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Tech Talk for Monday July 22nd 2019

 

The Bottom Line

Seasonal weakness in world equity indices appeared on schedule last week. Most equity markets are intermediate overbought and have started to roll over. At this time of year, equity markets have a history of entering into a period of increased volatility with a downward bias into mid-October. Events trigger seasonal weakness this year include lower year-over-year second quarter earnings reports by major corporations (including 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 next week), growing Middle East tensions and unsettled trade negotiations.

 

Observations

Seasonal weakness in U.S and Canadian equity indices appeared on schedule last week

Technical action by individual S&P 500 stocks was mixed last week. Number of stocks breaking intermediate resistance totaled 40 while number of stocks breaking support totaled 24. The Up/Down ratio advanced last week to (273/137=) 1.99 from 1.96.

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

Medium term technical indicators in Canada were mixed last week. Percent of TSX stocks trading above their 50 day moving average moved lower while Bullish Percent Index for TSX stocks moved higher. 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 moved lower last week

Short term technical indicators for Canadian markets and sectors also moved last week.

Frequency of quarterly reports increases this week. Another 144 S&P 500 companies and 10 Dow Jones Industrial Average companies are scheduled to release results. Frequency of reports by major Canadian companies ramps up.

Forecasts for S&P 500 revenues and earnings moved slightly lower again last week. According to FactSet, 16% of S&P 500 companies have reported to date: Second quarter earnings are expected to drop 2.7% on a year-over-year basis (versus 3.0% last week) and second quarter revenues are expected to increase 3.8% (versus 3.7% last week). Six companies have issued negative second quarter guidance and 5 companies have issued positive guidance. Third quarter earnings are expected to drop 1.4% (versus a drop of 0.8% last week) and revenues are expected to increase 3.2% (versus 3.3% last week). Fourth quarter earnings are expected to increase 5.4% (versus 6.0% last week) and fourth quarter revenues are expected to increase 4.0% (versus 4.2% last week). For all of 2019, earnings are expected to increase 2.3% (versus 2.4% last week) and revenues are expected to increase 4.4% (versus 4.3% last week). First quarter 2020 earnings are expected to increase 9.5% (versus 9.8% last week) and revenues are expected to increase 5.9 % (versus 5.8% last week). Second quarter 2020 earnings are expected to increase 12.0% (versus 13.2% last week) and revenue are expected to increase 6.7% (versus 6.6% last week).

The VIX Index has a history of reaching a seasonal low on July 17th for an upside move to mid-October. A bounce by the VIX Index last week from 12.24% level to 14.34% suggests that history is about to repeat.

 

Economic News This Week

June Existing Home Sales to be released at 10:00 AM EDT on Tuesday are expected to increase to 5.34 million units from 5.34 million units in May.

June New Home Sales to be released at 10:00 AM EDT on Wednesday are expected to increase to 659,000 units from 626,000 units in May.

June Durable Goods Orders to be released at 8:30 AM EDT on Thursday are expected to increase 0.7% versus a drop of 1.3% in May. Excluding Transportation Orders, June Durable Goods Orders are expected to increase 0.2% versus a gain of 0.4% in May.

Weekly Jobless Claims to be released at 8:30 AM EDT on Thursday are expected to increase to 217,000 from 216,000 last week.

Second quarter real GDP to be released at 8:30 AM EDT on Friday is expected to grow at a 1.8% rate versus growth at a 3.1% rate in the first quarter.

 

Selected Earnings News This Week

 

Trader’s Corner

 

Equity Indices and related ETFs

Daily Seasonal/Technical Equity Trends for July 19th 2019

Green: Increase from previous day

Red: Decrease from previous day

 

Commodities

Daily Seasonal/Technical Commodities Trends for July 19th 2019

Green: Increase from previous day

Red: Decrease from previous day

 

Sectors

Daily Seasonal/Technical Sector Trends for July 19th 2019

Green: Increase from previous day

Red: Decrease from previous day

 

Keith Richard’s Blog

Keith asks, “Arbitration opportunity”? See:

https://www.valuetrend.ca/arbitrage-opportunity/

 

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

Metals & Mining SPDRs $XME moved above $28.55 setting an intermediate uptrend.

Technical action by S&P 500 stocks to 10:00: Bullish. Intermediate breakouts: $ETFC $STT $BK $ALB

Editor’s Note: After 10:00 AM EDT, intermediate breakouts included DFS and CMI. Breakdowns included LKQ and REG.

Canada Retail Sales up 13.5% (NSA) in May, stronger than the 10.0% increase that is average for the spring month. $MACRO #CAD #CDNecon

 

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 dropped last week to 76.00 from 85.20. Percent has rolled over from an intermediate overbought level.

Bullish Percent Index for S&P 500 stocks slipped last week to 73.20 from 74.00. The Index remains intermediate overbought and showing early signs of rolling over.

 

TSX Momentum Barometers

Percent of TSX stocks trading above their 50 day moving average slipped last week to 59.05 from 60.26. Percent changed to intermediate overbought to intermediate neutral on a drop below 60.00 and has rolled over.

Bullish Percent Index for TSX stocks increased last week to 65.00 from 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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