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Tech Talk for Monday July 15th

 

The Bottom Line

Continue to hold favoured equities for now, but prepare to take seasonal profits on the first signs of significant short term technical weakness. World equity markets moved higher again last week. Most equity markets are intermediate overbought, but have yet to show signs of peaking. History is repeating. Most equity markets have a history of moving higher from late June to mid-July. Thereafter, equity markets have a history of entering into a period of increased volatility and a downward bias into mid-October. Expected events beyond mid-July this year suggest that the time to take seasonal profits is rapidly approaching. Events of concern include lower year-over-year quarterly earnings reports by major corporations that will confirm an earning recession (i.e. two consecutive year-over-year quarterly earnings declines), increasing political uncertainty (i.e. Federal election in Canada that likely will lead to a minority government, a likely attempt by the Democrats to impeach Donald Trump following the Mueller testimonies in the third week in July) and unsettled trade negotiations.

 

Observations

Favourable seasonal influences on equity indices, commodities and sectors from June 28th to July 17th continued on schedule this year. Note changes in seasonality ratings later in this report on a wide variety of equity indices, commodities and sectors effective July 17th.

Technical action by individual S&P 500 stocks remained bullish last week. Number of stocks breaking intermediate resistance totaled 40 while number of stocks breaking support totaled 7. The Up/Down ratio advanced last week to (268/137=) 1.96 from 1.82.

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 again last week. They remain intermediate overbought. See charts near the end of this report

Medium term technical indicators in Canada also moved slightly lower last week. They remain intermediate overbought and show early signs of rolling over. See charts near the end of this report.

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

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

Short term political concerns in the U.S. remain elevated. Issues include tariff wars between the U.S and China, increased tensions with Iran and anti-Trump hearings initiated by the Democrat controlled House of Representatives. The recently released Mueller report is expected to elevate political rhetoric. Mueller is schedule to testify before Congress on July 24th .

Forecasts for S&P 500 revenues and earnings moved slightly lower again last week. Declines were prompted partially by strength in the U.S. Dollar Index. According to FactSet, second quarter earnings are expected to drop 3.0% on a year-over-year basis (versus 2.6% last week) and second quarter revenues are expected to increase 3.7% (versus 3.8% last week). Eighty eight companies have issued negative second quarter guidance and 26 companies have issued positive guidance. Third quarter earnings are expected to drop 0.8% (versus a drop of 0.5% last week) and revenues are expected to increase 3.3% (versus 3.8% last week). Fourth quarter earnings are expected to increase 6.0% (versus 6.3% last week) and fourth quarter revenues are expected to increase 4.2% (versus 4.4% last week). For all of 2019, earnings are expected to increase 2.4% (versus 2.6% last week) and revenues are expected to increase 4.3% (versus 4.4% last week). First quarter 2020 earnings are expected to increase 9.8% (versus 9.9% last week) and revenues are expected to increase 5.8 %. Second quarter 2020 earnings are expected to increase 13.2% (versus 13.3% last week) and revenue are expected to increase 6.6%.

The VIX Index has a history of reaching a seasonal low on July 17th for an upside move to mid-October.

 

Economic News This Week

July Empire State Manufacturing Survey to be released at 8:30 AM EDT on Monday is expected to improve to 2.00 from -8.60 in June.

June Retail Sales to be released at 8:30 AM EDT on Tuesday are expected to increase 0.2% versus a gain of 0.5% in May. Excluding auto sales, June Retail Sales are expected to increase 0.2% versus a gain of 0.5% in May.

June Capacity Utilization to be released at 9:15 AM EDT on Tuesday is expected to remain at 78.1% reached in May. June Industrial Production is expected to increase 0.1% versus a gain of 0.4% in May.

June Housing Starts to be released at 8:30 AM EDT on Wednesday are expected to slip to 1.262 million units from 1.269 million units in May.

June Canadian Consumer Price Index to be released at 8:30 AM EDT on Wednesday are expected to decrease 0.2% versus a gain of 0.4% in May (2.0% versus 2.4% year-over-year).

Beige Book is released at 2:00 PM EDT on Wednesday.

Initial Jobless Claims to be released at 8:30 AM EDT are expected to increase to 215,000 from 209,000 last week.

July Philly Fed Index to be released at 8:30 AM EDT on Thursday is expected to recover to 5.0 from 0.3 in June.

July Michigan Consumer Sentiment Index to be released at 10:00 AM EDT on Friday is expected to slip to 98.50 from 98.2 in June.

 

Selected Earnings Reports This Week

Fifty seven S&P 500 and 7 Dow Jones Industrial stocks are scheduled to report quarterly results this week

 

Trader’s Corner

 

Equity Indices and related ETFs

Daily Seasonal/Technical Equity Trends for July 12th 2019

Green: Increase from previous day

Red: Decrease from previous day

 

Commodities

Daily Seasonal/Technical Commodities Trends for July 12th 2019

Green: Increase from previous day

Red: Decrease from previous day

 

Sectors

Daily Seasonal/Technical Sector Trends for July 12th 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 @EquityClock

Technical action by S&P 500 Index to 10:00: Quietly bullish. Intermediate breakouts: $HP $CSCO $WDC. Breakdown: $BMY

Editor’s Note: After 10:00 AM EDT, intermediate breakouts included DISCA, PHM, OXY, JKHY, UHS, CTXS, DISH, HAS, UAA, PGR and IPG. No breakdowns.

Cisco $CSCO, a NASDAQ 100 stock moved above $57.79 to an all-time high extending an intermediate uptrend.

Citrix Systems $CTXS, a NASDAQ 100 stock moved above $100.73 setting an intermediate uptrend.

U.S. Airline stocks soar! Breakouts by $UAA $AAL $DJUSAR

 

Don and Jon Vialoux at the Toronto MoneyShow

 

Once again Jon and I are presenting at the MoneyShow this September. Following is a link giving background

 

· SPEAKERS

 

· SCHEDULE

· SPECIAL EVENTS

· PAID EVENTS

· EXHIBIT HALL

· HOTEL

 

· ATTEND FREE

 

September 20 – 21, 2019 | Toronto

Questions? Call: 1-800-970-4355

 

Panel Workshop Details

Sep. 21, 2:45 PM – 3:30 PM EST

Saturday

 

Improving Investment Returns by Combining Seasonal, Fundamental, and Technical Analysis

The end of September is the opportune time to review your investment portfolio prior to start of the traditional period of seasonal strength for equity markets in October. Which markets, sectors and securities have the best technical and fundamental profiles this year? Join the father-and-son team of Don and Jon Vialoux for an update.

 

Donald Vialoux

Founder

Tech Talk

 

Jon Vialoux

Founder

EquityClock.com

S&P 500 Momentum Barometers

Percent of S&P 500 stocks trading above their 50 day moving average increased last week to 85.20 from 82.20. Percent remains intermediate overbought.

Bullish Percent Index for S&P 500 stocks slipped last week to 74.00 from 74.80. Percent remains intermediate overbought.

 

TSX Momentum Barometers

Percent of TSX stocks trading above their 50 day moving average slipped last week to 60.26 from 66.24. Percent remains intermediate overbought and shows signs of rolling over.

0

Bullish Percent Index for TSX stocks remained unchanged last week at 60.33. The Index remains intermediate overbought.

 

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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