by Don Vialoux, Timingthemarket.ca
WALL STREET RAW RADIO – SATURDAY- JUNE 17, 2017 WITH HOST, MARK LEIBOVIT AND GUESTS DON VIALOUX,
HENRY WEINGARTEN, JEFF HIRSCH, SINCLAIR HOE, DAVID HOROWITZ AND CRAIG SMITH:
The Bottom Line
Equity markets around the world remain intermediate overbought and vulnerable to a correction. Cracks appeared in several places last week including the Technology sector early last week, European equity market in mid-week and the retail sector at the end of the week. The usual period of summer weakness from Mid-June to Mid-October has arrived. However, volatility measured by the VIX Index remains relatively muted. Political events in a wide variety of countries (most notably in the U.S.) could change that quickly. Be careful out there! A spike in volatility will be the most likely sign that the summer correction has started. Meanwhile, holding a robust position in cash in your investment portfolio makes sense.
Economic News This Week
May Existing Homes Sales to be released at 10:00 AM EDT on Wednesday are expected to dip to 5.51 million units from 5.57 million units in April.
Weekly Jobless Claims are to be released at 8:30 AM EDT on Thursday.
April Cdn. Retail Sales to be released at 8:30 AM EDT on Thursday are expected to increase 0.3% versus a gain of 0.7% in May.
May Leading Economic Indicators are to be released at 10:00 AM EDT on Thursday.
May Cdn. Consumer Prices to be released at 8:30 AM EDT on Friday are expected to increase 0.2% versus a gain of 0.4% in April
May New Home Sales to be released at10:00 AM EDT on Friday are expected to increase to 599,000 from 569,000 in April
Technical action by S&P 500 stocks was modestly bullish last week. Forty seven stocks broke above intermediate resistance and 22 stocks broke below intermediate support. Notable on the list of stocks breaking resistance were Financials. Notable on the list of stocks breaking support were Consumer Staples (particularly stocks related to the Amazon/Whole Foods news on Friday). Number of stocks in an uptrend increased last week to 292 from 280, number of stocks in a neutral trend slipped last week to 45 from 47 and number of stocks in a downtrend dropped to 163 from 173. The Up/Down ratio increased last week to (292/163=) 1.79 from 1.62.
Economic news this week is relatively quiet. Focus is on May New Home Sales on Friday.
Short term technical indicators (momentum, above/below 20 day moving average) for S&P 500 stocks and sectors were relatively unchanged last week. They remain overbought.
Medium term technical indicators (Percent trading above 50 day moving average, Bullish Percent Index) remain intermediate overbought. Some have rolled over (e.g. Technology) and some have extended their downtrends (e.g. Retail sector)
The fundamental outlook for S&P 500 companies remains promising. Earnings and sales estimates were virtually unchanged last week. According to FactSet, second quarter earnings on a year-over-year basis are expected to increase 6.5% while sales are expected to increase 4.9%. Third quarter earnings are expected to increase 7.5% and sales are expected to 5.2%. Fourth quarter earnings are expected to increase 12.4% and sales are expected to 5.2%. For 2017, earnings are expected to increase 9.9% and sales are expected to increase 5.4%.