Tech Talk for Monday March 20th 2017

Tech Talk for Monday March 20th 2017

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by Don Vialoux, Timingthemarket.ca

 

Editor’s Note: Next Tech Talk report is available on Monday March 27th

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The Bottom Line

Highs set by U.S. equity markets on March 1st (2,400.98 for the S&P 500 Index and 21,169.11 for the Dow Jones Industrial Average) likely will prove to be intermediate highs lasting well into April and possibly longer. North American equity markets rallied briefly last week following release of the FOMC announcement, but failed to move to new highs. Traders continue to look for excuses triggered by short term technical indicators to take profits in North American equities. International equity markets (particularly emerging markets) continue to offer better opportunities for equity investors during their current period of seasonal strength lasting into at least early May.

 

Observations

Technical action by S&P 500 stocks was mildly bullish last week: 47 stocks broke intermediate resistance levels and 11 stocks broke intermediate support levels. However, most of the stocks breaking resistance already were in uptrends. Number of stocks in an uptrend increased to 337 from 335, number of stocks in a neutral trend remained at 51 and number of stocks in a downtrend slipped to 112 from 114. The Up/Down ratio increased last week to (337/112=) 3.01 from 2.94.

Short term technical indicators (e.g. 20 day moving averages, short term momentum indicators) for a wide variety of equity indices, sectors and commodities) recovered slightly, but in many cases have returned to overbought levels.

Intermediate technical indicators (e.g. Percent of stocks trading above their 50 day moving average, Bullish Percent Index) remain intermediate overbought and are trending down.

Prospects for S&P 500 companies for the first quarter and 2017 remain promising. According to FactSet, first quarter earnings are expected to increase on a year-over-year basis by 9.0% and revenues are expected to increase 7.2% (unchanged from the previous week). 78 companies have issued negative first quarter earnings guidance while 32 companies have issued positive guidance. Consensus for 2017 calls for a 9.8% in earnings per share and a 5.3% increase in revenues. Consensus for 2018 calls for a 12.0% increase in earnings per share and a 4.8% increase in revenues.

Economic focus this week in the U.S. is on New Home Sales on Thursday. A small increase is anticipated.

Economic focuses in Canada this week are on the Budget on Wednesday evening, January Retail Sales on Tuesday and February Consumer Prices on Thursday.

Earnings news is quiet this week. U.S. focuses are on Nike on Tuesday and KB Homes on Thursday. Canadian focuses are on Lennar on Tuesday and Power Corp on Friday.

International focus is on the G20 Finance Ministers meeting that occurred over the weekend.

History shows U.S. equity markets struggle in March and April after a first term President is elected. Election promises prove to take longer than expected to implement due to time needed to install a new cabinet and working through the Congressional process with new political friends and foes. Trump’s tenure to date as President has been controversial at best and uncoordinated at worst.

Thought on the Financial Services sector: Bank stocks on both sides of the border recorded significant technical deterioration last week. Notable was weakness in the S&P Financials Index on Friday when Relative Strength turned negative and the Index dropped below its 20 day moving average. Momentum indicators already had turned down.

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Ditto for the Canadian banks! ZEB.TO completed a double top pattern on a move below $28.03

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Thoughts on the precious metals and precious metal equity sectors: Their periods of seasonal strength from mid-December to late February expired on scheduled this year. After losing approximately half of their gains since the third week in February, they reached short term bottoms 10 days ago and recovered nicely last week. Short term technical indicators (momentum, 20 day moving averages) turned positive last week. If continued to be held, stick with the trade until short term technical indicators become overbought and show signs of rolling over. It’s a question of “When do I take trading profits”? Stay tuned.

Thoughts on the U.S. and Canadian Energy sectors: The TSX Energy Index is in the early stages of forming a potential double bottom pattern. Relative strength improved to neutral and short term momentum indicators turned higher last week. The S&P Energy Index also showed improved short term momentum indicators. These are encouraging technical signs during a period when their seasonal trends are positive until mid-May. However, improving technical signs to date are not yet sufficient to introduce/add to positions for a seasonal trade. Stay tuned!

 

Economic News This Week

Canadian January Retail Sales to be released at 8:30 AM EDT on Tuesday are expected to increase 1.1% versus a decline of 0.5% in December. Excluding auto sales, Canadian January Retail Sales are expected to increase 1.2% versus a gain of 0.3% in December

February Existing Homes to be released at 10:00 AM EDT on Wednesday are expected to slip to 5.54 million units from 5.69 million units in January.

Canadian Budget is released at 4:00 AM EDT on Wednesday.

Weekly Initial Jobless Claims to be released at 8:30 AM EDT on Thursday are expected to dip to 239,000 from 241,000 last week.

February New Home Sales to be released at 10:00 AM EDT on Thursday are expected to increase to 560,000 units from 555,000 units in January.

February Durable Goods Orders to be released at 8:30 AM EDT on Friday are expected to increase 1.3% versus a gain of 1.8% in January. Excluding Transportation, February Durable Goods Orders are expected to increase 0.7% versus a decline of 0.2% in January.

February Canadian Consumer Price Index to be released at 8:30 AM EDT on Friday is expected to increase 0.5% versus a gain of 0.9% in in January.

 

Earnings News This Week

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Equity Indices and Related ETFs

Daily Seasonal/Technical Equity Trends for March 17th 2017

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Green: Increase from previous day

Red: Decrease from previous day

 

Calculating Technical Scores

Technical scores are 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.

 

The S&P 500 Index added 5.65 points (0.24%) last week. Intermediate trend remains up. The Index remains above its 20 day moving average. Short term momentum indicators are trending down.

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Percent of S&P 500 stocks trading above their 50 day moving average (Also known as the S&P 500 Momentum Barometer) increased last week to 69.00 from 68.80. Percent remains intermediate overbought and trending down.

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Percent of S&P 500 stocks trading above their 200 day moving average increased last week to 80.00 from 76.20. Percent remains intermediate overbought.

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Bullish Percent Index was unchanged last week at 76.60% and remained below its 20 day moving average. The Index remains intermediate overbought and trending down.

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Bullish Percent Index for TSX Composite stocks dropped to 72.29% from 73.09% and remained below its 20 day moving average. The Index remains intermediate overbought and trending down.

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The TSX Composite Index slipped another 16.27 points (0.10%) last week. Intermediate trend changed to down from up on a move below 15,396 (Score: -2). Strength relative to the S&P 500 Index remains Negative (Score: -2). The Index remains below its 20 day moving average (Score: -1). Short term momentum indicators are trending up (Score: 1). Technical score dropped last week to -4 from -2

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Percent of TSX stocks trading above their 50 day moving average (Also known as the TSX Momentum Barometer) increased last week to 46.94 from 44.67. Percent remains intermediate neutral and trending down.

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Percent of TSX stocks trading above their 200 day moving average increased last week to 64.08 from 63.52. Percent remains intermediate overbought and trending down.

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The Dow Jones Industrial Average added 11.64 points (0.06%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index slipped to Neutral from Positive. The Average remains above its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to 2 from 4.

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Bullish Percent Index for Dow Jones Industrial Average stocks increased last week to 86.67% from 83.33% and remained above its 20 day moving average. The Index remains intermediate overbought.

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Bullish Percent Index for NASDAQ Composite stocks increased last week to 64.36% from 64.08% and remained below its 20 day moving average. The Index remains intermediate overbought and trending down.

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The NASDAQ Composite Index gained 39.27 points (0.67%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index turned Positive. The Index remains above its 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to 6 from 0.

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The Russell 2000 Index gained 26.26 points (1.92%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Negative. The Index moved above its 20 day moving average on Friday. Short term momentum indicators are trending up. Technical score increased last week to 2 from -2.

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The Dow Jones Transportation Average dropped 144.31 points (1.55%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Negative. The Average remains below its 20 day moving average. Short term momentum indicator remains down. Technical score remained last week at -2.

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The Australia All Ordinaries Composite Index added 29.60 points (0.51%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index improved to Neutral from Negative. The Index remained above its 20 day moving average. Short term momentum indicators are trending up. Technical score improved last week to 4 from 0.

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The Nikkei Average dropped 83.02 points (0.42%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remained Neutral. The Average remains above its 20 day moving average. Short term momentum indicators are trending higher. Technical score remained last week at 4.

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Europe iShares gained $0.92 (2.25%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Positive. Units remained above their 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 6.

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The Shanghai Composite Index gained 24.69 points (0.77%) last week. Intermediate trend remains Neutral. Strength relative to the S&P 500 Index improved to Neutral from Negative. The Index slipped back below its 20 day moving average on Friday. Short term momentum indicators are trending up. Technical score improved last week to 0 from -4.

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Emerging Markets ETF gained $1.50 (3.85%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to Positive from Negative. Units moved above their 20 day moving average. Short term momentum indicators are trending up. Technical score improved last week to 6 from -2.

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Currencies

The U.S. Dollar dropped another 0.93 (0.92%) last week. Intermediate trend remains up. The Dollar moved below its 20 day moving average. Short term momentum indicators are trending down.

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The Euro added 0.46 (0.43%) 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 gained US 0.70 cents (0.94%) last week. Intermediate trend remains neutral. The Canuck Buck remained below its 20 day moving average. Short term momentum indicators are trending up.

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The Japanese Yen added 1.54 (1.77%) last week. Intermediate trend remains down. The Yen moved above its 20 day moving average. Short term momentum indicators are trending up.

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The British Pound gained 2.19 (1.80%) last week. Intermediate trend remains down. The Pound moved above its 20 day moving average on Friday. Short term momentum indicators are trending up.

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Commodities

Daily Seasonal/Technical Commodities Trends for March 17th 2017clip_image002[9]

Green: Increase from previous day

Red: Decrease from previous day

* Excludes adjustment from rollover of futures contracts

 

The CRB Index gained 1.83 points (1.00%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains Negative. The Index remains below its 20 day moving average. Short term momentum indicators are trending up. Technical score improved last week to -4 from -6.

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Gasoline added $0.01 per gallon (0.62%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Negative. Gas remains below its 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to -4 from -6

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Crude Oil gained $0.82 per barrel (1.69%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains Negative. Crude remains below its 20 day moving average. Short term momentum indicators are trending up. Technical score improved last week to -4 from -6.

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Natural Gas dropped $0.16 (5.32%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains Positive. “Natty” remains above its 20 day moving average. Short term momentum indicators have turned down. Technical score slipped last week to 0 from 2.

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The S&P Energy Index gained 1.67 points (0.33%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains Negative. The Index remains below its 20 day moving average. Short term momentum indicators have turned up. Technical score increased last week to -4 from -6.

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The Philadelphia Oil Services Index added 1.24 points (0.74%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains Negative. The Index remains below its 20 day moving average. Short term momentum indicators have turned up. Technical score improved last week to -4 from -6.

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Gold gained $28.80 per ounce (2.40%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to Neutral from Negative. Gold moved above its 20 day moving average on Friday. Short term momentum indicators are trending up. Technical score improved last week to 4 from -2.

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Silver gained $0.49 per ounce (2.90%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Negative. Silver remains below its 20 day moving average. Short term momentum indicators have turned up. Technical score increased last week to 0 from -2.

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The AMEX Gold Bug Index added 8.82 points (4.73%) last week. Intermediate trend remains Neutral. Strength relative to the S&P 500 Index changed to Neutral from Negative. The Index moved above its 20 day moving average. Short term momentum indicators are trending up. Technical score improved last week to 2 from -4.

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Platinum gained $24.80 per ounce (2.64%) last week. Intermediate trend remains up. Relative strength remained Negative. Trades below its 20 day MA. Momentum turned up. Score: 0

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Palladium gained $30.65 per ounce (4.11%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to Neutral from Negative. PALL moved above its 20 day moving average. Short term momentum trend up. Technical score increased to 4

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Copper gained $0.09 per lb. (3.46%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to Neutral from Negative. Copper moved above its 20 day moving average. Short term momentum indicators have turned up. Technical score increased last week to 4 from -2.

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The BMO Base Metal Equity ETF gained $0.37 (3.81%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains negative. Units remain below their 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to 2 from -2

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Lumber dropped $0.70 (0.19%) last week. Trend changed to down. Relative strength remained Negative. Trades below its 20 day MA. Momentum remains down. Score down to -6 from 0

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Grain ETN slipped $0.02 (0.07%) last week. Trend remains Neutral. Relative strength remains Negative. Units trade below their 20 day moving average. Momentum turned up. Technical score improved to -2 from -4.

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The Agriculture ETF added $0.22 (0.41%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index changed to Neutral from Negative. Units moved above their 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to 0 from -6.

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Interest Rates

Yield on 10 year Treasuries dropped 8.1 basis points (3.14%) last week. Intermediate trend remains up. Yield remained above its 20 day moving average. Short term momentum indicators have turned down.

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Conversely, price of the long term Treasury ETF gained $1.39 (1.19%) last week. Intermediate trend remains down. Units remain below their 20 day moving average.

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Volatilty

The VIX Index dropped 0.40 (3.43%) last week. Intermediate trend remains down. The Index dropped below its 20 day moving average.

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Sectors

Daily Seasonal/Technical Sector Trends for March 17th 2017

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Green: Increase from previous day

Red: Decrease from previous day

 

StockTwits Released on Friday

Job increases show weakest January increase on record.

Technical action by S&P 500 stocks to 10:00: Bullish. Breakouts: $TIF $MMC $CTAS $ECL $ALL. No breakdowns

Editor’s Note: After 10:00 AM EDT, breakouts included CERN, UPS, FFIV, CHD, GD, PG, RTN, AEE and RHI. No breakdowns.

Coal ETF $KOL moved above $$13.70 extending an intermediate uptrend.

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Procter & Gamble $PG moved above $91.89 to an all-time high extending an uptrend.

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Accountability Report

Financial SPDRs (XLF $24.45) was selected for a seasonal trade on January 13th at $23.73 when its technical parameters turned positive. Its technical parameters turned negative on Friday: Relative strength turned Negative, units dropped below their 20 day moving average and short term momentum indicators already had turned down. Accordingly, units no longer are supported.

 

Disclaimer: Seasonality and technical ratings offered in this report 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


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