Tech Talk for Monday May 21st 2018

U.S. equity index futures were higher this morning. S&P 500 futures were up 15 points in pre-opening trade. Index futures responded to news that trade negotiations between China and the U.S. are progressing.

Big Lots (BIG $41.64) is expected to open higher after JP Morgan raised its target price to $55 from $44.

Lululemon gained $0.82 to $102.82 after SunTrust increased its target price to$114 from $95.

Campbell Soup slipped $0.37 to $34.00 after Stifel Nicolaus lowered its target price to $35 from $44.

General Electric added $0.34 to $15.31 on news of sale of its Transportation division for $11.1 billion.

American Outfitters dropped $0.51 to $22.59 after SunTrust downgraded the stock to Hold from Buy.

Jon Vialoux on BNNBloomberg's Market Call Tonight

Recorded on Friday evening. Following are links:

https://www.bnnbloomberg.ca/jon-vialoux-s-top-picks-may-18-2018-1.1079901

https://www.bnnbloomberg.ca/video/jon-vialoux-s-past-picks~1398205

https://www.bnnbloomberg.ca/video/jon-vialoux-s-market-outlook~1398176

WALL STREET RAW RADIO

WITH HOST, MARK LEIBOVIT, SATURDAY, MAY 19, 2018

https://tinyurl.com/y7opzgmj

GUESTS INCLUDE DON VIALOUX, HARRY BOXER AND SINCLAIR NOE

The Bottom Line

First quarter results by a wide variety of U.S. companies have been spectacular. S&P 500 companies have reported a year-over year gain of 24.5%. Despite results, responses by equity markets remain muted. The S&P 500 Index and Dow Jones Industrial Average were lower last week and are slightly lower than levels set nine weeks ago. Short and intermediate term technical indicators remain overbought and some are showing signs of peaking.

U.S. equity markets have a history of reaching a seasonal peak at this time of year. The first week in May historically is the week when U.S. equity indices, commodities and sectors change their seasonality from Positive to Neutral/Negative. Subsequently seasonal influences regularly turn Negative in the third week in July and bottom in mid-October. This year, seasonal influences have varied slightly mainly due to unusual strength in the energy sector triggered by non-recurring geopolitical events. Last week, the energy sector once again dominated the list of outperforming stocks.

Seasonal influences are particularly relevant in U.S. Mid-term election years. Volatility in equity markets increases from late April to mid-October due to concerns about a possible change in political control in Congress. These concerns are very real this year. Republicans control the House by 16 votes and the Senate by one vote. On average during a Mid-term election year, the controlling party loses 24 House seats to the opposition party. Anticipation of a possible change, regardless of the final result, is a major reason for a correction in North American equity markets between late April and October.

Seasonal influences for a wide variety of equity markets have a history of peaking at this time of year including Chinese, Japanese and most European equity markets Last week, weakness was particularly notable in Turkish, South African, Brazilian and Mexican equity markets and related ETFs.

Seasonal influences for Canadian equity markets follow a similar pattern. They normally peak near the end of May, turn neutral until mid-July and turn negative until mid-October. History is about to repeat. Short and intermediate technical indicators for the Canadian equity market already are overbought, but have yet to show signs of peaking.

Economic News This Week

April U.S. Home Sales to be released at 10:00 AM EDT on Wednesday are expected to slip to 670,000 units from 694,000 units in March.

FOMC Minutes to the May 2nd meeting are released at 2:00 PM EDT on Wednesday

Weekly Jobless Claims to be released at 8:30 AM EDT on Thursday are expected to slip to 220,000 from 222,000 last week.

April Existing Home Sales to be released at 10:00 AM EDT on Thursday are expected to slip to 5.55 million units from 5.600 million units in March.

April Durable Goods Orders to be released at 8:30 AM EDT on Friday are expected to drop 1.4% versus a gain of 2.6% in March. Excluding transportation, April Durable Goods Orders are expected to increase 0.5% versus a decline of 0.1% in March.

Fed Chairman Jerome Powell speaks at 9:20 AM EDT on Friday

May Consumer Sentiment Index to be released at 10:00 AM EDT on Friday is expected to increase to 99.0 from 98.8 in April.

Earnings News This Week

Observations

Technical action by individual S&P 500 stocks was modestly bullish last week. Number of stocks breaking resistance totaled 44 while number of stocks breaking support totaled 18. Notably, energy and financial stocks were on the list of breakouts and utilities were on the list of breakdowns. The Up/Down ratio increased last week to (218/211=) 1.03 from 0.93.

Earnings focuses this week are on U.S. retail merchandisers and Canadian banks.

Medium term technical indicators in the U.S. (Percent of stocks trading above their 50 day moving average, Bullish Percent Index) showed signs of rolling over last week from overbought levels.

Medium term technical indicators in Canada remained in upward trends last week and remained overbought.

Short term technical indicators for U.S. and Canadian equity markets, commodities and most sectors (20 day moving averages, short term momentum) continued to trend up last week. Many are overbought.

Seasonal influences in U.S. equity markets normally turn neutral early in May and negative in mid-July, particularly in mid-term U.S. election years. Seasonal influences in Canadian equity markets frequently remain neutral/positive to early June. Thereafter, they turn negative. See charts below:

The outlook for S&P 500 earnings and sales remains positive: According to FactSet, 93% of companies have reported first quarter results. Another 22 companies are scheduled to report this week. To date, 78% beat consensus earnings estimates and 77% beat consensus sales estimates. First quarter 2018 earnings are expected to increase 24.5% on an 8.3% increase in sales. Second quarter 2018 earnings are expected to increase 18.8% on an 8.4% increase in sales. Third quarter earnings are expected to increase 20.9% on a 7.3% increase in sales. Fourth quarter earnings are expected to increase 16.7% on a 5.6% increase in sales. For all of 2018, earnings are expected to increase 19.4% on a 7.3% increase in sales.

Short term political uncertainties remain NAFTA negotiations, rising trade war fears (particularly against China), impact of revocation of the Iran nuclear weapons agreement and increased scrutiny by special council on Russia's influence on the Presidential election. In addition, Mid-term election political rhetoric normally starts to ramp up in May culminating in October.

Earnings and revenue prospects for 2018 are expected to be exceptional for U.S. based companies with international exposure. Earnings will benefit significantly from weakness in the U.S. Dollar on a year-over-year basis when revenues and earnings from international operations are translated into U.S. Dollars. For example, U.S. based company with 50% or more of earnings and revenues from international operations saw first quarter earnings increase by 29.6% (versus 24.5% for all companies and first quarter sales increase by 13.1% (versus an 8.3% for all companies). The U.S. Dollar Index averaged 100 in the fourth quarter of 2016 and 101 in the first quarter of 2017. Strong gains from international operations due to currency translation are anticipated during the next three quarters.

Equity Indices and Related ETFs

Daily Seasonal/Technical Equity Trends for May 18th 2018

Green: Increase from previous day

Red: Decrease from previous day

Technical scores are 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.

S&P 500 Index dropped 14.75 points (0.54%) last week. Intermediate trend remains down. The Index remains above its 20 day moving average. Short term momentum indicators are trending up (but are overbought and showing early signs of peaking).

Percent of S&P 500 stocks trading above their 50 day moving average slipped last week to 57.80 from 62.20. Percent changed to intermediate neutral from intermediate overbought and showed early signs of a short term peak.

Percent of S&P 500 stocks trading above their 200 day moving average slipped last week to 59.80 from 62.29. Percent changed to intermediate neutral from intermediate overbought and shows early signs of a short term peak.

Bullish Percent Index for S&P 500 stocks increased last week to 57.60 from 54.40 and remained above its 20 day moving average. The Index remains intermediate neutral and continues to move higher.

Bullish Percent Index for TSX stocks increased last week to 63.80 from 62.40 and remained above its 20 day moving average. The Index remains intermediate overbought and continues to move higher.

TSX Composite Index gained another 178.99 points (1.12%) last week. Intermediate trend remains up (Score: 2). Strength relative to the S&P 500 Index remains Positive (Score: 2). The Index remains above its 20 day moving average (Score: 1). Short term momentum indicators are trending up (Score: 1). Technical score remained last week at 6.

Percent of TSX stocks trading above their 50 day moving average increased last week to 72.02 from 69.26. Percent remains intermediate overbought, but continues to trend higher.

Percent of TSX stocks trading above their 200 day moving average increased last week to 56.38 from 55.33. Percent remains intermediate Neutral, but continues to trend higher.

Dow Jones Industrial Average dropped 116.08 points (0.47%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index changed last week to Neutral from Negative. The Average remains above its 20 day moving average. Short term momentum indicators are trending up, but showing early signs of peaking. Technical score increased last week to 0 from -2.

Bullish Percent Index for Dow Jones Industrial stocks increased last week to 60.00 from 56.67 and remained above its 20 day moving average. The Index has returned to an intermediate overbought level.

Bullish Percent Index for NASDAQ Composite stocks increased last week to 60.17 from 57.38 and remained above its 20 day moving average. The Index moved to an intermediate overbought level.

NASDAQ Composite Index dropped 48.54 points (0.66%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Positive. The Index remains above its 20 day moving average. Short term momentum indicators are trending up, but are overbought and showing early signs of peaking. Technical score remained last week at 6.

Russell 2000 Index gained 19.84 points (1.23%) last week. Intermediate trend changed to up from neutral on a move above 1615.52 to an all-time high. Strength relative to the S&P 500 Index remained Positive. The Index remained above its 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to 6 from 4.

Dow Jones Transportation Average added 16.89 points (0.16%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index remains Neutral. The Average remains above its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 2.

Australia All Ordinaries Composite Index dropped 25.50 points (0.41%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index changed to Neutral from Positive. The Index remains above its 20 day moving average. Short term momentum indicators have turned down. Technical score dropped last week to 0 from 4.

Nikkei Average added 171.88 points (0.76%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index changed to Positive from Neutral. The Average remains above its 20 day moving average. Short term momentum indicators are trending up. Technical score increase last week to 4 from 0.

Europe iShares dropped $0.31 (0.64%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index remains Negative. Units remained above their 20 day moving average. Short term momentum indicators have turned down. Technical score dropped last week to -2 from 0.

Shanghai Composite Index gained 30.04 points (0.95%) last week with all of the gain recorded on Friday. Strength relative to the S&P 500 Index remained Neutral. The Index remained above its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 0.

Emerging Markets ETF dropped $1.33 (2.81%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remained Negative. Units dropped below their 20 day moving average. Short term momentum indicators turned lower. Technical score dropped last week to -2 from 2.

Currencies

The U.S. Dollar Index gained another 1.13 (1.22%) last week. Intermediate trend remains up. The Dollar remains above its 20 day moving average. Short term momentum indicators are trending up, but are overbought and showing early signs of peaking.

The Euro dropped another 1.77 (1.48%) last week. Intermediate trend remains down. The Euro remains below its 20 day moving average. Short term momentum indicators are trending down and are deeply oversold.

The Canadian Dollar dropped U.S. 056 cents (0.72%) last week. Intermediate trend remains down. The Canuck Buck moved below its 20 day moving average. Short term momentum indicators are mixed .

The Japanese Yen dropped another 1.18 (1.29%) last week. Intermediate trend remains down. The Yen remains below its 20 day moving average. Short term momentum indicators are trending down., but are deeply oversold.

British Pound dropped 0.60 (0.44%) last week. Intermediate trend remains down. The Pound remains below its 20 day moving average. Short term momentum indicators have turned up.

Commodities and Related ETFs

Daily Seasonal/Technical Commodities Trends for May 18th 2018

Green: Increase from previous day

Red: Decrease from previous day

The CRB Index slipped 0.83 (0.41%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Neutral. The Index remains above its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 4.

Gasoline gained another 4 cents per gallon (1.83%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Positive. Gas remains above its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 6.

Crude Oil added another $0.67 per barrel (0.95%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Positive. Crude remains above its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 6.

Natural Gas gained $0.04 per MBtu (1.42%) last week. Intermediate uptrend was confirmed on a move above 2.844. Strength relative to the S&P 500 Index remained Neutral. "Natty" remained above its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 4.

S&P Energy Index gained another 8.57 points (1.52%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Positive. The Index remains above its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 6.

Philadelphia Oil Services Index gained another 7.22 points (4.47%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Positive. The Index remains above its 20 day moving average. Short term momentum indicators are trending up. Technical score remained last week at 6.

Gold dropped $29.40 per ounce (2.23%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index changed last week to Negative. Gold remains below its 20 day moving average. Short term momentum indicators turned down. Technical score dropped last week to -4 from -2.

Silver dropped $0.30 per ounce (1.79%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains Negative. Silver dropped below its 20 day moving average. Short term momentum indicators have turned down. Technical score dropped last week to -6 from -2.

AMEX Gold Bugs Index dropped 4.49 points (1.79) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to Negative from Neutral. The Index remains below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -6 from -2.

Platinum dropped $39.40 per ounce (4.26%) last week. Trend remains down. Relative strength remains Negative. Moved below its 20 day MA. Momentum remains down.

Palladium dropped $25.00 per ounce (2.54%) last week. Trend remains down. Relative strength remains Negative. Dropped below its 20 day MA on Friday. Momentum turned down.

Copper dropped 4.9 cents per lb. (1.57%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains Negative. Copper moved below its 20 day moving average on Friday. Short term momentum indicators are trending up. Technical score slipped last week to -4 from -2.

BMO Base Metals ETF added $0.12 (1.00%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index changed to Positive from Neutral. Units remained above their 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to 2 from 0.

Lumber added another $21.30 (3.53%) last week. Trend remains up. Relative Strength remains Positive. Lumber remains above its 20 day MA. Momentum remains up.

Grain ETN added $0.40 (1.52%) last week. Trend remains up. Relative strength remains Negative. Units remain below their 20 day MA. Momentum turned down.

Agriculture ETF added $0.49 (0.78%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to Neutral from Negative. Units remained above their 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to 4 from 2.

Interest Rates

Yield on 10 Year Treasuries increased 9.6 basis points (3.23%) last week to 3.067%. Intermediate trend remains up. Yield remains above its 20 day moving average. Short term momentum indicators are trending up.

Conversely, price of the long term Treasuries ETF dropped $2.02 (1.69%) last week. Intermediate trend remains down. Units remain below their 20 day moving average.

Volatility

The VIX Index added 0.75 (5.93%) last week. Intermediate trend remains down. The Index remains below its 20 day moving average.

Sectors

Daily Seasonal/Technical Sector Trends for May 18th 2018

Green: Increase from previous day

Red: Decrease from previous day

StockTwits released on Friday @EquityClock

Technical action by S&P 500 stocks to 10:30: Quietly mixed. Intermediate breakouts: $DE $AVY. Breakdowns: $MKC $AVB.

Editor's Note: After 10:30 AM EDT, breakouts included SYK and FTV. Breakdowns included SO and JWN.

Another Canadian energy stock breakout! Vermilion Energy $VET.CA moved above $46.56 extending an intermediate uptrend.

Natural Gas ETN $UNG moved above $23.37 completing a base building pattern.

Canada #CPI higher by 0.3% in April, just above average increase for month of 0.2%.

Rogers Communications $RCI.B.CA, a TSX 60 stock moved above $62.20 extending an intermediate uptrend.

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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