Vialoux's Tech Talk: June 30, 2014

by Don Vialoux, Timing the Market

(Editor’s Note: Next Tech Talk report is offered on Monday July 7^th)

Economic News This Week

April Canadian GDP to be released at 8:30 AM EDT on Monday is expected to increase 0.2% versus a gain of 0.1% in March.

June Chicago Purchasing Managers Index to be released at 9:45 AM EDT on Monday is expected to decline to 63.0 from 65.5 in May.

May Construction Spending to be released at 10:00 AM EDT on Tuesday is expected to increase 0.5% versus a gain of 0.2% in April.

June ISM to be released at 10:00 AM EDT on Tuesday is expected to increase 0.5% versus a gain of 0.5% in May.

June ADP Employment report to be released at 8:15 AM EDT on Wednesday is expected to show an increase to 200,000 from 179,000 in May.

May Factory Orders to be released at 10:00 AM EDT on Wednesday are expected to decline 0.2% versus a gain of 0.7% in April.

June Non-farm Payrolls to be released at 8:30 AM EDT on Thursday are expected to slip to 210,000 from 217,000 in May. June Private Non-farm Payrolls are expected to slip to 200,000 from 216,000 in May. June Unemployment Rate is expected to remain unchanged from May at 6.3%. June Hourly Earnings are expected to increase 0.2% versus a gain of 0.2% in May.

Weekly Initial Jobless Claims to be released at 8:30 AM EDT on Thursday are expected to increase 315,000 versus 312,000 last week

May U.S. Trade Deficit to be released at 8:30 AM EDT on Thursday is expected to fall to $45 billion from $47.2 billion.

June ISM Services to be released at 10:00 AM EDT on Thursday are expected to slip to 56.1 from 56.3 in May.

Earning News This Week

No major Canadian or U.S. companies are scheduled to release earnings reports.

Equity Trends

The S&P 500 Index slipped 1.91 points (0.10%) last week. Trend remains up. The Index remains above its 20 day moving average. Short term momentum indicators are trending down.

Percent of S&P 500 stocks trading above their 50 day moving average fell last week to 81.00% from 88.40%. Percent is intermediate overbought and rolling over.

Percent of S&P 500 stocks trading above their 200 day moving average fell last week to 85.80% from 87.80%. Percent is intermediate overbought and rolling over.

Bullish Percent Index for S&P 500 stocks slipped to 83.00% from 83.80%, but remained above its 15 day moving average. The Index remains intermediate overbought and showing early signs of rolling over.

Bullish Percent Index for TSX Composite stocks increased last week to 84.08% from 83.67% and remained above its 15 day moving average. The Index remains intermediate overbought.

The TSX Composite Index slipped 14.22 points (0.10%) last week. 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 changed from positive to neutral (Score: 0.5). Total technical score based on the above indicator slipped to 2.5 from 3.0 out of 3.0. Short term momentum indicators are trending down.

Percent of TSX stocks trading above their 50 day moving average fell last week to 63.79% from 68.31%. Percent remains intermediate overbought and has rolled over.

Percent of TSX stocks trading above their 200 day moving average slipped last week to 75.72% from 76.13%. Percent remains intermediate overbought.

The Dow Jones Industrial Average fell 95.24 points (0.56%) last week. Intermediate trend remains up. The Average remains above its 20 day moving average. Strength relative to the S&P 500 Index remains negative. Technical score remains at 2.0 out of 3.0. Short term momentum indicators are trending down.

Bullish Percent Index for Dow Jones Industrial Average stocks was unchanged last week at 86.67% and remained above its 15 day moving average. The Index remains intermediate overbought.

Bullish Percent Index for NASDAQ Composite stocks increased last week to 60.06% from 59.86% and remained above its 15 day moving average. The Index remains intermediate overbought.

The NASDAQ Composite Index added 29.89 points (0.68%) 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.

The Russell 2000 Index gained 7.44 points (0.63%) last week. Intermediate trend remains neutral. The Index 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 remain overbought.

The Dow Jones Transportation Average fell 29.71 points (0.36%) last week. Intermediate trend remains up. The Average remains above its 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 down.

The Australia All Ordinaries Composite Index added 27.50 points (0.51%) last week. Intermediate trend remains neutral. The Index moved above its 20 day moving average. Strength relative to the S&P 500 Index remains negative. Technical score improved to 1.5 from 0.5 out of 3.0. Short term momentum indicators are trending up.

The Nikkei Average fell 254.42 points (1.66%) last week. Intermediate trend remains up. The Average fell below its 20 day moving average. Strength relative to the S&P 500 Index changed from positive to neutral. Technical score fell to 1.5 from 3.0 out of 3.0.Short term momentum indicators are trending down.

Europe 350 iShares fell $1.86 (3.69%) last week. Intermediate trend changed from up to neutral on a fall below $48.48. Units fell below their 20 day moving average. Strength relative to the S&P 500 Index remains negative. Technical score fell to 0.5 from 2.0 out of 3.0.Short term momentum indicators are trending down.

The Shanghai Composite Index added 9.84 points (0.49%) last week. Intermediate trend remains up. The Index remains below its 20 day moving average. Strength relative to the S&P 500 Index remains negative. Short term momentum indicators are mixed.

iShares Emerging Markets slipped $0.21 (0.48%) last week. Intermediate trend remains up. Units remain above their 20 day moving average. Strength relative to the S&P 500 Index remains negative. Technical score remains at 2.0 out of 3.0.Short term momentum indicators are trending down.

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

Green: Upgrade

Red: Downgrade

Currencies

The U.S. Dollar fell 0.34 (0.42%) last week. Intermediate trend remains neutral. The Dollar remains below its 20 day moving average. Short term momentum indicators are trending down.

The Euro gained 0.51 (0.38%) last week. Intermediate trend remains neutral. The Euro remains above its 20 day moving average. Short term momentum indicators are trending up.

The Canadian Dollar added US 081 cents (0.87%) last week. Trend remains up. The Canuck Buck remains above its 20 day moving average. Short term momentum indicators are trending up, but are overbought.

The Japanese Yen added 0.59 (0.60%) last week. Intermediate trend remains down. The Yen remains above their 20 day moving average. Short term momentum indicators are trending up.

Commodities

The CRB Index slipped 0.92 points (0.29%) last week. Intermediate trend remains up. The Index remains above its 20 day moving average. Strength relative to the S&P 500 Index remains neutral. Technical score remains at 2.5 out of 3.0.

Gasoline fell $0.03 per gallon (0.97%) last week. Intermediate trend remains up. Gas remains above its 20 day moving average. Strength relative to the S&P 500 Index changed from positive to neutral.

Crude Oil fell $1.09 per barrel (1.02%) last week. Intermediate trend remains up. Crude remains above its 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 down.

Natural Gas fell $0.12 MBtu (2.65%) last week. Intermediate trend remains up. Crude remains below its 20 day moving average. Strength relative to the S&P 500 Index changed from neutral to negative. Technical score changed to 1.0 from 1.5 out of 3.0. Short term momentum indicators are trending down.

The S&P Energy Index fell 6.65 points (0.91%) 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.

The Philadelphia Oil Services Index gained 1.55 points (0.50%) 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 overbought and showing early signs of rolling over.

Gold added $3.40 per ounce (0.26%) last week. Intermediate trend remains neutral. Gold remains above its 20 day moving average. Strength relative to the S&P 500 Index remains positive. Technical score remains at 1.5 out of 3.0. Short term momentum indicators are trending up, but are overbought.

Silver added $0.13 per ounce (0.62%) last week. Intermediate trend remains up. Silver 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. Strength relative to Gold remains positive.

The AMEX Gold Bug Index added 0.28 (0.12%) 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.

Platinum added $21.20 per ounce (1.45%) last week. Trend remains up. Platinum remains above its 20 day moving average. Strength relative to the S&P 500 Index turned positive. Technical score improved to 3.0 from 2.0. Strength relative to gold remains negative.

Palladium gained $20.65 per ounce (2.51%) last week. Trend remains up. PALL moved above its 20 day moving average. Strength relative to S&P 500 and Gold improved to neutral.

Copper added $0.03 per lb.(0.96%) last week. Intermediate trend remains up. Copper remains above its 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.

The TSX Metals & Mining Index fell 12.70 points (1.50%). Intermediate trend changed from up to down on a move below 823.53. The Index remains below its 20 day moving average. Strength relative to the S&P 500 Index remains negative. Technical score fell to 0.0 from 1.0 out of 3.0. Short term momentum indicators are trending down.

Lumber added $8.80 (2.68%) last week. Trend remains down. Lumber remains above its 20 day moving average. Strength relative to the S&P 500 Index remains positive.

The Grain ETN fell $0.43 (0.93%) last week. Intermediate 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 $0.24 (0.45%) last week. Intermediate trend remains up. Units remain above their 20 day moving average. Strength relative to the S&P 500 Index remains negative. Technical score remains at 2.0 out of 3.0. Short term momentum indicators are trending down.

Interest Rates

The yield on 10 year Treasuries fell 9.2 basis points (3.51%) last week. Intermediate trend remains down. Yield fell below its 20 day moving average. Short term momentum indicators are trending down.

Conversely, price of the long term Treasury ETF added $1.44 (1.29%) last week. Units moved above their 20 day moving average.

Other Issues

The VIX added 0.40 (3.69%) last week. Trend remains down. The Index remains below its 20 day moving average.

Economic focus this week is on the June employment report released on Thursday. This report and most others released during the week are expected to confirm that economic growth in the U.S. is slowing.

Earnings news is not a factor this week. Look for more earnings “confessions” this week when individual companies lower their guidance (e.g. Dupont)

However, a greater influence is anticipation of second quarter results that start next week. Consensus for Dow Jones Industrial Average companies is an average (median) gain on a year-over-year basis of 3.4%. Consensus for TSX 60 companies is an average (median) gain of 6.8%.

Anticipation of second quarter results is a major reason for the “Independence Day Holiday” trade lasting from the last two trading days in June to five trading days beyond the July 4^th holiday. On occasion when responses to second quarter results are positive, the trade can last as long as the third week in July.

The month of July is an average month in the year with most of the gains recorded in the first half. Based on performance during the past 62 years, the month ranks sixth for the S&P 500 Index and the TSX Composite Index. Best performing sectors during the past 22 years are Financials and Energy. Worst performing sectors were Telecom and Utilities. Best performing Subsectors were Biotech, Railroads and Silver. Worst performing sectors were Softwar, Agriculture and Steel.

Liquidity in North American equity markets is expected to be significantly below average. The Canadian equity market is closed on Tuesday for the Canada Day holiday. U.S. equity markets are closed on Friday for the Independence Day celebration. U.S. equity markets also will close early on Thursday.

Short and intermediate technical indicators are overbought and showing early signs of peaking.

International events will be a factor. The Purchasing Managers Index from China and growing political and military concerns from Iraq are the focuses.

The Bottom Line

Equity markets currently are overbought and vulnerable to a correction. Slight gains are possible this year if the Independence Day Holiday trade clicks in. Caution is recommended, 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:

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 June 27^th 2014

Copyright © Don Vialoux, Jon Vialoux, Brooke Thackray