Tech Talk for Monday January 28th 2019

U.S. equity index futures were lower this morning. S&P 500 futures were down 16 points in pre-opening trade.

Caterpillar dropped $6.10 to $130.76 after reporting lower than consensus fourth quarter earnings.

SNC Lavalin ($SNC $48.50) is expected to open lower after the company lowered fourth quarter guidance.

Goldman Sachs (GS $200.24), Morgan Stanley (MS $42.98), Deutsche Bank (DB $9.24) and Credit Suisse (CS $12.48) are expected to open lower after JP Morgan lowered targets on major broker stocks.

Colgate Palmolive (CL $61.84) is expected to open lower after JP Morgan lowered its target price to $51 from $54.

EquityClock's Daily Market Comment

Following is a link:

http://www.equityclock.com/2019/01/25/stock-market-outlook-for-january-28-2019/

Note seasonality charts on the German DAX Index, French CAC Index and Shanghai Composite Index.

WALL STREET RAW RADIO

SATURDAY, JANUARY 26, 2019

WITH YOUR HOST, MARK LEIBOVIT.

SPECIAL GUESTS INCLUDE: DON VIALOUX, SINCLAIR NOE, HARRY BOXER AND BILL MURPHY

https://tinyurl.com/y6wrc4zu

Excerpt from Don Vialoux' comments on Wall Street Raw

The Bear Market Rally continued last week. North American equity markets were virtually unchanged despite lots of bearish headline news including stalled trade negotiations with China and growing concerns about the Mueller investigation.

Emerging equity markets continued to record strong gains last week. The Turkish ETF (Symbol:TUR) broke to a six month high. The Hang Seng Index broke above a four month trading range on Friday completing a classic double bottom pattern. Also, the South Korea Kospi Index broke above a three month trading range on Thursday completing a classic double bottom pattern. Seasonal influences for Hong Kong, China, South Korea and Emerging Markets are positive to the end of April. Participation in Emerging Markets is available through an ETF (Symbol: EEM). Canadian investors can participate through ZEM and XEM trading on the Toronto Exchange.

More commodity sensitive sectors came alive last week. Gold moved above $1300 per ounce to a seven month high on Friday. Gold stocks and related ETFs quickly responded. Seasonal influences are positive for gold and gold stocks to the end of February. Spot price of lumber completed a classic reverse Head & Shoulders pattern on Thursday on a move above $372.00 per MTbd. Forest product stocks quickly responded, particularly Canadian producers including Canfor, Interfor and West Fraser Timber. Seasonal influences for lumber and lumber stocks are positive until the end of April. U.S. Investors can participate through an ETF (Symbol:WOOD).

Responses to fourth quarter reports by S&P 500 companies remain positive. Next week is the busiest week for reports. Fourteen Dow Jones Industrial companies are expected to report including Caterpillar, Apple, Verizon, Pfizer, MMM, Microsoft, AT&T, Amazon, DowDupont, McDonalds, Exxon Mobil, Chevron, Visa and Merck.

The Bottom Line

U.S. and Canadian equity markets extended their tradable bear market rally last week Traders with a time horizon of two months or less can take advantage of a recovery from oversold levels by owning equities that have favourable seasonality and positive strength relative to North American equity indices. Focus is on commodity sensitive securities that are responsive to a flat-to-lower U.S. Dollar Index including precious metals, base metals, agriculture, forest products and energy related equities and Exchange Traded Funds.

Observations

Technical action by individual S&P 500 stocks was quiet last week. Number of stocks breaking intermediate resistance totaled 23 while number of stocks breaking support totaled 4.

Notable strength late last week was recorded by commodity stocks thanks to weakness in the U.S. Dollar Index.

Fourth quarter earnings reports by major U.S. companies continue to pour in this week. See separate report below.

Medium term technical indicators for U.S. equity markets (e.g. Percent of stocks trading above their 50 day moving average, Bullish Percent Index) continued trending higher last week. See charts near the end of this report

Medium term technical indicators in Canada also continued trending higher last week. See charts near the end of this report.

Short term technical indicators for U.S. markets and sectors (20 day moving averages, short term momentum) remain overbought.

Short term technical indicators for Canadian markets and sectors also remain overbought.

Short term political concerns remain elevated. Issues include heightened tariff wars between the U.S. and China, shut down of Congress related to extension of government deficit limits and the Mueller investigation.

Results to date from reporting S&P 500 companies have been encouraging. At the end of last week, 22% of S&P 500 companies have reported quarterly results: 71% beat consensus earnings and 59% beat consensus revenues. Consensus now calls for a 10.9% increase in fourth quarter earnings and a 6.1% increase in revenues on a year-over-year basis.

Prospects for S&P 500 companies in 2019 remain encouraging. According to FactSet, first quarter earnings are expected to increase 0.7% and revenues are expected to increase 6.1%. Second quarter earnings are expected to increase 2.4% and revenues are expected to increase 5.3%. Third quarter earnings are expected to increase 3.1% and revenues are expected to increase 5.0%. Fourth quarter earnings are expected to increase 11.1% and revenues are expected to increase 6.2%. For all of 2019, earnings are expected to increase 6.3% and revenues are expected to increase 5.2%.

Major U.S. companies are seeking places to invest their new found cash flow following changes in U.S. tax laws. Look for additional news about share buybacks, increased dividends, take overs, employee bonuses and wage increases with release of fourth quarter results.

Seasonal influences in the first and second quarters of a U.S. Pre-Presidential Election Year are favourable. Average gain per period for the Dow Jones Industrial Average since 1929 is 5.2% in the first quarter and 4.5% in the second quarter.

Technical evidence of strength in equity markets outside of North America continues to expand. Encouraging breakouts by the South Korea Kospi and Hong Kong Hang Seng!

Economic News This Week

U.S. fourth quarter real GDP to be released at 8:30 AM EST on Wednesday is expected to grow at a 2.5% rate versus a 3.4% rate in the third quarter.

Fed Fund Rate to be announced at 2:00 PM EST on Wednesday is expected to remain unchanged. News conference follows at 2:30 PM EST

January ADP Employment Report to be released at 8:15 AM EST on Wednesday is expected to drop to 175,000 from 271,000 in December

Weekly Jobless Claims to be released at 8:30 AM EST on Thursday are expected to increase to 211,000 from 199,000 last week.

December Personal Income to be released at 8:30 AM EST on Thursday is expected to increase 0.4% versus a gain of 0.2% in November. December Personal Spending is expected to increase 0.3% versus a gain of 0.4% in November.

November Canadian GDP to be released at 8:30 AM EST on Thursday is expected to drop 0.2% versus a gain of 0.3% in October.

December Chicago PMI to be released at 9:45 AM EST on Thursday is expected to slip to 62.3from 65.4 in November.

January Non-farm Payrolls to be released at 8:30 AM EST on Friday is expected to drop to 160,000 from 312,000 in December. January Unemployment Rate is expected to remain unchanged from December at 3.9%. January Hourly Earnings are expected to increase 0.3% versus a gain of 0.4% in December.

January Manufacturing ISM to be released at 10:00 AM EST on Friday is expected to slip to 54.0 from 54.1 in December

January Michigan Consumer Sentiment to be released at 10:00 AM EST on Friday is expected to remain unchanged from December at 90.7

Selected Earnings News This Week

Another 126 S&P 500 and 14 Dow Jones Industrial companies are scheduled to release quarterly results this week.

Trader's Corner

Equity Indices and related ETFs

Daily Seasonal/Technical Equity Trends for January 25th 2019

Green: Increase from previous day

Red: Decrease from previous day

Commodities

Daily Seasonal/Technical Commodities Trends for January 25th 2019

Green: Increase from previous day

Red: Decrease from previous day

Sectors

Daily Seasonal/Technical Sector Trends for January 25th 2019

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

StockTwits Released on Friday @EquityClock

Initial jobless claims chart fresh multi-decade low as year-to-date change remains well below average. equityclock.com/2019/01/24/… $MACRO $STUDY

South Korea iShares $EWY moved above $61.66 completing a double bottom pattern.

Magna International $MG.CA, a TSX 60 stock moved above $68.16 completing a double bottom pattern

West Fraser Timber $WFT moved above $75.76 completing a double bottom pattern.

‘Tis the season for Magna International $MG.CA $MGA to move higher to at least May!

‘Tis the season for West Fraser Timber $WFT to move higher to early April!

Technical action by S&P 500 stocks to 10:00: Bullish. Intermediate breakouts: $AMAT $LRCX $TXN $WDC $AES. Breakdown: $RMD

‘Tis the season for Applied Materials $AMAT to move higher to late March!

‘Tis the season for Texas Instruments $TXN to move higher to May!

‘Tis the season for Lam Research $LRCX to move higher to at least the end of April!

Gold SPDRs $GLD moved above $122.46 extending an intermediate uptrend

TSX 60 iShares $XIU.CA moved above $23.18 extending an intermediate uptrend.

‘Tis the season for TSX 60 iShares $XIU.CA to move higher to the end of May!

Rio Tinto $RIO moved above $52.74 resuming an intermediate uptrend

‘Tis the season for Rio Tinto $RIO and other base metal stocks and ETFs to move higher to early May! $PICK $XBM.CA $COPX

Gold stocks are responding to higher gold prices. Yamana Gold $YRI.CA moved above $3.41 extending an intermediate uptrend.

‘Tis the season for Yamana $YRI.CA $AUY and other gold stocks and ETFs to move higher to the end of February! $GDX $GDXJ

Semiconductor iShares $SOXX moved above $173.58 extending an intermediate uptrend.

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S&P 500 Momentum Barometers

Percent of S&P 500 stocks trading above their 50 day moving average slipped last week to 66.40 from 72.80. Percent remains intermediate overbought, but continues to trend higher.

Bullish Percent Index for S&P 500 stocks increased last week to 50.20 from 47.80. The Index remains intermediate neutral, but continues to trend higher.

TSX Momentum Barometers

Percent of TSX stocks trading above their 50 day moving average slipped last week to 77.97 from 79.32. Percent remains intermediate overbought, but continues to trend higher.

Bullish Percent Index for TSX stocks increased last week to 44.77 from 43.33. The Index remains intermediate neutral, but continues to trend higher.

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

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