The Bottom Line
Cross currents! History shows that the strongest three week period in the year for North American equity indices is the last two weeks of the year and first week in the New Year. During the past 32 years, the S&P 500 Index has recorded gains in 24 periods for an average gain per period of 1.48%. The TSX Composite has gained in 28 of the past 32 periods for an average gain per period of 2.15%. Gains were triggered by a series of favourable social and financial events during the period that prompt individual investors to be net buyers of equities. On the other hand, non-recurring economic events announced just before or during this three week period can increase volatility of returns including negative returns. The current period unfortunately is likely to be one of them. Offsetting the traditionally good news at this time of year was news on Thursday that November U.S. retail sales dropped more than expected in response to recent efforts by the Federal Reserve to lower inflation rates. Compounding the response was news that the Federal Reserve plans to continue its current Financial Tightening program at least until the U.S. inflation rate at 7.1% in November (core rate at 6.0%) drops below the Fed Fund Rate currently at 4.25%-4.50%.
Consensus for Earnings and Revenues for S&P 500 Companies
Analysts once again lowered fourth quarter earnings and revenue estimates. According to www.factset.com fourth quarter earnings are expected to decrease 2.8% (versus previous decrease of 2.5%) and revenues are expected to increase 4.0% (versus previous increase of 4.2%). For all of 2022 earnings are expected to increase 5.1% and revenues are expected to increase 10.4%.
Preliminary earnings estimates for 2023 also moved lower. According to www.factset.com first quarter 2023 earnings are expected to increase 0.7% (versus previous increase at 1.1%) and revenues are expected to increase 3.6%. Second quarter 2023 earnings are expected to increase 0.3% (versus previous increase at 0.6%) and revenues are expected to increase 1.1% (versus previous increase at 1.0%). For all of 2023, earnings are expected to increase 5.5% and revenues are expected to increase 3.3%
Economic News This Week
October Canadian Retail Sales released at 8:30 AM EST on Tuesday are expected to increase 1.4% versus a drop of 0.5% in September. Excluding auto sales, October Canadian Retail Sales are expected to increase 1.5% versus a drop of 0.7% in September.
November U.S. Housing Starts released at 8:30 AM EST on Tuesday are expected to slip to 1.400 million units from 1.425 million units in October.
November Canadian Consumer Price Index released at 8:30 AM EST on Wednesday is expected to drop 0.1% versus a gain of 0.7% in October. On a year-over-year basis November CPI is expected to increase 6.6% versus a gain of 6.9% in October.
November U.S. Existing Home Sales released at 10:00 AM EST on Wednesday are expected to slip to 4.20 million units from 4.43 million units in October .
U.S. third quarter annualized real GDP update released at 8:30 AM EST on Thursday is expected to remain unchanged at 2.9%.
November Leading Economic Indicators released at 10:00 AM EST on Thursday are expected to slip 0.5% versus a drop of 0.8% in October.
November Core PCE Price Index released at 8:30 AM EST on Friday is expected to increase 0.3% versus a gain of 0.2% in October. On a year-over-year basis, November core PCE Price Index is expected to increase 4.6% versus a gain of 5.0% in October.
November Durable Goods Orders released at 8:30 AM EST on Friday are expected to drop 0.8% versus a gain of 1.1% in October. Excluding Transportation Orders, November Durable Goods Orders are expected to increase 0.1% versus a gain of 0.5% in October.
November Personal Income released at 8:30 AM EST on Friday is expected to increase 0.3% versus a gain of 0.7% in October. November Personal Spending is expected to 0.2% versus a gain of 0.8% in October.
October Canadian GDP released at 8:30 AM EST on Friday is expected to increase 0.1% versus a gain of 0.1% in September.
December Michigan Sentiment released at 10:00 AM EST on Friday is expected to drop to 55.0 from 59.1 in November.
November New Home Sales released at 10:00 AM EST on Friday are expected to drop to 595,000 units from 632,000 units in October.
Selected Earnings News This Week
Trader’s Corner
Equity Indices and Related ETFs
Daily Seasonal/Technical Equity Trends for December 16th 2022
Green: Increase from previous day
Red: Decrease from previous day
Commodities
Daily Seasonal/Technical Commodities Trends for December 16th 2022
Green: Increase from previous day
Red: Decrease from previous day
Sectors
Daily Seasonal/Technical Sector Trends for December 16th 2021
Green: Increase from previous day
Red: Decrease from previous day
Links offered by Valued Providers
Michael Campbell’s Money Talks for December 17th
https://mikesmoneytalks.ca/category/mikes-content/complete-show/?mc_cid=be70e62aa6&mc_eid=592546b4b5
David Keller asks “The end of another bear market rally”?
The End of Another Bear Market Rally? | The Mindful Investor | StockCharts.com
Greg Schnell asks “Can energy bounce”?
Can Energy Bounce? | The Canadian Technician | StockCharts.com
Mary Ellen McGonagle says “The markets are oversold. Will this provide a window for Santa”?
The Markets are Oversold — Will This Provide a Window for Santa? | The MEM Edge | StockCharts.com
Erin Swenlin notes “Two index ETFs show rising momentum”
Two Index ETFs with Rising Momentum | DecisionPoint | StockCharts.com
Five ideas offered by three technical analysts Includes favourable comments on gold bullion
Link offered by Mark Bunting and www.uncommonsenseinvestor.com
How to Profit from Chick-fil-A’s Rapid Market-Leading Growth – Uncommon Sense Investor
Mark Leibovit comment for December15th
This Week in Money – HoweStreet
Bob Hoye asks “Will Fed Cause Recession to Cure Inflations”?
Will Fed Cause Recession to Cure Inflation? – HoweStreet
Victor Adair’s Trading Notes for December 17th
Trading Desk Notes for December 17, 2022 – The Trading Desk Notes by Victor Adair
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
Seasonality Chart of the Day
Gold and gold equities/ETFs have just entered their period of seasonal strength lasting to late March.
Seasonal Chart Analysis
Analysis of the VanEck Vectors Gold Miners ETF (NYSE:GDX) seasonal charts above shows that a Buy Date of December 18 and a Sell Date of March 25 has resulted in a geometric average return of 4.12% above the benchmark rate of the S&P 500 Total Return Index over the past 15 years. This seasonal timeframe has shown positive results compared to the benchmark in 10 of those periods. This is a good rate of success and the return strongly outperforms the relative buy-and-hold performance of the stock over the past 15 years by an average of 13.96% per year.
Technical Notes for Friday
S&P Bank SPDRs $KBE moved below $43.95 setting an intermediate downtrend.
Transportation iShares $IYT moved below intermediate support at $218.53.
Semiconductor ETFs broke intermediate support. SOXX moved below $362.53 and SMH moved below $214.26.
Several S&P 100 stocks moved below intermediate support: Black Rock $BLK moved below $688.54 completing a double top pattern. Bristol-Myers $BMY moved below intermediate support at $74.55. Medtronic $MDT moved below $75.83 extending an intermediate downtrend.
Capital One $COF moved below $89.74 extending an intermediate downtrend. Apple $AAPL moved below $134.15 resuming an intermediate downtrend. Keurig Dr. Pepper moved below $35.51 extending an intermediate downtrend.
Commerce Bank $CM.TO a TSX 60 stock moved below $55.35 extending an intermediate downtrend.
Brookfield Infrastructure $BIP/UN.TO a TSX 60 stock moved below extending an intermediate downtrend.
TC Energy $TRP.TO a TSX 60 stock moved below $54.60 extending an intermediate downtrend.
S&P 500 Momentum Barometers
The intermediate term Barometer dropped 8.40 on Friday and 19.20 last week to 58.80. It changed on Friday from Overbought to Neutral on a move below 60.00. Trend is down.
The long term Barometer dropped 3.60 on Friday and 6.80 last week to 49.40. It remains Neutral. Trend is down.
TSX Momentum Barometers
The intermediate term Barometer slipped 3.38 on Friday and plunged 12.52 last week to 55.70. It changed from Overbought to Neutral on a drop below 60.00. Trend is down.
The long term Barometer slipped 2.11 on Friday and dropped 4.41 last week to 41.35. It remains Neutral. Trend is 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
