarter 2020 earnings are expected to increase 6.7% (down from 7.3%) and revenues are expected to increase 4.8 % (down from 5.3% last week). Second quarter 2020 earnings are expected to increase 7.7% (down from 8.6%) and revenues are expected to increase 5.2% (down from 5.9%). Earnings for all of 2020 are expected to increase 10.4% (down from 10.6%) and revenues are expected to increase 5.3% (down from 5.6%).

 

Economic News This Week

August Canadian Retail Sales to be released at 8:30 AM EDT on Tuesday are expected to increase 0.6% versus a gain of 0.4% in July.

September Existing Home Sales to be released at 10:00 AM EDT on Tuesday are expected to slip to 5.45 million from 5.49 million units in August.

OPEC meeting tentatively is scheduled on Wednesday.

September Durable Goods Orders to be released at 8:30 AM EDT on Thursday are expected to drop 0.8% versus a gain of 0.2% in August. Excluding transportation, September Durable Goods Orders are expected to increase 0.1% versus a gain of 0.5% in August.

Weekly Initial Jobless Claims to be released at 8:30 AM EDT on Thursday are expected to increase to 215,000 from 214,000 last week.

September New Home Sales to be released at 10:00 AM EDT on Thursday are expected to dip to 701,000 units from 713,000 units in August.

October Michigan Consumer Sentiment Index to be released at 10:00 AM EDT on Friday is expected to increase to 96.0 from 93.2 in September.

 

Selected Earnings News This Week

 

Trader’s Corner

Equity Indices and related ETFs

Daily Seasonal/Technical Equity Trends for October 18th 2019

Green: Increase from previous day

Red: Decrease from previous day


Commodities

Daily Seasonal/Technical Commodities Trends for October 18th 2019

Green: Increase from previous day

Red: Decrease from previous day

 

Sectors

Daily Seasonal/Technical Sector Trends for October 18th 2019

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


StockTwits released on Friday

Lockheed Martin $LMT, an S&P 100 stock moved below $374.07 completing a Head & Shoulders pattern.

U.S. REIT iShares $IYR moved above $94.04 to an all-time high extending an intermediate uptrend.

Much of the weakness in the Dow Jones Industrial Average today can be attributed to weakness in Boeing $BA on a breakdown below $363.23

Adobe $ADBE, a NASDAQ 100 stock moved below $263.85 extending an intermediate downtrend

 

Hap Sneddon on BNN Bloomberg’s Market Call on Friday

Market Comment

https://www.bnnbloomberg.ca/video/hap-sneddon-s-market-outlook~1807757

Past Picks

https://www.bnnbloomberg.ca/video/hap-sneddon-s-past-picks~1807713

Top Picks

https://www.bnnbloomberg.ca/video/hap-sneddon-s-top-picks~1807715

 

S&P 500 Momentum Barometers

Percent of S&P 500 stocks trading above their 50 day moving average increased last week to 66.13 from 63.53. Percent remains intermediate overbought, but continues to trend higher.

Bullish Percent Index for S&P 500 stocks increased last week to 59.00 from 56.00. The Index remains intermediate neutral and trending higher.

 

TSX Momentum Barometers

Percent of TSX stocks trading above their 50 day moving average slipped last week to 46.67 from 50.00. Percent remains intermediate neutral.

Bullish Percent Index for TSX stocks dropped last week to 60.51 from 61.80. The Index remains intermediate overbought and trending down.

 

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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