Vialoux's Technical Talk: May 5, 2014

by Don Vialoux, Timing the Market
Economic News This Week

April ISM Services to be released at 10:00 AM EDT on Monday is expected to increase to 54.0 from 53.1 in March.

March Trade Deficit to be released at 8:30 AM EDT on Tuesday is expected to increase to $42.5 billion from $42.3 billion in February.

March Canadian Merchandise Trade to be released at 8:30 AM EDT on Tuesday is expected to increase to a surplus of $500 million from a surplus of $300 million in February.

First Quarter Productivity to be released at 8:30 AM EDT on Wednesday is expected to decline 1.2% versus a gain of 1.8% in the fourth quarter.

Canadian March Housing Starts to be released at 8:15 AM EDT on Thursday are expected to increase to 177,000 units from 156,800 units in February.

Weekly Jobless Claims to be released at 8:30 AM EDT on Thursday are expected to drop to 325,000 from 344,000 last week.

Canadian April Employment to be released at 8:30 AM EDT on Friday is expected to fall to 21,300 from 42,900 in March. April Unemployment Rate is expected to remain unchanged from March at 6.9%.

Earnings News This Week

Equity Trends

The S&P 500 Index added 17.74 points (0.95%) last week. Intermediate trend remains neutral. The Index briefly moved above its all-time closing high on Friday, but was unable to sustain that level. The Index remains above its 20 and50 day moving averages. Short term momentum indicators are trending up.

Percent of S&P 500 stocks trading above their 50 day moving average increased last week to 59.00% from 53.80%. Percent is intermediate overbought.

Percent of S&P 500 stocks trading above their 200 day moving average increased last week to 80.00% from 79.20%. Percent remains intermediate overbought and trending down.

Bullish Percent Index for S&P 500 stocks increased last week to 69.40% from 68.20% and moved above its 15 day moving average. The Index remains intermediate overbought.

Bullish Percent Index for TSX Composite stocks increased last week to 84.08% from 82.45% and remained above its 15 day moving average. The Index remains intermediate overbought.

The TSX Composite Index added 231.58 points (1.59%) last week. Intermediate trend remains up (Score: 1.0). The Index remains above its 20 day moving average (Score: 1.0). Strength relative to the S&P 500 Index remains positive (Score: 1.0). Technical score remains at 3.0 out of 3.0. Short term momentum indicators are trending up, but are overbought.

Percent of TSX stocks trading above their 50 day moving average increased last week to 72.95% from 67.21%. Percent remains intermediate overbought.

Percent of TSX stocks trading above their 200 day moving average increased last week to 81.56% from 81.15%. Percent remains intermediate overbought.

The Dow Jones Industrial Average increased 151.43 points (0.93%) last week. The Average reached an all-time closing high on Thursday, but trend based on inter-day highs and lows remains neutral. The Average moved above its 20 day moving average. Strength relative to the S&P 500 Index changed from neutral to negative. Technical score changed to 1.5 from 2.0 out of 3.0. Short term momentum indicators are trending up.

Bullish Percent Index for Dow Jones Industrial Average stocks increased last week to 80.00% from 66.67% and moved above its 15 day moving average. The Index remains intermediate overbought.

Bullish Percent Index for NASDAQ Composite Index stocks dropped last week to 52.33% from 54.45%. The Index remains overbought and trending down.

The NASDAQ Composite Index gained 48.34 points (1.19%) last week. Intermediate trend remains down. The Index moved above its 20 day moving average. Strength relative to the S&P 500 Index remains negative. Technical score remains at 0.0 out of 3.0. Short term momentum indicators are trending up.

The Russell 2000 Index added 5.77 points (0.51%) last week. Intermediate trend remains down. The Index moved above its 20 day moving average on Friday. Strength relative to the S&P 500 Index remains negative. Technical score remains at 0.0 out of 3.0. Short term momentum indicators are mixed.

The Dow Jones Transportation Average added 112.70 points (1.49%) last week. Intermediate trend remains up. The Average remains above its 20 day moving average. Strength relative to the S&P 500 Index remains positive. Technical score remains at 3.0 out of 3.0. Short term momentum indicators are trending up.

The Australia All Ordinaries Composite Index fell 76.70 points (1.39%) last week. Intermediate trend remains up. The Index fell below its 20 day moving average. Strength relative to the S&P 500 Index changed from positive to negative. Technical score fell from 3.0 to 1.0 out of 3.0. Short term momentum indicators are trending down.

The Nikkei Average added 28.25 points (0.02%) last week. Intermediate trend remains down. The Average moved above its 20 day moving average on Friday. Strength relative to the S&P 500 Index remains negative. Technical score improved to 1.0 from 0.0 out of 3.0. Short term momentum indicators are trending up.

iShares Europe 350 units gained 40.90 points (1.85%) last week. Intermediate trend remains up. Units remain above its 20 day moving average. Strength relative to the S&P 500 Index remains positive. Technical score remains at 3.0 out of 3.0. Short term momentum indicators are trending up, but are overbought.

The Shanghai Composite Index slipped 10.16 points (0.50%) last week. Intermediate trend changed from up to neutral on a move below 2,024.19. The Index remains below its 20 day moving average. Strength relative to the S&P 500 Index changed from neutral to negative. Technical score dropped to 0.5 from 1.5 out of 3.0. Short term momentum indicators are trending down.

iShares Emerging Markets added $0.79 (1.94%) last week. Intermediate trend remains up. Units moved above their 20 day moving average on Friday. Strength relative to the S&P 500 Index remains negative. Technical score improve to 2.0 from 1.0 out of 3.0. Short term momentum indicators are mixed.

Currencies

The U.S. Dollar Index lost 0.27 (0.34%) last week. Intermediate trend remains neutral. The Index remains below its 20 day moving average. Short term momentum indicators are trending down. Note the test of long term support at 79.06.

The Euro added 0.39 (0.28%) last week. Intermediate trend remains up. The Euro remains above its 20 day moving average. Short term momentum indicators are trending up.

The Canadian Dollar added 0.42 (0.46%) last week. Intermediate trend remains neutral. The Canuck Buck recovered to its 20 day moving average. Short term momentum indicators are trending up.

The Japanese Yen slipped 0.09 (0.09%) last week. Intermediate trend remains down. The Yen moved above it is 20 day moving average on Friday. Short term momentum indicators are mixed.

Commodities

The CRB Index fell 3.55 points (1.14%) last week. Intermediate trend remains up. The Index fell below its 20 day moving average. Strength relative to the S&P 500 Index changed from positive to negative. Technical score fell from 1.0 from 3.0 out of 3.0

Gasoline fell $0.08 per gallon (2.65%) last week. Intermediate trend remains up. Gasoline fell below its 20 day moving average. Strength relative to the S&P 500 Index changed from positive to negative. Technical score fell to 1.0 from 3.0 out of 3.0.

Crude Oil fell $0.85 per barrel (0.84%) last week. Intermediate trend remains neutral. Crude remains below its 20, 50 and 200 day moving averages. Strength relative to the S&P 500 Index changed from neutral to negative. Technical score fell to 0.5 from 1.5 out of 3.0. Short term momentum indicators are trending down

Natural Gas added $0.03 per MBtu (0.65%) last week. Intermediate trend remains neutral. Gas remains above its 20 day moving average. Strength relative to the S&P 500 Index remains neutral. Technical score remains at 2.0 out of 3.0. Short term momentum indicators are trending up.

The S&P Energy Index added 4.41 points (0.65%) last week. Intermediate trend remains up. The Index remains above its 20, 50 and 200 day moving average. Strength relative to the S&P 500 Index remains positive. Technical score remains at 3.0 out of 3.0. Short term momentum indicators are trending up, but are overbought.

The Philadelphia Oil Services Index slipped 1.70 points (0.57%) last week. Intermediate trend remains up. The Index remains above its 20 day moving average. Strength relative to the S&P 500 Index changed from positive to neutral. Technical score dipped to 2.5 from 3.0 out of 3.0. Short term momentum indicators are trending down.

Gold added $0.40 per ounce (0.03%) last week. Intermediate trend remains down. Gold remains above its 20 day moving average. Strength relative to the S&P 500 Index remains neutral. Technical score remains at 1.5 out of 3.0. Short term momentum indicators are mixed.

The AMEX Gold Bug Index fell 2.17 points (0.95%) last week. Intermediate trend remains down. The Index remains above its 20 day moving average. Strength relative to the S&P 500 Index and Gold changed from positive to neutral. Technical score slipped to 1.5 from 2.0 out of 3.0. Short term momentum indicators are mixed.

Silver fell $0.15 (0.76%) last week. Intermediate trend remains down. Silver remains below its 20 day moving average. Strength relative to the S&P 500 Index and Gold changed from neutral to negative. Technical score fell to 0.0 from 0.5 out of 3.0. Short term momentum indicators are mixed.

See Mark Leibovit’s Tutorial on Silver released over the weekend. Following is the link:

http://www.vrtrader.com/files/VR_Gold_Letter_140502.pdf

Platinum gained $16.30 per ounce (1.14%) last week. Intermediate trend remains down. Platinum moved above its 20 day moving average. Strength relative to the S&P 500 Index and Gold remains neutral. Technical score remains at 1.5 out of 3.0.

Palladium gained $2.90 (0.36%) last week. Trend remains up. Palladium remains above its 20 day moving average. Strength relative to S&P and Gold remains positive. (Score: 3.0)

Copper fell $0.05 per lb. (1.60%) last week. Intermediate trend remains up. Copper remains above its 20 day moving average. Strength relative to the S&P 500 Index changed from positive to neutral. Technical score slipped to 2.5 from 3.0 out of 3.0. Short term momentum indicators are neutral.

The TSX Metals & Mining Index added 6.67 points (0.77%) last week. Intermediate trend changed from neutral to up on a move above 867.73. The Index remains above its 20 day moving average. Strength relative to the S&P 500 Index remains positive. Technical score improved to 3.0 from 2.5 out of 3.0. Short term momentum indicators are trending up, but are overbought.

Lumber gained 8.90 points (2.65%) last week. Trend remains negative. Lumber remains above its 20 day MA. Strength relative to the S&P 500 Index changed from neutral to positive.

The Grain ETN fell $0.58 (1.13%) last week. Intermediate trend remains up. Units remain above their 20 day moving average. Strength relative to the S&P 500 Index changed from positive to neutral. Technical score slipped to 2.5 from 3.0 out of 3.0.

The Agriculture ETF added $0.54 (0.31%) last week. Intermediate trend remains up. Units remain above their 20 day moving average. Strength relative to the S&P 500 Index remains neutral. Technical score remains at 2.5 out of 3.0. Short term momentum indicators are trending up, but are overbought.

Interest Rates

The yield on 10 year Treasuries fell 7.5 basis points (2.81%) last week. Trend changed from neutral to negative on Friday on a move below 2.579%. Yield remains below its 20 day moving average. Short term momentum indicators are trending down.

Conversely, price of the long term Treasury ETF added $1.38 (1.24%) last week. Intermediate trend remains up. Units remain above their 20 day moving average.

Other Issues

The VIX Index fell 1.22 (8.63%) last week. Trend remains neutral. The Index remains below its 20, 50 and 200 day moving averages.

First quarter reports continue to pour in. Earnings and revenues continue to slightly beat consensus estimates. The focus this week is on the energy sector.

Economic news this week is quiet and is unlikely to impact equity markets significantly.

Short and intermediate technical indicators for most equity markets and sectors are overbought and some are rolling over.

International focus is on Ukraine. Other notable news events include the ECB and Bank of England interest rate announcements on Thursday (no change expected) and China Final HSBC Manufacturing PMI announced on Monday (an improvement to 48.4 from 48.3 expected).

On average, optimal day for the end of the period of seasonal strength from October to May for world equity markets is May 5^th.

The Bottom Line

The S&P 500 Index, Dow Jones Industrial Average and economic sensitive sectors (Technology, Industrials, Materials) reached an intermediate peak on April 4^th and have struggled since then with increasing volatility. In addition, their period of seasonal strength is at or near the end. Strength is an opportunity to take profits. Reductions in market and economic sensitive sectors are prudent at current prices.

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Disclaimer: Comments, charts and opinions offered in this report by www.timingthemarket.ca  and 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. Don and Jon Vialoux are Research Analysts with Horizons ETFs Management (Canada) Inc.  All of the views expressed herein are the personal views of the authors and are not necessarily the views of Horizons ETFs Investment Management (Canada) Inc., although any of the recommendations found herein may be reflected in positions or transactions in the various client portfolios managed by Horizons ETFs Investment Management (Canada) Inc.

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Horizons Seasonal Rotation ETF HAC May 2^nd 2014

Copyright © Don Vialoux, Jon Vialoux, Brooke Thackray