Tech Talk for Monday August 27th 2018

U.S. equity index futures were higher this morning. S&P 500 futures were up 11 points in pre-opening trade.

Tesla dropped $8.25 to $314.50 after Elon Musk decided to not to take the company private.

Mexico iShares (EWW $51.19) are expected to open higher in anticipation of a bi-lateral agreement with the U.S. that could be reached today as part of NAFTA negotiations.

Pfizer (PFE$42.40) is expected to open higher after announcing positive test results on a rare disease drug.

EquityClock's Daily Market Comment

Following is a link:

http://www.equityclock.com/2018/08/24/stock-market-outlook-for-august-27-2018/

Note seasonality chart on Durable Goods Orders

WALL STREET RAW RADIO, AUGUST 25, 2018, WITH YOUR HOST, MARK LEIBOVIT

GUESTS INCLUDE: DON VIALOUX, HENRY WEINGARTEN AND SINCLAIR NOE:

https://tinyurl.com/yajr6yln

Excerpts from Don Vialoux's comments for Wall Street Raw

Markets on both sides of the border responded favourably to Federal Reserve Chairman Jerome Powell's comments on Friday at the Jackson Hole symposium. Equity prices on both sides of the border moved higher, bond prices rallied, the U.S. Dollar Index moved lower and the price of gold moved higher.

Precious metal prices including gold, silver, platinum and palladium finally recorded positive technical action last week. Short term momentum indicators (i.e. Stochastic, RSI, MACD) turned upward. Gold moved above its 20 day moving average. Palladium ETN completed a base building pattern on a move above $89.17. Tis the season for the sector to move higher to early October!

U.S. economic focus next week is on the next estimate of second quarter real GDP. Consensus shows that annualized growth will slip from the first estimate at 4.1%, but remain a robust 4.0% rate.

Star performers last week were the cannabis stocks and their related ETF. HMMJ advanced another 20%. Honourable mention is given to Canada's banks (ETF symbol: ZEB). Royal Bank and Commerce Bank moved higher after reporting higher than consensus fiscal third quarter earnings. They also raised their dividend. Look for more good news from the sector next week. Seasonal influences are positive until the last week in November.

Trading activity in equity markets next week is expected to slow as the week progresses. Canada and the U.S. have a Labour Day holiday on September 3rd.

The Bottom Line

Broadly based U.S. equity indices reached all-time highs last week in response to strong second quarter reports. Companies that offered positive guidance (Kohl's, TJX Companies, Target, Lowe's, AutoDesk, Intuit) saw their share prices move smartly higher. Conversely, companies that offered lower guidance (JM Smucker, L Brands, Gap Stores, Foot Locker) saw their share prices fall significantly.

Seasonal influences for major U.S. equity indices are not following their regular pattern this year. Seasonal influences, that normally turn Negative from the third week in July to mid-October, have not surfaced yet despite political turmoil that surfaced last Wednesday related to Paul Manafort and Michael Cohen.

Seasonal influences are particularly relevant during 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 mid-July and October.

In contrast, Canadian equity markets continue to follow their seasonal pattern. They normally are negative from the third week in July to mid-October. This year, the TSX Composite

Index has continued to drift down/sideways from its seasonal peak reached on July 13th

The summer swoon in North American equity markets frequently is related to increased volatility. So far, the VIX Index has not shown technical signs of increasing during its traditional mid-July to mid-October period. Traders will monitor closely.

Economic News This Week

Second estimate of U.S. Second Quarter Real GDP to be released at 8:30 AM EDT on Wednesday is expected to show a slip in annualized growth to 4.0% from the first estimate at 4.1%.

Weekly Jobless Claims to be released at 8:30 AM EDT on Thursday are expected to increase to 214,000 from 210,000 last week.

July Personal Income to be released at 8:30 AM EDT on Thursday is expected to increase 0.4% versus a gain of 0.4% in June. July Personal Spending is expected to increase 0.4% versus a gain of 0.4% in June.

Canadian Second Quarter Real GDP to be released at 8:30 AM EDT on Thursday is expected to grow at a 3.0% rate versus a 1.3% rate in the first quarter.

July Chicago Purchasing Managers Index to be released at 8:30 AM EDT on Friday is expected to slip to 62.2 from 65.5 in June.

Earnings News This Week

Observations

Technical action by individual S&P 500 stocks was bullish last week. Number of stocks breaking intermediate resistance totaled 43 while number of stocks breaking support totaled 9. The Up/Down ratio increased last week to (288/163=) 1.77 from 1.66.

Focus on U.S. quarterly reports remains on retail merchandisers.

Focus on Canadian quarterly reports remains on Canada's banks. Results released to date have exceeded consensus estimates.

U.S. economic focus this week is on the second estimate of second quarter GDP released on Wednesday

Canadian economic focuses this week is on second quarter real GDP to be announced on Thursday

Medium term technical indicators for U.S. equity markets (e.g. Percent of stocks trading above their 50 day moving average, Bullish Percent Index) increased slightly last week, but remain intermediate neutral/overbought

Medium term technical indicators in Canada last week were unchanged/slightly lower last week. They remain intermediate neutral and continue to trend lower.

Short term technical indicators for U.S. markets and sectors (20 day moving averages, short term momentum) continued moving higher last week

Short term technical indicators for Canadian markets and sectors also continued moving higher last week.

Short term political concerns remain elevated. Issues include heightened tariff wars, stalled NAFTA negotiations and the ramp up of U.S. mid-term election political rhetoric. Added to the list is currency instability.

Trader's Corner

Equities and Related ETFs

Green: Increase from previous day

Red: Decrease from previous day

Commodities

Daily Seasonal/Technical Commodities Trends for August 24th 2018

Green: Increase from previous day

Red: Decrease from previous day

Sectors

Daily Seasonal/Technical Sector Trends for August 24th 2018

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

Visa $V, a Dow Jones Industrial stock moved above 4142.93 to an all-time high extending an intermediate uptrend.

Technical action by S&P 500 stocks to 10:00: Bullish. Intermediate breakouts: $CRM $NTAP $NVDA $V. Breakdown: $ITW.

Editor's Note: After 10:00 AM EDT, breakouts included CMCSA, MPC, DXC, ILMN, NFLX and GGP. Breakdown: $GPS $FL.

Mullen Group $MTL.CA moved above $16.62 extending an intermediate uptrend.

Technology SPDRs $XLK moved above $74.24 to an all-time high extending an intermediate uptrend.

Editor's Note: Ditto for the Technology rich NASDAQ Composite Index! It also broke to an all-time high on Friday.

US Durable Goods Orders down 23.2% (NSA) in July, more than the 17.4% decline that is average for the month. $MACRO #Economy #Manufacturing

Another concerning report on the housing market in the US. equityclock.com/2018/08/23/… $MACRO $STUDY $ITB $XHB

S&P 500 Momentum Barometers

Percent of S&P 500 stocks trading above their 50 day moving average increased last week to 69.80 from 67.20. Percent remains intermediate overbought

Bullish Percent Index for S&P 500 stocks increased last week to 65.80 from 63.20. The Index remains intermediate overbought and showing signs of rolling over.

TSX Momentum Barometers

Percent of TSX stocks trading above their 50 day moving average increased last week to 49.79 from 49.38. Percent remains intermediate neutral and continues to trend down.

Bullish Percent Index for TSX stocks dropped last week to 58.54 from 58.94. The Index remains intermediate neutral and trending down.

A Bullish Technical Case for Gold and Gold Stocks

Greg Schnell from StockCharts.com released a video on commodities on Friday that offers a bullish case for owning gold and precious metal stocks. Following is a link:

https://vimeo.com/channels/gregschnell

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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