Vialoux's Technical Talk: Monday April 7, 2014

by Don Vialoux, EquityClock.com

April 7, 2014

March Canadian Housing Starts to be released at 8:15 AM EDT on Tuesday are expected to increase to 193,000 from 191,200 in February.

February Wholesale Inventories to be released at 8:30 AM EDT on Wednesday are expected to increase 0.5% versus a gain of 0.6% in January.

Minutes from the FOMC meeting on March 19^th are released at 2:00 PM EDT on Wednesday

Weekly Initial Jobless Claims to be released at 8:30 AM EDT on Thursday are expected to slip to 325,000 from 326,000 last week.

March Producer Prices to be released at 8:30 AM EDT on Friday are expected to increase 0.1% versus a decline of 0.1% in February. Excluding food and energy March PPI is expected to decline 0.2% versus a drop of 0.2% in February

April Michigan Sentiment to be released at 9:55 AM EDT on Friday is expected to improve to 81.0% from 80.0.0% in March.

Earnings News This Week

Tuesday: Alcoa

Thursday: Family Dollar

Friday: Fastenol, JP Morgan, Wells Fargo

Equity Trends

The S&P 500 Index gained 7.47 points (0.40%) last week despite the 1.25% drop on Friday. Note the negative key reversal on Friday when the Index also touched an all-time high. Intermediate trend remains up. The Index fell below its 20 day moving average on Friday. Short term momentum indicators are overbought and showing early signs of rolling over.

Percent of S&P 500 stocks trading above their 50 day moving average increased last week to 74.60% from 68.40%. Percent remains intermediate overbought. A rollover from above the 80% level frequently occurs at the start of an intermediate correction.

Percent of S&P 500 stocks trading above their 200 day moving average increased last week to 85.20% from 82.40%. Percent remains intermediate overbought.

Bullish Percent Index for S&P 500 stocks increased last week to 73.60% from 72.00%. The Index closed at its 15 day moving average.

Bullish Percent Index for TSX Composite stocks increased last week to 78.66% from 77.82% and remained above its 15 day moving average. The Index remains intermediate overbought.

The TSX Composite Index added 132.38 points (0.93%) last week. Intermediate trend remains up (Score: 1.0). The Index recovered back above its 20 day moving average (Score: 1.0). Strength relative to the S&P 500 Index remains neutral (Score: 0.5). Technical score based on the above indicators improved to 2.5 from 1.5 out of 3.0. Short term momentum indicators are overbought and showing early signs of rolling over.

Percent of TSX stocks trading above their 50 day moving average increased last week to 67.09% from 58.82%. Percent remains intermediate overbought.

Percent of TSX stocks trading above their 200 day moving average increased last week to 78.90% from 76.05%. Percent remains intermediate overbought.

Dow Jones Industrial Average added 89.65 points (0.55%) last week. Intermediate trend changed from down to up on a move on Friday above 16,588.25 to an all-time high. Notice the bearish key reversal recorded on Friday. The Average remains above its 20 day moving average. Strength relative to the S&P 500 Index remains positive. Technical score improved to 3.0 from 2.0 out of 3.0. Short term momentum indicators are overbought.

Bullish Percent Index for Dow Jones Industrial Average stocks fell last week to 73.33% from 76.67% and fell below its 15 day moving average. The Index remains intermediate overbought.

Bullish Percent for NASDAQ Composite stocks fell last week to 60.74% from 61.14% and remained below its 15 day moving average. Percent remains intermediate overbought and trending down.

The NASDAQ Composite Index fell 28.03 points (0.67%) last week. Intermediate trend remains down. The Index remained below its 20 and 50 day moving averages. Strength relative to the S&P 500 Index remains negative. Technical score remained at 0.0 out of 3.0. Short term momentum indicators are trending down.

The Russell 2000 Index added 1.51 points (0.14%) last week. Trend remains down. The Index remains below its 20 and 50 day moving averages. Strength relative to the S&P 500 Index remains negative. Technical score remains at 0.0 out of 3.0. Short term momentum indicators are mixed.

The Dow Jones Transportation Average added 119.40 points (1.60%) last week. Intermediate trend changed from down to up on a move above 7,627.44. The Average remains above its 20 day moving average. Strength relative to the S&P 500 Index changed from neutral to positive. Technical score improved to 3.0 from 0.5 out of 3.0. Short term momentum indicators are overbought and showing early signs of rolling over.

The Australia All Ordinaries Index added 51.80 points (0.96%) last week. Intermediate trend remains up. The Index recovered back above its 20 day moving average. Strength relative to the S&P 500 Index remains neutral. Technical score improved to 2.5 from 1.5 out of 3.0. Short term momentum indicators are trending up.

The Nikkei Average gained 367.74 points (2.50%) last week. Intermediate trend remains down. The Average remains above its 20 day moving average. Strength relative to the S&P 500 Index changed from neutral to positive. Technical score improved to 2.0 from 1.5 out of 3.0. Short term momentum indicators are trending up.

iShares Europe 350 units gained $0.37 (0.77%) last week. Intermediate trend remains up. Units remain above their 20 day moving average. Strength relative to the S&P 500 Index improved from neutral to positive. Technical score improved to 3.0 from 2.5 out of 3.0. Short term momentum indicators are trending up.

The Shanghai Composite Index added 17.12 points (0.84%) last week. Intermediate trend remains down. The Index remains above its 20 day moving average. Strength relative to the S&P 500 Index remains neutral. Technical score remains at 1.5 out of 3.0. Short term momentum indicators are trending up.

iShares Emerging Markets added 0.56 (1.37%) last week. Intermediate trend remains up. Units remain above their 20, 50 and 200 day moving averages. Strength relative to the S&P 500 Index remains positive. Technical score remains at 3.0 out of 3.0. Short term momentum indicators are trending up.

Currencies

The U.S. Dollar Index added 0.23 (0.29%) last week. Intermediate trend remains neutral. The Index remains above its 20 day moving average. Short term momentum indicators are trending up.

The Euro fell 0.47 (0.34%) last week. Intermediate trend remains up. The Euro remains below its 20 day moving average. Short term momentum indicators are trending down.

The Canadian Dollar gained US0.69 cents (0.44%) last week. Intermediate trend remains down. The Canuck Buck remains above its 20 and 50 day moving averages. Short term momentum indicators are trending up. ‘Tis the season!

The Japanese Yen slipped 0.43 (0.44%) last week. Intermediate trend remains down. The Yen remains below its 20, 50 and 200 day moving averages. Short term momentum indicators are trending down.

Commodities

The CRB Index slipped 0.37 (0.12%) last week. Intermediate trend remains up. The Index remains above its 20 day moving average. Strength relative to the S&P 500 Index remains neutral. Technical score remains at 2.5 out of 3.0.

Gasoline was unchanged last week. Intermediate trend remains up. Gasoline moved above its 20 day moving average. Strength relative to the S&P 500 Index remains neutral. Technical score remained at 2.5 out of 3.0.

Crude Oil slipped $0.57 per barrel (0.56%) last week. Intermediate trend remains neutral. Crude remains above its 20, 50 and 200 day moving averages. Strength relative to the S&P 500 Index changed from positive to neutral. Technical score slipped to 2.0 form 2.5 out of 3.0. Short term momentum indicators are mixed.

Natural Gas fell $0.06 per MBtu (1.34%) last week. Intermediate trend remains down. Gas remains below its 20 day moving average. Strength relative to the S&P 500 Index remains neutral. Technical score remains at 0.5 out of 3.0.

The S&P Energy Index added 6.52 points (1.00%) last week. Intermediate trend remains up. The Index remains above its 20, 50 and 200 day moving averages. Strength relative to the S&P 500 Index remains positive. Technical score remains at 3.0 out of 3.0. Short term momentum indicators are overbought.

The Philadelphia Oil Services Index gained 2.49 points (0.86%) last week. Intermediate trend changed from neutral to up on a move above 293.06. The Index remains above its 20, 50 and 200 day moving averages. Strength relative to the S&P 500 Index remains positive. Technical score improved to 3.0 from 2.5 out of 3.0. Short term momentum indicators are overbought.

Gold gained $7.40 per ounce (0.57%) last week. Intermediate trend remains up. Gold remains below its 20 day moving average. Strength relative to the S&P 500 Index remains negative. Technical score remains at 1.0 out of 3.0. Short term momentum indicators are oversold and showing early signs of bottoming.

Silver added $0.32 per ounce (1.63%) last week. Intermediate trend is up. Silver remains below its 20, 50 and 200 day moving averages. Strength relative to the S&P 500 Index remains negative. Technical score remains at 1.0 out of 3.0. Short term momentum indicators are oversold and showing early signs of bottoming. Strength relative to Gold changed from negative to neutral.

The AMEX Gold Bug Index added 1.60 points (0.71%) last week. Intermediate trend remains neutral. The Index remains below its 20 and 50 day moving averages. Strength relative to the S&P 500 Index remains negative. Technical score remains at 0.5 out of 3.0. Short term momentum indicators are oversold and showing early signs of bottoming. Strength relative to Gold changed from negative to neutral.

Platinum added $35.90 per ounce (2.54%) last week. Trend remains up. Platinum moved above its 20 day moving average. Strength relative to the S&P 500 changed from negative to positive. Strength relative to Gold improved from neutral to positive.

Palladium added $15.30 per ounce (1.97%) last week. Trend remains up. PALL remains above its 20 Day MA. Strength relative to S&P 500 changed from neutral to positive.

Copper slipped $0.01 per lb. (0.33%) last week. Intermediate trend remains down. Copper remains above its 20 day moving average. Strength relative to the S&P 500 Index remained neutral. Technical score remains at 1.5 out of 3.0. Short term momentum indicators are trending up.

The TSX Metals & Mining Index gained 4.17 points (0.52%) last week. Intermediate trend remains down. The Index remains above its 20 day moving average. Strength relative to the S&P 500 Index remains positive. Technical score remains at 2.0 out of 3.0. Short term momentum indicators are trending up.

Lumber fell another $6.80 (2.03%) last week. Trend remains down. Lumber remains below its 20 day MA. Strength relative to the S&P 500 remains negative. Technical score remains 0.0.

The Grain ETN added $0.47 (0.95%) last week. Trend remains up. Units remain above their 20 day moving average. Strength relative to the S&P 500 remains positive. Technical score: 3.0.

The Agriculture ETF slipped $0.15 (0.28%) last week. Intermediate trend changed from down to up on a move above $54.57. Units remain above their 20 day moving average. Strength relative to the S&P 500 Index remains neutral. Technical score improved to 2.5 from 1.5 out of 3.0. Short term momentum indicators are overbought.

Interest Rates

The yield on 10 year Treasuries added 1.4 basis points (0.52%) last week. Intermediate trend remains up. Yield remains below its 20 day moving average. Short term momentum indicators are mixed.

Conversely, price of the long term Treasury ETF slipped $0.91 (0.83%) last week. Intermediate trend remains up. Units remain above their 20 day moving average.

Other Issues

The VIX Index fell 0.45 (3.12%) last week. The Index remains below its 20 day moving average.

A key reversal by the S&P 500 Index and Dow Jones Industrial Average on Friday is a short term bearish technical signal for U.S. equity markets.

First quarter corporate reports start to flow late this week. Initial focus is on the U.S. financial services sector. Consensus shows that year-over-year comparisons for S&P 500 and Dow Jones Industrial companies will be slightly negative. On the other hand, first quarter reports frequently are released during annual meeting that often include good news (increased dividends, stock splits, share buy backs). In addition, many companies are expected to report positive second quarter guidance relative to first quarter, weather weakened results.

Short and intermediate technical indicators remain overbought for most equity markets and sectors.

Economic news this week is expected to be quiet. Focus is on release of the FOMC minutes for the March 19^th meeting.

Political focuses this week are on election results from Quebec and Afghanistan.

Seasonal influences for U.S. equity markets and sectors normally are positive during the first half of half of April followed by underperformance in the second half of April

Historically, during U.S. Midterm election years, the S&P 500 Index and Dow Jones Industrial Average reach a significant medium term peak in the second half of April followed by a significant intermediate correction lasting until the beginning of October. Tipoff is the start of mid-term election ads.

The Bottom Line

North American equity markets are in the final stages of their current period of seasonal strength. Short term technical evidence of a top has appeared, but is inconclusive. Preferred strategy is to hold seasonally strong equity positions for now, but start to plan an exit strategy to be triggered on additional technical evidence of a possible downtrend.

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Disclaimer: Comments, charts and opinions offered in this report by www.timingthemarket.ca  and 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. Don and Jon Vialoux are Research Analysts with Horizons ETFs Management (Canada) Inc.  All of the views expressed herein are the personal views of the authors and are not necessarily the views of Horizons ETFs Investment Management (Canada) Inc., although any of the recommendations found herein may be reflected in positions or transactions in the various client portfolios managed by Horizons ETFs Investment Management (Canada) Inc.

Horizons Seasonal Rotation ETF HAC April 4^th 2014

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