by Don Vialoux, EquityClock.com
The Bottom Line
Major equity indices around the world were mixed to slightly lower again last week. The notable exception was strength in the Chinese equity market. Hardest hit was the technology heavy NASDAQ 100 Index, down 12.08% from its September 2nd all-time high. 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 remained unchanged last week at intermediate neutral and extended their intermediate downtrend. The VIX Index remained 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 remained elevated last week.
Ditto for VXN showing volatility for 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 lower again last week. It remained intermediate neutral and is trending down. See Barometer chart at the end of this report.
Medium term technical indicator for Canadian equity markets was virtually unchanged 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 again last week
Short term momentum indicators for Canadian markets/sectors were mixed again last week.
Year-over-year 2020 consensus earnings and revenue declines by S&P 500 companies ebbed slightly again last west. According to www.FactSet.com, third quarter earnings are expected to fall 21.8% (versus previous decline of 22.2%) and revenues are expected to decrease 3.8% (versus previous drop of 3.9%). Fourth quarter earnings are expected to drop 12.8% (versus previous 13.0%) and revenues are expected to decline 1.2% (versus previous drop of 1.3%). Earnings for all of 2020 are expected to fall 18.2% (versus previous drop of 18.4%) and revenues are expected to decline 2.8%.
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 13.3% (versus previous 13.2%) and revenues are expected to increase 3.3% (versus previous 3.2%). Earnings in the second quarter are expected to increase 44.2% (versus previous 44.3% and revenues are expected to increase 13.9%. Earnings for all of 2021 are expected to increase 26.2% and revenues are expected to increase 8.1%.
Economic News This Week
August Existing Home Sales to be released at 10:00 AM EDT on Tuesday are expected to increase to 5.98 million from 5.86 million in July.
August New Home Sales to be released at 10:00 AM EDT on Thursday are expected to slip to 892,000 from 901,000 in July.
August Durable Goods Orders to be released at 8:30 AM EDT on Friday are expected to increase 1.5% versus a gain of 11.4% in July. Excluding transportation, August Durable Goods Orders are expected to increase 1.2% versus a gain of 2.6% in July.
Earnings News This Week
Eight S&P 500 companies and one Dow Jones Industrial Average company (Nike) are scheduled to report quarterly results this week.
Trader’s Corner
Equity Indices and related ETFs
Daily Seasonal/Technical Equity Trends for September 18th 2020
Green: Increase from previous day
Red: Decrease from previous day
Commodities
Seasonal/Technical Commodities Trends for September 18th 2020
Green: Increase from previous day
Red: Decrease from previous day
Sectors
Daily Seasonal/Technical Sector Trends for September 18th 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 21st
S&P 500 Index moved below its 50 day moving average at 3,342.96. David Keller, chief market strategist for www.stockcharts.com comments on significance of the breakdown at:
https://www.youtube.com/watch?v=kZzRTgjPj7c
Coal ETF (KOL) moved above $80.00 extending an intermediate uptrend.
BioMarin Pharma (BMRN), a NASDAQ 100 stock moved above $79.00 completing a double bottom pattern.
Pembina Pipelines (PPL), a TSX 60 stock moved below $30.88 completing a double top pattern.
Monster Beverages (MNST), a NASDAQ 100 stock moved below $79.65 completing a Head & Shoulders pattern.
The Wheat ETN (WEAT) moved above $5.67 extending an intermediate uptrend.
Kinross (KGC K), a TSX 60 stock moved above US$10.20 and Cdn$13.50 to a 7 year high extending an intermediate uptrend. The company announced an initial dividend.
Alphabet (GOOGL), a NASDAQ 100 stock moved below intermediate support at $1454.00 and Alphabet Class C (GOOG) moved below intermediate support at $1,454.03.
Microsoft (MSFT), a Dow Jones Industrial Average stock moved below intermediate support at $197.03
Splunk (SPLK), a NASDAQ 100 stock moved below $171.28 extending an intermediate downtrend.
Magna International (MG), a TSX 60 stock moved below $61.00 completing a Head & Shoulders pattern.
S&P 500 Momentum Barometer
The Barometer dropped 8.22 on Friday and 1.81 last week to 52.10. It briefly returned above 60.00 and an intermediate overweight rating, but closed below 60.00 on Friday and an intermediate neutral rating. Trend is down.
TSX Momentum Barometer
The Barometer dropped 7.39 on Friday, but gained 2.38 last week to 51.18. It also briefly moved above 60.00, but returned to an intermediate neutral level. Trend is 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.
