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Tech Talk for Monday May 6th 2019

 

The Bottom Line

U.S. equity markets were mixed again last week despite better than consensus first quarter results released to date by S&P 500 and Dow Jones Industrial companies. The TSX Composite Index was slightly weaker. Seasonal influences for most equity markets around the world have a history of peaking this week.

Observations

Technical action by individual S&P 500 stocks was mixed again last week. Number of stocks breaking intermediate resistance totaled 27 while number of stocks breaking support totaled 28. Most of the breakdowns were in the Energy sector. The Up/Down ratio dropped to (306/107=) 2.86 from 3.17.

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 slightly lower last week. They remain overbought and have rolled over. See charts near the end of this report

Medium term technical indicators in Canada were moved lower last week. They remain intermediate overbought/neutral and are trending down. See charts near the end of this report.

Short term technical indicators for U.S. markets and sectors (20 day moving averages, short term momentum) deteriorated slightly again last week.

Short term technical indicators for Canadian markets and sectors also deteriorated slightly again last week.

Short term political concerns in the U.S. remain elevated. Issues include tariff wars between the U.S. and China and anti-Trump hearings initiated by the Democrat controlled House of Representatives. Release of the Mueller report elevated political rhetoric.

Frequency of S&P 500 quarterly earnings reports passed their peak last week while frequency of TSX listed companies is expected to increase. Another 59 S&P 500 companies (including one Dow Jones Industrial company: Disney) are scheduled to report. To date, 76% of S&P 500 companies have reported quarterly results.

Prospects for S&P 500 earnings in the first quarter improved again last week thanks.to higher than consensus results released to date. However, estimates beyond the first quarter moved slightly lower. According to FactSet, first quarter earnings are expected to decline 0.8% on a year-over-year basis (versus a decline of 2.3% last week) but revenues are expected to increase 5.2%. Second quarter earnings are expected to slip 1.3% (versus a drop of 0.6% last week) and second quarter revenues are expected to increase 4.3%. Fifty six companies issued negative second quarter guidance (versus 32 last week) and 14 companies issued positive guidance (versus 6 last week). Third quarter earnings are expected to increase 0.8% (versus 1.3% last week) and revenues are expected to increase 4.4%. Fourth quarter earnings are expected to increase 7.5% (versus 8.1% last week) and fourth quarter revenues are expected to increase 4.8%. For all of 2019, earnings are expected to increase 3.4% (versus 3.6% last week) and revenues are expected to increase 4.7%.

Seasonal influences for most world equity market normally reach a seasonal peak at this time of year. Exceptions include China and the TSX. They tend to reach a peak near the end of May.

 

Economic News This Week

April Producer Price Index to be released at 8:30 AM EDT on Thursday is expected to increase 0.2 versus a gain of 0.6% in March. Excluding food and energy, April Producer Price Index is expected to increase 0.2% versus a gain of 0.3% in March.

Weekly Jobless Claims to be released at 8:30 AM EDT on Thursday are expected to drop to 220,000 from 230,000 last week.

March Trade Deficit to be released at 8:30 AM EDT on Thursday is expected to increase to $51.1 billion from $49.4 billion in February.

March Canadian Trade Deficit to be released at 8:30 AM EDT on Thursday is expected to slip to $2.30 billion from $2.90 billion in February.

April Consumer Price Index to be released at 8:30 AM EDT on Friday is expected to increase 0.4% versus a gain of 0.4% in March. Excluding food and energy, April Consumer Price Index is expected to increase 0.2% versus a gain of 0.1% in March.

April Canadian Employment to be released at 8:30 AM EDT on Friday is expected to increase 15,000 versus a decline of 7,200 in March. April Unemployment Rate is expected to remain unchanged from March at 5.8%.

Selected Earnings News This Week

 

Trader’s Corner

Equity Indices and related ETFs

Daily Seasonal/Technical Equity Trends for May 3rd 2019

Green: Increase from previous day

Red: Decrease from previous day

 

Commodities

Daily Seasonal/Technical Commodities Trends for May 3rd 2019

Green: Increase from previous day

Red: Decrease from previous day

 

Sectors

Daily Seasonal/Technical Sector Trends for May 3rd 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

US Nonfarm Payrolls up 1.126 million (NSA), or 0.8%, in April, stronger than 0.7% average increase for the month $MACRO #Employment #Economy

Technical action by S&P 500 stocks to 10:00: Quiet. Intermediate breakouts: $NWL $BLL Breakdown: $SRCL

Editor’s Note: After 10:00 AM EDT, intermediate breakouts included EQIX, TTWO, COTY, DXC, DHR and GE.

Solar Energy ETF $TAN moved above $25.80 extending an intermediate uptrend.

Toromont Industries $TIH.CA moved below $66.10 completing a double top pattern.

Ivanhoe Mines $IVN.CA moved above $2.57 and $2.59 extending an intermediate uptrend.

MSCI Pacific ex Japan iShares $EPP moved above $47.11 extending an intermediate uptrend

WestJet $WJA.CA moved below $18.55 extending an intermediate downtrend.

Canadian Tire $CTC.A.CA, a TSX 60 stock moved above $152.56 completing a double bottom pattern

 

Keith Richard’s Blog

Keith says “Bear-O-Meter drops from 7 to 4”.

Following is a link:

https://www.valuetrend.ca/bear-o-meter-drops-considerably/

 

S&P 500 Momentum Barometers

Percent of S&P 500 stocks trading above their 50 day moving average dropped last week to 67.40 from 71.60. Percent remains intermediate overbought and rolling over.

Bullish Percent Index for S&P 500 stocks dropped last week to 73.20 from 74.80. The Index remains intermediate overbought and rolling over.

 

TSX Momentum Barometers

Percent of TSX stocks trading above their 50 day moving average plunged last week to 46.19 from 58.65. Percent remains intermediate neutral and trending down.

Bullish Percent Index for TSX stocks slipped last week to 60.74 from 61.16. The Index remains intermediate overbought and rolling over.

 

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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