Vialoux's Tech Talk: May 27, 2014

Economic News This Week

April Durable Goods Orders to be released at 8:30 AM EDT on Tuesday are expected to decline 1.3% versus a gain of 2.9% in March. Ex Transportation, April Orders are expected to decline 0.2% versus a gain of 2.4% in March

March Case/Shiller 20 City Home Price Index to be released at 9:00 AM EDT on Tuesday is expected to increase 11.9% on a year-over-year basis versus a gain of 12.9% in February.

May Consumer Confidence Index to be released at 10:00 AM EDT on Tuesday is expected to increase to 82.7 from 82.3 in April

Weekly Initial Jobless Claims to be released at 8:30 AM EDT on Thursday are expected to slip to 320,000 from 326,000 last week.

Second estimate of First Quarter Real GDP to be released at 8:30 AM EDT on Thursday is expected to decline 0.5% versus a gain of 0.1% reported in the first estimate.

Canada’s March GDP to be released at 8:30 AM EDT on Friday is expected to increase 0.1% versus a gain of 0.2% in February.

April Personal Income to be released at 8:30 AM EDT on Friday is expected to increase 0.3% versus a gain of 0.5% in March. April Personal Spending is expected to increased 0.2% versus a gain of 0.9% in March

May Chicago PMI to be released at 9:45 AM EDT on Friday is expected to slip to 60.3 from 63.0 in April.

May Michigan Sentiment to be released at 9:55 AM EDT on Friday is expected to decrease to 81.4 from 81.8 in April.

Earnings News This Week

Equity Trends

The S&P 500 Index added 22.67 points (1.21%) last week. Intermediate trend is up. The Index closed at an all-time closing high on Friday. The Index remains above its 20, 50 and 200 day moving averages. Short term momentum indicators are trending up, but remain overbought.

Percent of S&P 500 stocks trading above their 50 day moving average increased last week to 65.40% from 56.40%. Percent remains intermediate overbought.

Percent of S&P 500 stocks trading above their 200 day moving average increased last week to 81.60% from 78.20%. Percent remains intermediate overbought.

Bullish Percent Index for S&P 500 stocks increased last week to 74.20% from 71.80% and remains above their 15 day moving average. The Index remains intermediate overbought.

Bullish Percent Index for TSX Composite stocks slipped last week to 82.86% from 83.67% and fell below its 15 day moving average. The Index remains intermediate overbought and starting to trend down.

The TSX Composite Index added 193.04 points (1.33%) last week. Intermediate trend remains up (Score: 1.0). The Index recovered to above its 20 day moving average (Score: 1.0). Strength relative to the S&P 500 Index remains negative (Score: 0.0). Technical score improved to 2.0 from 1.0 out of 3.0. Short term momentum indicators are mixed.

Percent of TSX stocks trading above their 50 day moving average increased last week to 56.17% from 53.50%. Percent remains intermediate overbought.

Percent of TSX stocks trading above their 200 day moving average increased last week to 73.77% from 73.25%. Percent remains intermediate overbought.

The Dow Jones Industrial Average increased 114.96 points (0.70%) last week. Intermediate trend remains up. The Average recovered back above its 20 day moving average. Strength relative to the S&P 500 Index changed from neutral to negative. Technical score improved to 2.0 from 1.5 out of 3.0. Short term momentum indicators are mixed.

Bullish Percent Index for Dow Jones Industrial Average stocks was unchanged last week at 80.00% and remained below its 15 day moving average. The Index remains intermediate overbought.

Bullish Percent Index for NASDAQ Composite stocks increased last week to 48.70% from 47.13%, but remained below its 15 day moving average. The Index is showing early signs of bottoming at slightly oversold levels.

The NASDAQ Composite Index increased 95.22 points (2.33%) last week. Intermediate trend changed from down to up on Friday on a move above 4,177.16. The Index moved above its 20 day moving average. Strength relative to the S&P 500 Index changed from negative to positive. Technical score improved to 3.0 from 0.0 out of 3.0. Short term momentum indicators are trending up.

The Russell 2000 Index added 23.28 points (2.11%) 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 changed from negative to neutral. Technical score improved to 1.5 from 0.0 out of 3.0. Short term momentum indicators are trending up.

The Dow Jones Transportation Average gained 140.73 points (1.79%) last week. Intermediate trend remains up. The Average closed at an all-time high on Friday. 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, but are overbought.

The Australia All Ordinaries Composite Index added 11.40 points (0.82%) last week Intermediate trend changed from up to down on a move below 5,400. The Index recovered back 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 Nikkei Average gained 365.58 points (2.59%) last week. Intermediate trend remains down. The Average moved above its 20 day moving average. Strength relative to the S&P 500 Index changed from negative to neutral. Technical score improved to 1.5 from 0.0 out of 3.0. Short term momentum indicators are mixed.

Europe 350 iShares was unchanged 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 negative. Technical score changed to 2.0 from 3.0 out of 3.0. Short term momentum indicators are mixed.

The Shanghai Composite Index added 8.07 points (0.84%) last week. Intermediate trend remains neutral. The Index moved above its 20 day moving average on Friday. Strength relative to the S&P 500 Index remains neutral. Technical score improved to 2.0 from 1.5 out of 3.0. Short term momentum indicators are mixed.

iShares Emerging Markets added $0.20 (0.47%) last week. Intermediate trend remains up. Units remain above their 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.

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

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

Twenty Day Moving Average: Above, Below

Currencies

The U.S. Dollar Index added 0.32 (0.40%) last week. Intermediate trend remains down. The Index remains above its 20 and 50 day moving averages. Short term momentum indicators are trending up, but are overbought.

The Euro fell 0.67 (0.49%) last week. Intermediate trend remains neutral. The Euro remains below its 20 and 50 day moving averages. Short term momentum indicators are trending down, but are oversold.

The Canadian Dollar slipped US 0.10 cents (0.10%) last week. Intermediate trend remains up. The Canuck Buck remains above its 20 and 50 day moving averages. Short term momentum indicators are trending down.

The Japanese Yen fell 0.46 (0.47%) last week. Intermediate trend remains down. The Yen fell below its 20 day moving average on Friday. Short term momentum indicators are trending down.

Commodities

The CRB Index added 1.71 points (0.56%) last week. Intermediate trend remains up. The Index remains below 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.

Gasoline added $0.04 per gallon (1.35%) last week. Intermediate trend remains up. Gasoline remains above its 20 and 50 day moving averages. Strength relative to the S&P 500 Index remains neutral. Technical score remains at 2.5 out of 3.0.

Crude Oil gained $2.33 per barrel (2.28%) last week. Intermediate trend remains neutral. Crude remains above its 20 day moving average. Strength relative to the S&P 500 Index remains positive. Technical score remains at 2.5 out of 3.0. Short term momentum indicators are trending up, but are overbought.

Natural Gas was unchanged last week. Intermediate trend remains neutral. Gas remains below its 20 day moving average. 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 mixed.

The S&P Energy Index added 5.77 points (0.85%) last week. Intermediate trend remains up. The Index remains below its 20 day moving average on Friday. Strength relative to the S&P 500 Index remains negative. Technical score remains at 1.0 out of 3.0. Short term momentum indicators are mixed.

The Philadelphia Oil Services Index added 3.92 points (1.39%) 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 up.

Gold slipped $1.70 per ounce (0.13%) last week. Intermediate trend remains down. Gold remains below its 20 day moving average. Strength relative to the S&P 500 Index remains neutral. Technical score remains at 0.5 out of 3.0. Short term momentum indicators are mixed.

Silver added $0.09 per ounce (0.47%) last week. Intermediate trend remains down. Silver closed at its 20 day moving average. Strength relative to the S&P 500 Index and Gold remains neutral. Technical score remains at 0.5 out of 3.0. Short term momentum indicators are mixed.

The AMEX Gold Bug Index slipped 0.88 points (0.41%) last week. Intermediate trend remains down. The Index 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. Short term momentum indicators are trending down.

Platinum gained $6.70 per ounce (0.46%) last week. Trend changed from neutral to up on a move above $1,489.00. Platinum remains above its 20 day moving average. Strength relative to the S&P 500 and Gold remain positive. Technical score improved to 3.0 from 2.5 out of 3.0.

Palladium gained $16.45 per ounce (2.02%) last week. Trend remains up. Palladium remains above its 20 day MA. Strength relative to the S&P 500 Index and Gold remains positive.

Copper gained $0.02 per lb. (0.63%) last week. Intermediate trend remains up. Copper remains above its 20 and 50 day moving averages. Strength relative to the S&P 500 Index changed from positive to neutral. Technical score eased to 2.5 from 3.0 out of 3.0. Short term momentum indicators are trending up, but are overbought.

The TSX Metals & Mining Index added 21.89 points (2.54%) last week. Intermediate trend remains up. The Index 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, but are overbought.

Lumber fell $6.90 (2.13%) last week. Trend changed from neutral to down on a move below $321.30. Lumber remains below its 20 day MA. Relative strength remains negative.

The Grain ETN slipped $0.10 (0.20%) last week. Trend remains up. Units remain below their 20 day moving average. Strength relative to the S&P 500 Index remains negative. Technical score remains at 1.0 out of 3.0.

The Agriculture ETF slipped $0.11 (0.20%) 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. Short term momentum indicators are mixed.

Interest Rates

The yield on 10 year Treasuries increased 1.7 basis points (0.68%) last week. Intermediate trend remains down. Yield remains below its 20 day moving average. Short term momentum indicators are mixed.

Conversely, price of the long term Treasury ETF slipped $0.84 (0.74%) last week. Intermediate trend remains up. Units remain above their 20 day moving average.

Other Issues

The Volatility Index closed at a 13 month low.

Earnings focus this week is on Canada’s banks. Results released by Royal and TD last week were encouraging.

Short and intermediate technical indicators for most equity markets remain overbought.

International focus remains on Ukraine.

North American equity markets have a history of moving higher during the week after the Memorial Day holiday.

North American equity markets have a history of entering into a corrective phase from late April to the beginning of October during U.S. mid-term election years.

Economic data released this week generally are expected to show a slow-down in growth relative to exceptionally high reports recorded in April.

The Bottom Line

Equity markets around the world have ended their annual period of seasonal strength. Equity markets recently have entered into a period of higher than average volatility and lower returns from the first week in May to the last week in October. Strength if occurring is an opportunity to take profits, particularly in economic sensitive sectors.

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:

Materials Sector Seasonal Chart

FP Trading Desk Headline

FP Trading Desk headline reads, “First taper tantrum, then rate rage”. Following is a link:

http://business.financialpost.com/2014/05/23/first-taper-tantrum-then-rate-rage/

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.

Horizons Seasonal Rotation ETF HAC May 23^rd 2014