Vialoux's Technical Talk – October 20, 2014

by Don Vialoux, EquityClock.com

 

Pre-opening Comments for Monday October 20th

U.S. equity index futures lost overnight gains following release of IBM third quarter report. S&P 500 futures were down 1 points in pre-opening trade. Dow Jones Industrial futures were down 64 points in pre-opening trade.

IBM plunged $12.45 to 169.60 after reporting lower than consensus third quarter revenues and earnings. IBM is the second highest price weighted equity in the Dow Jones Industrial Average.

Other companies that reported third quarter results prior to the opening included Halliburton, Valeant, VF Corp, Gannet and Hasbro.

American International Group added $0.49 to $51.25 after Deutsche Bank upgraded the stock from Hold to Buy. Target is $60.

Bank of New York Mellon added $1.26 to $37.62 after Goldman Sachs upgraded the stock from Sell to Neutral.

Micron Technologies added $0.30 to $29.07 after Pacific Crest upgraded the stock from Sector Perform to Outperform. Target is $37.

Freeport McMoran Copper & Gold added $0.19 to $30.53 after Citigroup upgraded the stock from Sell to Neutral.

 

EquityClock.com’s Daily Market Comment

Following is a link:

http://www.equityclock.com/2014/10/20/stock-market-outlook-for-october-20-2014/

Note the list of companies that enter their period of seasonal strength today.

 

Economic News This Week

September Existing Home Sales to be released at 10:00 AM EDT on Tuesday are expected to increase to 5.11 million units from 5.05 million units in August

September Consumer Price Index to be released at 8:30 AM EDT on Wednesday is expected to be unchanged versus a loss of 0.2% in August. Excluding Food and Energy, September CPI is expected to increase 0.2% versus no change in August

August Canadian Retail Sales to be released at 8:30 AM EDT on Wednesday are expected to decline 0.1% versus a decline of 0.1% in July.

Bank of Canada announces its overnight lending rate at 10:00 AM EDT on Wednesday. No change in the 1.00% rate is expected.

Weekly Initial Jobless Claims to be released at 8:30 AM EDT on Thursday are expected to increase to 283,000 from 264,000 last week

September Leading Economic Indicators to be released at 10:00 AM EDT on Thursday are expected to increase 0.6% versus a gain of 0.2% in August

September New Home Sales to be released at 10:00 AM EDT on Friday are expected to decline to 473,000 from 504,000 in August.

 

Earnings News This Week

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Equity Trends

Summary of Weekly Seasonal/Technical Parameters for Equity Indices/ETFs

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Key:

Seasonal: Positive, Negative or Neutral on a relative basis applying EquityClock.com charts

Trend: Up, Down or Neutral

Strength relative to the S&P 500 Index: Positive, Negative or Neutral

Momentum based on an average of Stochastics, RSI and MACD: Up, Down or Mixed

Green: Upgrade

Red: Downgrade

The S&P 500 Index fell 18.37 points (1.02%) last week. Intermediate trend changed from up to neutral on a move below 1904.39. The Index remains below its 20 day moving average and closed below its 200 day moving average. Short term momentum indicators are trending down, but are oversold and showing early signs of bottoming. Note the surge in volume last week. Higher volume is a classic sign of capitulation and a short term bottom.

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Percent of S&P 500 stocks trading above their 50 day moving average plunged to 19.80% from 24.20% after reaching a low of 13.40% on Thursday. Percent reached the lowest level since October 2011 when the Index bottomed after more than a 10% correction. A confirmed recovery from this level historically has signaled the start of an intermediate uptrend by the S&P 500 Index. However, a one day recovery on Friday is too soon to call as the start of a confirmed recovery. Stay tuned!

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Percent of S&P 500 stocks trading above their 200 day moving average dropped last week to 44.20% from 47.00%. Percent remains in an intermediate downtrend, but may be trying to bottom.

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Bullish Percent Index for S&P 500 stocks fell last week to 41.60% from 55.80% and remained below its 20 day moving average. The Index remains in an intermediate downtrend.

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Bullish Percent Index for TSX Composite stocks fell last week to 54.10% from 60.25% and remains below its 20 day moving average. The Index remains in an intermediate downtrend.

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The TSX Composite Index added 0.32 points (0.00%) last week. Intermediate trend remained down (Score: 1.0). The Index remains below its 20, 50 and 200 day moving average (Score: 0.0). Strength relative to the S&P 500 Index changed to neutral from negative (Score: 0.5). Technical score improved to 0.5 from 0.0 out of 3.0. Short term momentum indicators are trending down, but are oversold and showing early signs of bottoming. Note the increase in volume. Similar scenario as the S&P 500 Index!

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Percent of TSX stocks trading above their 50 day moving average fell last week to 13.17% from 13.58% after reaching a three year low at 10.29%. Percent remains in an intermediate downtrend and showing early signs of trying to bottom.

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Percent of S&P 500 stocks trading above their 200 day moving average slipped last week to 35.39% from 36.21%. Percent remains in an intermediate downtrend, but showing early signs of bottoming.

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The Dow Jones Industrial Average dropped 163.69 points (1.00%) last week. Intermediate trend changed from up to down on moves below 16,333.79 and 16.015.32. The Average remains below its 20 and 50 day moving average and fell below its 200 day moving average. Strength relative to the S&P 500 Index remains positive. Technical score fell to 1.0 from 2.0 out of 3.0. Short term momentum indicators are trending down, but are oversold and showing early signs of bottoming. Note the increase in volume.

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Bullish Percent Index for Dow Jones Industrial Average stocks plunged last week to 53.33% from 73.33% and remained below its 20 day moving average. The Index remains in an intermediate downtrend.

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Bullish Percent Index for NASDAQ Composite stocks fell last week to 40.79% from 44.10% and remained below its 20 day moving average. The Index remains in an intermediate downtrend.

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The NASDAQ Composite Index fell 17.80 points (0.42%) last week. Intermediate trend remains neutral. The Index remains below its 20, 50 and 200 day moving averages. Strength relative to the S&P 500 Index remains negative. Technical score remains at 0.5 out of 3.0. Short term momentum indicators are trending down, but are oversold and showing early signs of bottoming.Note the surge in volume.

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The Russell 2000 Index added 29.01 points (2.75%) last week. Intermediate trend remains down. The Index remains below its 20 day moving average. Strength relative to the S&P 500 Index changed from negative to positive. Technical score improved to 1.0 from 0.0 out of 3.0. Short term momentum indicators have started to trend up.

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The Dow Jones Transportation Averages gained 254.58 points (3.23%) last week. Intermediate trend remain neutral. The Average remains below its 20 day moving average. Strength relative to the S&P 500 Index changed from negative to positive. Technical score improved to 1.5 from 0.5 out of 3.0. Short term momentum indicators have started to trend up.

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The Australia All Ordinaries Composite Index added 74.40 points (1.43%) last week. Intermediate trend remains down. The Index remains below its 20 day moving average. Strength relative to the S&P 500 Index changed to positive from neutral. Technical score improved to 1.0 from 0.5 out of 3.0. Short term momentum indicators are starting to trend up.

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The Nikkei Average plunged 768.04 points (5.02%) last week. Intermediate trend changed to neutral from up. The Average remains below its 20 day moving average. Strength relative to the S&P 500 Index changed to negative from neutral. Technical score dropped to 0.5 from 1.5 out of 3.0. Short term momentum indicators are trending down, but are oversold.

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iShares Europe 350 added $0.21 (0.52%) last week. Intermediate trend remains down. Units remain below their 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 down, but are oversold.

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The Shanghai Composite Index fell 33.36 points (1.40%) last week. Intermediate trend remains up. The Index fell below its 20 day moving average on Friday. Strength relative to the S&P 500 Index remains positive. Technical score slipped to 2.0 out of 3.0. Short term momentum indicators are trending down.

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iShares Emerging Markets added $0.21 (0.52%) last week. Intermediate trend remains down. Units remain below their 20 day moving average. Strength relative to the S&P 500 Index changed from negative to positive. Technical score improved to 1.0 from 0.0 out of 3.0. Short term momentum indicators are trending up.

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Currencies

The U.S. Dollar fell 0.77 (0.89%) last week. Intermediate trend remains up. The Dollar fell below its 20 day moving average. Short term momentum indicators are trending down.

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The Euro added 1.47 (1.17%) last week. Intermediate trend remains down. The Euro moved above its 20 day moving average. Short term momentum indicators are trending up.

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The Canadian Dollar fell US 0.50 cents (0.56%) last week. Intermediate trend remains down. The Canuck Buck remains below its 20 day moving average. Short term momentum indicators are mixed.

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The Japanese Yen added 0.73 (0.79%) last week. Intermediate trend remains down. The Yen remains above its 20 day moving average. Short term momentum indicators are trending up, but are overbought.

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Commodities

The CRB Index fell 2.96 points (1.07%) last week. Intermediate trend remains down. The Index remains below its 20 day moving average. Strength relative to the S&P 500 Index remains positive. Technical score remains at 1.0 out of 3.0.

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Gasoline lost another $0.03 per gallon (1.33%) last week. Intermediate trend remains down. Gas remains below its 20 day moving average. Strength relative to the S&P 500 Index remains negative.

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Crude Oil plunged $3.07 per barrel (3.58%) last week. Intermediate trend remains down. Crude remains below 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 down, but are oversold.

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Natural Gas slipped $0.09 (2.33%) last week. Intermediate trend changed to Neutral from Up on a move below $3.761. “Natty” remains below its 20 day moving average. Strength relative to the S&P 500 Index remains neutral. Technical score slipped to 1.0 from 1.5 out of 3.0. Short term momentum indicators are trending down.

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The S&P Energy Index dropped 6.83 points (1.11%) last week. Intermediate trend remains down. The Index remains below 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 down, but are oversold and showing early signs of bottoming.

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The Philadelphia Oil Services Index slipped 0.93 points (0.39%) last week. Intermediate trend remains down. The Index remains below 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 down , but are oversold and showing early signs of bottoming.

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Gold gained $17.30 per ounce (1.42%) last week. Intermediate trend remains down. Gold remains above its 20 day moving average. Strength relative to the S&P 500 Index remains positive. Technical score remains at 2.0 out of 3.0. Short term momentum indicators are trending up.

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Silver added $0.03 per ounce (0.17%) last week. Intermediate trend remains down. Silver remains below its 20 day moving average. Strength relative to the S&P 500 Index remains positive. Technical score remains at 1.0 out of 3.0. Short term momentum indicators are trending up. Strength relative to Gold remains negative.

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The AMEX Gold Bug Index fell 1.97 points (1.04%) last week. Intermediate trend remains down. The Index remains below 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. Strength relative to Gold remains negative.

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Platinum slipped $0.10 per ounce (0.01%) last week. Trend remains down. PLAT remains below its 20 day moving average. Strength relative to the S&P 500 and Gold remains negative.

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Palladium dropped $28.35 per ounce (3.11%) last week. Intermediate trend remains down. PALL remains below its 20 day moving average. Strength relative to the S&P 500 Index and Gold remains negative. Technical score remains at 0.0 out of 3.0.

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Copper slipped $0.04 per lb. (1.32%) last week. Intermediate trend remains down. Copper remains below its 20 day moving average. Strength relative to the S&P 500 Index remains positive. Technical score remains at 1.0 out of 3.0. Short term momentum indicators are mixed.

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The TSX Metals & Mining Index fell another 14.27 points (2.01%) last week. Intermediate trend remains down. The Index remains below its 20 day moving average. Strength relative to the S&P 500 Index remains positive. Technical score remains at 1.0 out of 3.0. Short term momentum indicators are trending down, but are oversold.

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Lumber fell $8.10 (2.36%) last week. Intermediate trend remains neutral. Lumber fell below its 20 day moving average. Strength relative to the S&P 500 Index remains positive.

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The Grain ETN added $1.32 (3.88%) last week. Intermediate trend remains down. Units remain above their 20 day moving average. Strength relative to the S&P 500 Index remains positive. Technical score remains at 2.0 out of 3.0.

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The Agriculture ETF added $0.14 (0.28%) last week. Intermediate trend remains down. Units remain below their 20 day moving average. Strength relative to the S&P 500 Index improved to Neutral from Negative. Technical score improved to 0.5 from 0.0 out of 3.0. Short term momentum indicators are trending down, but are oversold and showing early signs of bottoming.

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Interest Rates

The yield on 10 year treasuries fell 10 basis points (4.43%) last week. Intermediate trend remains down. Yield remains below its 20 day moving average. Short term momentum indicators are trending down, but are oversold and showing early signs of bottoming.

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Conversely, price of the long term Treasury ETF added $1.02 (0.85%) last week. Intermediate trend remains up. Price remains above its 20 day moving average.

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Other Issues

The VIX Index rose 1.07 (4.87%) last week, but spiked as high as 31.06% on Wednesday. A typical blow off! Intermediate trend remains up. The Index remains above its 20 day moving average.

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Third quarter earnings reports are a focus this week. This is the week for the most reports during the season. Industrial and Material companies are prominent on the list of companies scheduled to report. Results to date have been slightly better than consensus (Average earnings gain on a year-over-year basis: 6.9%, average revenue gain: 3.9%). However, fourth quarter guidance frequently was lowered. Consequently, negative responses were significantly higher than positive responses. Look for more of the same this week.

Economic news is expected to be mixed this week.

Intermediate technicals remain oversold. Short term technicals (i.e. momentum indicators, Percent of stocks trading above their 50 day moving average) are showing early signs of bottoming. Higher than average volume on Thursday and Friday suggests capitulation and a short term low by North American equity indices.

Seasonal influences begin to turn positive at this time of year. Optimal entry zone for the S&P 500 Index and the TSX Composite Index is October 28th +/- three weeks. Seasonal influences frequently occur earlier than usual during U.S. mid-term election years.

International events remain a quiet concern including economic deterioration in Europe (particularly Greece), the Ebola fright and simmering conflicts in Ukraine, Palestine, Iraq and Syria.

 

The Bottom Line

A bottoming process after a intermediate correction in world equity markets finally appeared late last week. It’s too early to make a major commitment in equity markets, but it is not too late to make initial commitments. Preferred selections are seasonally sensitive economic sector ETFs and individual equities that already are showing strength relative to the market (e.g. equities with a technical score of at least 2.0).

Individual S&P 500 Equities That Recently Entered Into A Period of Seasonal Strength

During the past two weeks, www.EquityClock.com has published a list each day of individual $&P 500 stocks that have entered their period of seasonal strength. EquityClock.com also noted that selections must be supported by improving technical parameters before they are candidates for purchase for a seasonal trade expected between now and the end of the year. Following is the list.

A AAPL ADM AES AGCO ALTR AMAT AMD BCR BTU BK CA CAE.TO CAKE CCO.TO CHRW CIEN CMS CPWR CSCO CTSH DHR DO EMR EQT ETN FAST FLS GLW GPS GWW INTC KLAC KMB KO LLTC MAT MCD MCHP MON MS MRK MSFT NUE NWSA OI PCL PNRA POT PH QLGC RAI SEE SEIC SJR.TO SRCL STLD SYK SYY TD.TO TRV TWX UTX UNH USG VALE VAR WAG WDC WFT.TO WLT YHOO

Above stocks with a technical score of 2.0 or higher include:

CAE.TO, CAKE, CHRW, CMS, CTSH, DHR, DO, MON, PCL, PNRA, QLGC, SRCL, VALE, UNH

 

Special Free Services available through www.equityclock.com

Equityclock.com is offering free access to a data base showing seasonal studies on individual stocks and sectors. The data base holds seasonality studies on over 1000 big and moderate cap securities and indices. To login, simply go to http://www.equityclock.com/charts/

Following is an example:

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StockTwits on Friday

Technicals on individual S&P equities: quiet to 10:30 AM . $URBN broke support. $REGN and $UNH broke resistance

 

Technical Action by Individual Equities on Friday

By the close on Friday, two more S&P 500 stocks broke resistance: LEN and MJN. No TSX 60 stocks broke intermediate support or resistance.

 

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 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 Management (Canada) Inc.

Individual equities mentioned in StockTwits are not held personally or in HAC.

Horizons Seasonal Rotation ETF HAC October 17th 2014

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