by Don Vialoux, EquityClock.com
The Bottom Line
Equity markets around the world moved higher last week. Greatest influences on North American equity markets remain growing evidence of a second wave of the coronavirus (negative) and timing of distribution of a vaccine (positive).
Observations
TSX Composite Index has a history of outperforming the S&P 500 Index from the last week in December to the first week in March. The main reason: Canadian investors focus on contributing to their RRSPs during the first 60 days in the New Year and subsequently invest more funds into the equity market. As indicated in the chart below, average gain per period for the TSX Composite Index relative to the S&P 500 Index during the past 20 periods was 3.3%. History is repeating: Since December 31st, the S&P 500 Index has gained 4.76% and the TSX Composite Index has advanced 5.89%.
Intermediate term technical indicator for U.S. equity markets (e.g. Percent of S&P 500 stocks trading above their 50 day moving average) was virtually unchanged last week. It remained intermediate overbought. See Barometer chart at the end of this report.
Long term technical indicator for U.S. equity markets (e.g. Percent of S&P 500 stocks trading above their 200 day moving average). also was virtually unchanged last week. It remains at extremely overbought levels.. See chart at the end of this report.
Medium term technical indicator for Canadian equity markets was virtually unchanged last week. It changed from intermediate oversold to intermediate overbought. See Barometer chart at the end of this report.
Long term technical indicator for Canadian equity markets (i.e. Percent of TSX stocks trading above their 200 day moving average) also was virtually unchanged last week. It remains intermediate overbought. See Barometer chart at the end of this report.
Short term short term indicators for U.S. equity indices, commodities and sectors (20 day moving averages, short term momentum indicators) remained elevated last week.
Short term momentum indicators for Canadian indices and sectors also remained elevated last week.
Year-over-year 2020 consensus earnings by S&P 500 companies remained positive last week. According to www.FactSet.com, fourth quarter earnings on a year-over-year basis are expected to increase 2.9% (versus a gain of 1.7% last week) and revenues are expected to increase 2.8% (versus previous 2.7% increase last week). Earnings for all of 2020 are expected to fall 11.4% and revenues are expected to decline 1.1%.
Consensus estimates for earnings and revenues by S&P 500 companies turn more positive on a year-over-year basis in the first quarter of 2021. According to www.FactSet.com earnings in the first quarter of 2021 on a year-over-year basis are expected to increase 21.2% (versus previous 21.0% increase last week) and revenues are expected to increase 5.6%. Earnings in the second quarter are expected to increase 49.4 % and revenues are expected to increase 15.6%. Earnings in the third quarter are expected to increase 16.7% (versus previous 16.0% increase) and revenues are expected to increase 9.5% (versus previous 9.3% increase). Earnings in the fourth quarter are expected to increase 13.4% (versus previous 14.6% increase) and revenues are expected to increase 6.9% (versus previous 6.7% increase). Earnings for all of 2021 are expected to increase 23.6% (versus previous increase of 23.4%) and revenues are expected to increase 9.1% (versus previous 9.0% increase).
Economic News This Week
February Empire State Manufacturing Survey to be released at 8:30 AM EST on Tuesday is expected to increase to 5.50 from 3.50 in January.
January Producer Price Index to be released at 8:30 AM EST on Wednesday is expected to increase 0.4% versus a gain of 0.3% in December. Excluding food and energy, January Producer Price Index is expected to increase 0.2% versus a gain of 0.1% in December.
January Retail Sales to be released at 8:30 AM EST on Wednesday are expected to increase 1.2% versus a drop of 0.7% in December. Excluding auto sales, January Retail Sales are expected to increase 1.0% versus a drop of 1.4% in December.
January Capacity Utilization to be released at 9:15 AM EST on Wednesday is expected to increase to 74.8 from 74.5 in December. January Industrial Production is expected to increase 0.4% versus a gain of 1.6% in December.
January U.S. Housing Starts to be released at 8:30 AM EST on Thursday are expected to slip to 1,654,000 units from 1,669,000 units in December.
February Philly Fed Index to be released at 8:30 AM EST on Thursday is expected to slip to 20.0 from 26.5 in January.
Canadian December Retail Sales to be released at 8:30 AM EST on Friday are expected to increase 0.1% versus a gain of 1.3% in November.
January Existing Home Sales to be released at 10:00 AM EST on Friday are expected to slip to 6.56 million units from 6.76 million units in December.
Selected Earnings News This Week
Frequency of S&P 500 company quarterly reports is winding down this week: 74% of companies have reported to date. Another 51 companies (including one Dow Jones Industrial Average company) are scheduled to report this week. Frequency of TSX 60 company quarterly reports also has passed its peak.
Trader’s Corner
Equity Indices and Related ETFs
Daily Seasonal/Technical Equity Trends for February 12th 2021
Green: Increase from previous day
Red: Decrease from previous day
Commodities
Daily Seasonal/Technical Commodities Trends for February 12th 2021
Green: Increase from previous day
Red: Decrease from previous day
Sectors
Daily Seasonal/Technical Sector Trends for February 12th 2021
Green: Increase from previous day
Red: Decrease from previous day
Technical Scoop
Thank you to David Chapman and www.EnrichedInvesting.com for a link to Technical Scoop. Headline this week reads, “More mania, eerie similarity, option surge, commodity Supercycle, shortage driver, outshining silver”. Following is the link:
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
Changes in Seasonality Ratings
Nikkei Average changed to Positive from Neutral to March 28th
Natural Gas changed from Negative to Positive to mid-June.
Technical Notes for Friday February 12th
American Express (AXP), a Dow Jones Industrial Average stock moved above $129.54 extending an intermediate uptrend.
Micron (MU), a NASDAQ 100 stock moved above $87.25 to an all-time high extending an intermediate uptrend.
Lam Research (LRCX), a NASDAQ 100 stock moved above $585.42 to an all-time high extending an intermediate uptrend.
Schlumberger (SLB), an S&P 100 stock moved above $26.73 extending an intermediate uptrend.
Saputo (SAP), a TSX 60 stock moved above $37.69 extending an intermediate uptrend.
S&P 500 Momentum Barometer
The intermediate Barometer added 1.00 on Friday and gained 0.60 last week to 72.94. It remains overbought.
The long term Barometer slipped 0.40 on Friday and dropped 1.40 last week to 88.58. It remains extremely overbought as long as it remains above 80.00.
TSX Momentum Barometer
The intermediate Barometer added 3.40 to 66.99 on Friday and 3.53 last week to 66.99. It remains intermediate overbought.
The long term Barometer was unchanged on Friday and added 1.24 last week to 78.64. It remains overbought.
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.
