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Tech Talk for Monday April 6th 2020

 

The Bottom Line

Equity markets continued to recover from the “Black Swan event” last week. Spread of the coronavirus remains a major influence on equity prices. The VIX Index remained elevated but appears to have reached an intermediate peak. World equity markets generally remain intermediate oversold and show technical signs of forming a bottom.

 

Observations

The VIX Index (better known as the Fear Index) remains elevated, but appears to have peaked, typical of a bottoming phase for the U.S. equity market.

Medium term technical indicators for U.S. equity markets (e.g. Percent of S&P 500 stocks trading above their 50 day moving average) remain deeply oversold. Significant technical signs of a bottom have started to appear. See end of this report for chart.

Medium term technical indicators for Canadian equity markets also remain deeply oversold. Significant technical signs of a bottom have started to appear. See end of this report for chart.

Most short term short term momentum indicators for U.S. markets and sectors (20 day moving averages, short term momentum indicators) were mixed last week. Selected sectors moved above their 20 day moving average, but short term momentum indicators turned lower on Friday.

Short term momentum indicators for Canadian markets and sectors also were mixed last week. Gold and energy were notably stronger while financials and the technology sectors were notably weaker.

Year-over-year consensus earnings for S&P 500 companies were reduced significantly again last week in recognition of a greater impact from the coronavirus. According to FactSet, first quarter 2020 earnings are expected to drop 7.3% (versus a decline of 5.2% last week) and revenues are expected to increase 1.5% (versus an increase of 2.0% last week). Second quarter 2020 earnings are expected to fall 15.1% (versus a drop of 10.1% last week) and revenues are expected to drop 2.1% (versus a drop of 0.4% last week). Third quarter earnings are expected to fall 4.8% (versus a fall of 1.1% last week) and revenues are expected to increase 0.9% (versus a gain of 2.0% last week). Fourth quarter earnings are expected to increase 1.7% (versus a gain of 4.5% last week) and revenues are expected to increase 2.8% (versus a gain of 3.6% last week). Earnings for all of 2020 are expected to decrease 4.5% (versus a previous decrease of 1.2%) and revenues are expected to increase 0.8% (versus a previous gain of 2.0%).

 

Economic News This Week

March Canadian Housing Starts to be released at 8:15 AM EDT on Wednesday are expected to slip to 205,000 from 210,100 units.

March Producer Price Index to be released at 8:30 AM EDT on Thursday is expected to slip 0.3% versus a decline of 0.6% in February. Excluding food and energy, March Producer Price Index is expected to increase 0.1% versus a decline of 0.3% in February.

March Canadian Employment to be released at 8:30 AM EDT on Thursday is expected to drop to 10,000 from 30,300 in February. March Canadian Employment Rate is expected to remain unchanged from February at 5.6%.

Weekly Initial Jobless Claims to be released at 8:30 AM EDT are expected to slip to 5.000 million from 6.648 million last week.

April Michigan Consumer Sentiment Index to be released at 10:00 AM EDT on Thursday is expected to drop to 75.0 from 89.1 in March.

February Wholesale Inventories to be released at 10:00 AM EDT on Thursday is expected to decline 0.5% versus a drop of 0.4% in January.

March Consumer Price Index to be released at 8:30 AM EDT on Friday is expected to slip 0.3% versus a gain of 0.1% in February. Excluding food and energy, March Consumer Price Index is expected to increase 0.1% versus a gain of 0.2% in February.

 

Trader’s Corner

 

Equity Indices and related ETFs

Daily Seasonal/Technical Equity Trends for April 3rd 2020

Green: Increase from previous day

Red: Decrease from previous day


Commodities

Seasonal/Technical Commodities Trends for April 3rd 2020

Green: Increase from previous day

Red: Decrease from previous day

 

Sectors

Daily Seasonal/Technical Sector Trends for April 3rd 2020

Green: Increase from previous day

Red: Decrease from previous day

 

Greg Schnell’s “Market Buzz”

Greg discusses “Finding indicators that work”. Following is a link:

 

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


S&P 500 Momentum Barometer

Percent of S&P 500 stocks trading above their 50 day moving average increased last week from 1.80 to 5.03. Percent remains deeply intermediate oversold and showing technical signs of bottoming.

 

TSX Momentum Barometers

Percent of TSX stocks trading above their 50 day moving average increased last week from 2.61 to 5.09. Percent remains deeply intermediate oversold and showing technical signs of bottoming.

 

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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