by Don Vialoux, EquityClock.com
The Bottom Line
Major equity indices around the world were mixed to slightly lower last week.
Greatest influences remain a possible second wave of the coronavirus (negative) and possible approval of a vaccine (positive). Momentum indicators for North American equity markets changed last week from intermediate overbought to intermediate neutral and extended their intermediate downtrend. The VIX Index weakened from a high set early last week, but remains elevated. It typically moves higher between now and early October. Weakest four week period in the year for most equity market indices around the world is between mid-September and mid-October. (particularly the TSX Composite Index and U.S. equity indices during U.S. Presidential election years). Look for volatile, choppy equity markets between now and at least mid-October.
Observations
The VIX Index (better known as the Fear Index) showing volatility for the S&P 500 Index moved reached a high early last week and subsequently rolled over. It remains elevated in line with seasonal trends and remains above its 20 and 50 day moving averages.
Ditto for the VXN, volatility index on the NASDAQ 100 Index!
The Dow Jones Industrial Average and S&P 500 Index during U.S. Presidential Election years have a history of moving lower from early September to the end of October followed by a move higher after the election.
Other broadly based U.S. equity indices including the NASDAQ Composite Index, NASDAQ 100 Index, Russell 2000 and the Dow Jones Transportation Average have a history of moving lower between now and mid-October.
The TSX Composite Index has a history of moving lower on a real and relative basis from the beginning of September to at least the middle of October.
S&P/TSX Composite Index Seasonal Chart
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$TSX Relative to the S&P 500 |
Medium term technical indicator for U.S. equity markets (e.g. Percent of S&P 500 stocks trading above their 50 day moving average) moved substantially lower last week. It changed from intermediate overbought to intermediate neutral and is trending down. See Barometer chart at the end of this report.
Medium term technical indicator for Canadian equity markets slightly also moved lower last week. It remains intermediate neutral and is trending down. See Barometer chart at the end of this report.
More short term short term momentum indicators for U.S. markets/commodities/sectors (20 day moving averages, short term momentum indicators) moved lower last week
Short term momentum indicators for Canadian markets/sectors were mixed last week.
Year-over-year 2020 consensus earnings declines by S&P 500 companies ebbed slightly again last west. According to www.FactSet.com, third quarter earnings are expected to fall 22.2% (versus previous decline 22.4%) and revenues are expected to decrease 3.9% (versus previous drop of 4.1%). Fourth quarter earnings are expected to drop 13.0% and revenues are expected to decline 1.3% (versus previous drop of 1.4%). Earnings for all of 2020 are expected to fall 18.4% (versus previous drop of 18.5%) and revenues are expected to decline 2.8% (versus previous drop of 2.9%).
Consensus estimates for earnings and revenues by S&P 500 companies turn positive on a year-over-year basis in the first quarter of 2021. According to FactSet, earnings in the first quarter of 2021 are expected to increase 13.2% (versus previous 13.1%) and revenues are expected to increase 3.2% (versus previous 3.1%). Earnings in the second quarter are expected to increase 44.2% and revenues are expected to increase 13.9%. Earnings for all of 2021 are expected to increase 26.2% (versus previous 26.3%) and revenues are expected to increase 8.1%.
Economic News This Week
September Empire State Manufacturing Survey to be released at 8:30 AM EDT on Tuesday is expected to increase to 5.90 from 3.70 in August.
August Industrial Production to be released at 9:15 AM EDT on Tuesday is expected to increase 1.0% versus a gain of 3.0% in July. August Capacity Utilization is expected to increase to 71.6% from 70.6% in July.
August Retail Sales to be released at 8:30 AM EDT on Wednesday are expected to increase 1.0% versus a gain of 1.2% in July. Excluding auto sales, August Retail Sales are expected to increase 0.9% versus a gain of 1.9% in July.
Canadian August Consumer Price Index to be released at 8:30 AM EDT on Wednesday is expected to increase 0.2% versus no change in July.
July Business Inventories to be released at 10:00 AM EDT on Wednesday are expected to increase 0.2% versus a decline of 1.1% in June.
FOMC meeting results to be released at 2:00 PM EDT on Wednesday are expected to hold their Fed Fund rate at 0.00%-0.25%. Press conference is scheduled at 2:30 PM EDT.
August U.S. Housing Starts to be released at 8:30 AM EDT on Thursday are expected to slip to 1.450 million units from 1.496 million units in July.
September Philly Fed Index to be released at 8:30 AM EDT on Thursday is expected to slip to 15.5 from 17.2 in August.
July Canadian Retail Sales to be released at 8:30 AM EDT on Friday are expected to increase 1.0% versus a gain of 23.7% in June.
September Michigan Consumer Sentiment to be released at 10:00 AM EDT on Friday is expected to increase to 75.0 from 74.1 in August
Selected Earnings News This Week
Trader’s Corner
Equity Indices and related ETFs
Daily Seasonal/Technical Equity Trends for September 11th 2020
Green: Increase from previous day
Red: Decrease from previous day
Commodities
Seasonal/Technical Commodities Trends for September 11th 2020
Green: Increase from previous day
Red: Decrease from previous day
Sectors
Daily Seasonal/Technical Sector Trends for September 11th 2020
Green: Increase from previous day
Red: Decrease from previous day
Technical Scores
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
Changes Last Week
Technical Notes for Friday September 11th
General Electric (GE), an S&P 100 stock moved below $6.00 extending an intermediate downtrend.
Teck Resources (TECK), a TSX 60 stock moved above US$12.88 and Cdn$16.96 extending an intermediate uptrend.
Rio Tinto (RIO), the largest base metal producer in the world moved above $63.76 to a 12 year high extending an intermediate uptrend.
Splunk (SPLK), a NASDAQ 100 stock moved below$189.10 completing a double top pattern.
Fiserv (FISV), a NASDAQ 100 stock moved below $93.62 setting an intermediate downtrend.
National Bank (NA), a TSX 60 stock moved above $73.18 to an all-time high extending an intermediate uptrend.
Advanced Micro Devices (AMD), a NASDAQ 100 stock moved below support at $76.10.
Sirius XM (SIRI), a NASDAQ 100 stock moved below $5.50 setting an intermediate downtrend.
Russell 2000 Index and its related ETF closed decisively below its “institutionally sensitive” 50 day moving average on Friday.
S&P 500 Momentum Barometer
The Barometer added 0.80 on Friday, but dropped 18.43 last week to 53.91. It changed last week from intermediate overbought to intermediate neutral and is trending down.
TSX Momentum Barometer
The Barometer slipped 0.24 on Friday and dropped 5.27 last week to 48.80. It remains intermediate neutral and trending down.
Disclaimer: Seasonality and technical ratings offered in this report and at
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
This post was originally publised at Vialoux's Tech Talk.
