The Bottom Line
North American equity markets closely have been following their seasonal patterns for this time of year: modest weakness with higher than average volatility during the first half of December followed by the strongest three week period in the year frequently called “The Santa Claus rally”. The Santa Claus rally from December 14th to January 6th is triggered when institutional activity in equity markets is curtailed by holidays and when relatively more active ‘holiday infused” individual investors are net buyers. Funds from annual bonuses received by individuals during this period also add to the yearend rally.
Focus this week is on the FOMC meeting on monetary policy. Results of the meeting are scheduled for release at 2:00 PM EST on Wednesday. Consensus is calling from another 0.50% increase in the Fed Fund Rate to 4.25%-4.50%. Response to the announcement will depend on the message included with the expected increase in the Fed Fund Rate.
The Federal Reserve message on Wednesday will depend on recent economic “data points”. Key data points released last week, notably the November Non-manufacturing ISM Purchasing Managers Index and the November Producer Price Index came in “hotter” than expected. They implied a slightly higher than expected GDP growth rate and a stubbornly high inflation rate for the month of November. One remaining important data point is released prior the FOMC meeting, the November Consumer Price Index report on Tuesday morning.
Traditionally, most tax loss selling pressures reach their peak this week. Tax loss selling pressures this year are expected to be more intense than usual due to significant unrealized losses in 2022 that can be “written off” by selling before the end of the year. The investor’s tax bill for 2022 is lowered when realized losses subsequently are applied against realized gains recorded in previous years.
Will “Santa Claus” come to Bay Street and Wall Street this year? News from the Federal Reserve on Wednesday likely will provide the best clue.
Consensus for Earnings and Revenues for S&P 500 Companies
Analysts once again lowered earnings estimates for the remainder of 2022. According to www.factset.com fourth quarter earnings are expected to decrease 2.5% (versus previous decrease of 2.4%) and revenues are expected to increase 4.2% (versus previous increase of 4.4%). For all of 2022 earnings are expected to increase 5.1% (versus previous increase of 5.2%) and revenues are expected to increase 10.4% (versus previous 10.5%).
Preliminary earnings estimates for 2023 also moved lower. According to www.factset.com first quarter 2023 earnings are expected to increase 1.1% (versus previous increase at 1.5%) and revenues are expected to increase 3.6% (versus previous increase at 3.8%). Second quarter 2023 earnings are expected to increase 0.6% (versus previous increase at 0.8%) and revenues are expected to increase 1.0% (versus previous increase at 1.3%). For all of 2023, earnings are expected to increase 5.5% (versus previous increase at 5.6%)) and revenues are expected to increase 3.3% (versus previous 3.4%)
Economic News This Week
Bank of Canada Governor Macklem is scheduled to speak at 3:40 PM EST.
November Consumer Price Index released at 8:30 AM EST on Tuesday is expected to increase 0.3% versus a gain of 0.4% in October. On a year-over-year basis November Consumer Price Index is expected to 7.3% versus a gain of 7.7% in October. Excluding food and energy, November Consumer Price Index is expected to increase 0.4% versus a gain of 0.3% in October. On a year-over-year basis, November Consumer Price Index is expected to gain 6.1% versus an increase of 6.3% in October.
FOMC Statement on interest rates released at 2:00 PM EST on Wednesday is expected to increase the Fed Fund Rate by 0.50% to 4.25%-4.50%. Press conference is offered at 2:30 PM EST.
December Empire State Manufacturing Survey released at 8:30 AM EST on Thursday is expected to drop 6.50% versus a gain of 4.50 in November.
December Philly Fed Index released at 8:30 AM EST on Thursday is expected to improve to
-6.2 from -19.4 in November.
November U.S. Retail Sales released at 8:30 AM EST on Thursday are expected to slip 0.1% versus a gain of 1.3% in October. Excluding auto sales, November U.S. Retail Sales are expected to increase 0.3% versus a gain of 1.3% in October.
November Capacity Utilization released at 9:15 AM EST on Thursday is expected to slip to 79.8 from 79.9 in October. November Industrial Production is expected to slip 0.2% versus a slip of 0.1% in October.
October Business Inventories released at 10:00 AM EST on Thursday are expected to increase 0.5% versus a gain of 0.4% in September.
Selected Earnings News This Week
Trader’s Corner
Equity Indices and Related ETFs
Daily Seasonal/Technical Equity Trends for December 9th 2022
Green: Increase from previous day
Red: Decrease from previous day
Commodities
Daily Seasonal/Technical Commodities Trends for December 9th 2022
Green: Increase from previous day
Red: Decrease from previous day
Sectors
Daily Seasonal/Technical Sector Trends for December 9th 2021
Green: Increase from previous day
Red: Decrease from previous day
Next Canadian Association for Technical Analysis Meeting
Next meeting is scheduled at 8:00 AM EST on Tuesday. Speaker is Jon Vialoux, author of www.EquityClock.com . Connect below for information. Everyone is welcome
Not a member of CATA? See: https://canadianata.ca/content.aspx?page_id=4&club_id=71614
Links offered by valued providers
Michael Campbell’s Money Talks (features yearend tax tips by Tim Cestnick)
Michael Campbell’s MoneyTalks – Complete Show (mikesmoneytalks.ca)
Cramer’s game plan for the trading week of December 12th
https://www.youtube.com/watch?v=Krf9LHzBW3s
Greg Schnell notes “Energy names implode”
Energy Names Implode | The Canadian Technician | StockCharts.com
David Keller notes “Markets whimpers into weekend”.
Market Whimpers Into Weekend | David Keller, CMT | The Final Bar (12.09.22) – YouTube
Erin Swenlin says “Market weak, time to short”.
Market Weak, Time To Short | Erin Swenlin | Your Daily Five (12.09.22) – YouTube
Mary Ellen McGonagle says “Growth falters, but these areas shine”. Includes favourable favourable comments on semiconductor and precious metal stocks.
Growth Falters, But These Areas Shine | Mary Ellen McGonagle | The MEM Edge (12.09.22) – YouTube
Josh Brown says “If we get through this week, we could rip into the end of the year”.
Mark Leibovit’s weekly comment for December 8th
Interest Rates, Inflation, Gold, Silver, USD – HoweStreet
Links from Mark Bunting and www.uncommonsenseinvestor.com
No Trough Yet but Emerging Markets & Japan Leading the Way Up – Uncommon Sense Investor
Victor Adair’s Trading Notes for December 10th
Trading Desk Notes for December 10, 2022 – The Trading Desk Notes by Victor Adair
Ross Clark on Gold, Bonds, U.S. Dollar and Oil
This Week in Money – HoweStreet
Bob Hoye says Crypto exchanged not the only one limiting withdrawals
Crypto Exchanges Not the Only Ones Limiting Withdrawals – HoweStreet
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
T-Mobile $TMUS a NASDAQ 100 stock moved below $143.08 completing a double top pattern.
Schlumberger $SLB an S&P 100 stock moved below $48.91 completing a double top pattern.
S&P 500 Momentum Barometers
The intermediate term Barometer dropped 2.40 on Friday and 13.00 last week to78.00. It remains Overbought. Trend has turned down.
The long term Barometer dropped 1.60 on Friday and 7.60 last week to 56.20. It changed from Overbought to Neutral on a drop below 60.00. Trend has turned down.
TSX Momentum Barometers
The intermediate term Barometer added 0.42 on Friday, but dropped 16.53 last week to 68.22. It remains Overbought. Trend has turned down.
The long term Barometer slipped 0.42 on Friday and dropped 11.02 last week to 45.76. It remains Neutral. Trend has turned down.
Disclaimer: Seasonality ratings 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
