by Don Vialoux, EquityClock.com
The Bottom Line
Most U.S. equity indices moved slightly lower again last week. Greatest influences on North American equity markets remain evidence of a possible third wave of the coronavirus (negative) and continued expansion of distribution of a vaccine (positive).
Observations
The S&P 500 Index is following its historic seasonal pattern for this time of year, a mixed, choppy period between early May and the second week in October. Average return during this period is close to zero. Positive returns are possible by selecting sector investments that outperform during the period.
Last week, the TSX Composite Index continued to follow its historic pattern of outperforming the S&P 500 Index on a real and relative basis until early June.
Short term short term indicators for U.S. equity indices, commodities and sectors (20 day moving averages, short term momentum indicators) moved slightly again last week.
Intermediate term technical indicator for U.S. equity markets (e.g. Percent of S&P 500 stocks trading above their 50 day moving average) moved lower again last week. It remained 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) was virtually unchanged last week. It remained Extremely Overbought. See Barometer chart at the end of this report.
Short term momentum indicators for Canadian indices and sectors were virtually unchanged last week.
Intermediate term technical indicator for Canadian equity markets moved slightly lower again last week. It remains 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) moved slightly higher last week. It remains Overbought. See Barometer chart at the end of this report.
Consensus estimates for earnings by S&P 500 companies continued to increase last week. Ninety five percent have reported results to date with 86% reporting higher than consensus earnings estimates and 76% reporting higher than consensus revenue estimates. According to www.FactSet.com earnings in the first quarter of 2021 on a year-over-year basis are expected to increase 51.9% (versus previous estimate at 50.3% last week) and revenues are expected to increase 10.9% (versus previous estimate at 10.1% last week). Earnings in the second quarter are expected to increase 59.9% (versus previous estimate at 59.3%) and revenues are expected to increase 18.9% (versus previous estimate at 18.6%). Earnings in the third quarter are expected to increase 22.2% (versus previous estimate at 22.1%) and revenues are expected to increase 11.6% (versus previous estimate at 11.5%). Earnings in the fourth quarter are expected to increase 16.9% (versus previous estimate at 16.8%) and revenues are expected to increase 8.6%.. Earnings for all of 2021 are expected to increase 33.7% (versus previous estimate at 33.2%) and revenues are expected to increase 11.8% (versus previous estimate at 11.6%)
Economic News This Week
April U.S. New Home Sales to be released at 10:00 AM EDT on Tuesday are expected to slip to 950,000 units from 1,021,000 in March.
April Durable Goods Orders to be released at 8:30 AM EDT on Thursday are expected to increase 0.7% versus a gain of 1.0% in March. Excluding transportation orders, April Durable Goods Orders are expected to increase 0.7% versus a gain of 2.3% in March.
Next annualized estimate of first quarter real GDP to be released at 8:30 AM EDT on Thursday is expected to remain unchanged at 6.4%.
April Personal Income to be released at 8:30 AM EDT on Friday is expected to drop 14.0% versus a gain of 21.1% in March. April Personal Spending is expected to increase 0.6% versus a gain of 4.2% in March.
May Chicago PMI to be released at 9:45 AM EDT on Friday is expected to slip to 70.0 from 72.1 in April.
May Chicago Consumer Sentiment to be released at 10:00 AM EDT on Friday is expected to increase to 82.9 from 82.8 in April
Selected Earnings News This Week
Frequency of quarterly reports by S&P 500 companies declines again this week. Only 13 S&P 500 companies (including one Dow Jones Industrial Average stock: Salesforce.com) are scheduled to release results.
Focus of quarterly reports by TSX 60 companies is release of fiscal second quarter results by Canada’s largest banks.
Trader’s Corner
Equity Indices and Related ETFs
Daily Seasonal/Technical Equity Trends for May 21st 2021
Green: Increase from previous day
Red: Decrease from previous day
Commodities
Daily Seasonal/Technical Commodities Trends for May 21st 2021
Green: Increase from previous day
Red: Decrease from previous day
Sectors
Daily Seasonal/Technical Sector Trends for May 21st 2021
Green: Increase from previous day
Red: Decrease from previous day
All seasonality ratings are based on performance relative to the S&P 500 Index
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
Comments by Tom McClellan on CNBC on Thursday
(repeat comment from Friday’s Tech Talk)
Tom took a bullish intermediate term stance on U.S. equity markets based on favourable seasonal influences. He noted that the S&P 500 Index has a history of moving slightly lower between now and mid-June followed by a move higher from mid-June to the end of July during Post-Presidential Election Years. The following EquityClock.com chart confirms his call based on seasonal influences.
Following is a link to his comments.
The Canadian Technician
Greg Schnell asks, “Commodities pause, Can Tech take the baton”? Following is a link:
https://stockcharts.com/articles/canada/2021/05/commodities-pause-can-tech-tak-190.html
Technical Scoop
Thank you to David Chapman and www.EnrichedInvesting.com for a link to their weekly report. Following is a link:
Technical Notes released on Friday at StockTwits.com@EquityClock
Find out what we’re doing with Natural Gas as the fundamental prong to our approach has forced us to adjust our stance. equityclock.com/2021/05/20/… $UNG $FCG $KOLD $BOIL $UNL $GAZ
Maxim Integrated $MXIM a NASDAQ 100 stock moved above $98.44 to an all-time high extending an intermediate uptrend.
Base metal stocks and related ETFs $XBM.CA and $PICK are under technical pressure. HudBay Minerals $HBM.CA moved below intermediate support at $8.89.
S&P 500 Momentum Barometers
The intermediate Barometer slipped 1.40 on Friday and dropped 8.01 last week. It remains Overbought and continues to trend down.
The long term Barometer eased 1.00 to 91.38 on Friday and dropped 0.40 last week. It remains Extremely Overbought.
TSX Momentum Barometers
The intermediate Barometer slipped 1.41 on Friday and 0.44 last week. It remains Overbought and trending down.
The long term Barometer was unchanged on Friday and up 2.81 last week. 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.
