Tech Talk for Monday September 17th 2018

U.S. equity index futures were lower this morning. S&P 500 futures were down 3 points in pre-opening trade. Traders are responding to news that the Trump administration in readying additional tariffs on Chinese goods valued at $200 billion.

Index futures were virtually unchanged following release of the September Empire State Manufacturing Survey. Consensus was a drop to 23.6 from 25.6 in August. Actual was 19.0.

JP Morgan lowered its target prices on major gold producer stocks including Barrick Gold, Newmont Mining, Kinross Gold, Goldcorp, Novagold and Agnico-Eagle.

MasterCard added $2.01 to $218.89 after Goldman Sachs added the stock to its Conviction Buy list.

McDonalds (MCD $160.84) is expected to open lower after JP Morgan lowered its target price to $175 from $182.

Allergan (AGN $188.22) is expected to open higher after Raymond James raised its target price to $232 from $211.

EquityClock's Daily Comment

Following is a link:

http://www.equityclock.com/2018/09/14/stock-market-outlook-for-september-17-2018/

Note seasonality charts on Retail Trade, Industrial Production, Business Sales and Business Inventories.

WALL STREET RAW RADIO

SATURDAY, SEPTEMBER 15, 2018:

WITH YOUR HOST MARK LEIBOVIT.  GUESTS INCLUDE: DON VIALOUX, HARRY BOXER

AND SINCLAIR NOE:

https://tinyurl.com/ybnbzhqy

Notes used for Wall Street Raw

U.S. and Canadian equity markets have just entered their weakest four week period in the year from mid-September to mid-October. Weakness is particularly notable in mid-term election years. This period is known for its ramp up of political rhetoric in the U.S. and hurricanes that disrupt the U.S. economy. History appears to be repeating.

Natural gas prices and natural gas equity prices are starting to look interesting. Natural gas prices have a history of moving higher from mid-September to the third week in December, particularly in years when hurricanes hit the U.S. and when inventory levels are below average. This year, both factors are an influence. Natural gas inventories are setting new 5 year lows for this time of year. A possible hurricane entering into the Gulf of Mexico or an extension of higher than average temperatures will add to natural gas prices. On the charts, spot prices appear to have bottomed at $2.75 per MBtu. A move above $3.00 will confirm the seasonal trend. Preferred investment vehicles are "gassy" stocks and ETFs instead of the commodity. An example is the First Trust Natural Gas ETF (FCG).

Gold acted better last week. 'Tis the season for strength to early October! A move above $1221 per ounce will complete a short term base building pattern and will attract technical buying.

The Bottom Line

Seasonal influences for major U.S. equity indices have not followed their regular pattern this year. Seasonal influences normally turn Negative from the third week in July to mid-October.

Seasonal influences are particularly relevant during U.S. Mid-term election years. Volatility in equity markets normally 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. They escalated late last week when Paul Manafort agreed to testify in the Mueller investigation. 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 into 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 moved lower from its seasonal peak reached on July 13th. Last week the Index extended its Head & Shoulders pattern and tested its 200 day moving average.

.

The summer swoon in North American equity markets frequently is related to increased volatility into October. Last week, the VIX Index slipped lower to 12.10. Traders will continue to monitor closely

Economic News This Week

September Empire State Manufacturing Survey to be released at 8:30 AM EDT on Monday is expected to slip to 23.60 from 25.60 in August.

OPEC meeting tentatively is expected to meet from Tuesday to Thursday

August Housing Starts to be released at 8:30 AM EDT on Wednesday are expected to increase to 1.228 million units from 1.168 million units in July.

September Philly Fed Index to be released at 8:30 AM EDT on Thursday is expected to increase to 15.0 from 11.9 in August.

Weekly Jobless Claims to be released at 8:30 AM EDT on Thursday are expected to increase to 210,000 from 204,000 last week.

August Existing Home Sales to be released at 10:00 AM EDT on Thursday are expected to remain unchanged from July at 5.34 million units.

Canadian August Consumer Price Index to be released at 8:30 AM EDT on Friday is expected to slip 0.1% versus a gain of 0.5% in July. On a year-over-year basis August CPI is expected to increase 2.9% versus a gain of 3.0% in July.

Earnings News

Observations

Technical action by individual S&P 500 stocks was slightly bullish last week. Number of stocks breaking intermediate resistance totaled 37 while number of stocks breaking support totaled 20. The Up/Down ratio increased last week to (287/155=) 1.85 from 1.74.

U.S. economic focus this week is on the Philly Fed Index to be released on Thursday.

Canadian economic focus this week is on August CPI to be released on Friday.

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

Medium term technical indicators in Canada also moved lower last week. They are intermediate neutral/oversold and continue to trend lower.

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

Short term technical indicators for Canadian markets and sectors continued to trend lower last week.

Short term political concerns remain elevated. Issues include heightened tariff wars, stalled NAFTA negotiations, the Mueller investigation and ramp up of U.S. mid-term election political rhetoric.

Longer term outlook for S&P 500 company earnings remains positive, but less positive than previous. According to FactSet, earnings gains during the next four quarter will be strong on a year-over-year basis, but at a slightly lower rate than previous. Consensus calls for a 19.9% increase in earnings (down from 21.1%) and a 7.5% increase in sales in the third quarter. Consensus calls for a 17.5% increase in earnings and 6.0% increase in sales in the fourth quarter. Consensus calls for a 20.6% increase in earnings and an 8.1% increase in sales for 2018. Consensus calls for a 7.2% increase in earnings and 6.3% is sales in the first quarter 2019. Consensus calls for a 7.5% increase in earnings and 4.5% in sales in the second quarter 2019. Consensus for 2019 calls for a 10.3% increase in earnings and a 5.3% increase in sales.

Nice breakout by the Nikkei Average on Friday to an 8 month high!

Trader's Corner

Equities and Related ETFs

Daily Seasonal/Technical Equity Trends for September 14th 2018

Green: Increase from previous day

Red: Decrease from previous day

Commodities

Daily Seasonal/Technical Commodities Trends for September 14th 2018

Green: Increase from previous day

Red: Decrease from previous day

Sectors

Daily Seasonal/Technical Sector Trends for September 14th 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

Technical action by S&P 500 stocks to 10:00: Bullish. Intermediate breakouts: $MAT $CI $ITW $LLL $ADBE $APD. Breakdowns: $LYB $NI.

Editor's Note: After 10:00 AM EDT, breakouts included HII, CAT, NCLH, UTX, AFL, RE and OI. Breakdowns included UA, UAA and LKQ.

United Technologies $UTX, a Dow Jones Industrial stock moved above $135.93 extending an intermediate uptrend.

#Business Sales in US remain strong, but #inventories starting to grow above average trend. Possible supply/demand mismatch.$MACRO $STUDY

US Industrial Production up 2.4% (NSA) in August, less than the 3.2% increase that is average for the month. $MACRO #Economy #Manufacturing

US #Retail Sales up 3.5% (NSA) in August, better than the 2.5% average gain for the month. $MACRO #Economy #Consumer $XRT $RTH

Hap Sneddon on BNN Bloomberg's Market Call

on Friday Evening

Following are links:

Market Outlook

https://www.bnnbloomberg.ca/video/hap-sneddon-s-market-outlook~1489535

Top Picks

https://www.bnnbloomberg.ca/video/hap-sneddon-s-top-picks~1489636

Past Picks

https://www.bnnbloomberg.ca/video/hap-sneddon-s-past-picks~1489591

S&P 500 Momentum Barometers

Percent of S&P 500 stocks trading above their 50 day moving average increased last week to 69.20 from 65.60. Percent remains intermediate overbought and rolling over.

Bullish Percent Index for S&P 500 stocks increased last week to 67.00 from 66.40. The Index remains intermediate overbought and rolling over.

TSX Momentum Barometers

Percent of TSX stocks trading above their 50 day moving average increased last week to 38.24 from 36.55. Percent remains intermediate oversold and trending down.

Bullish Percent Index for TSX stocks dropped last week to 53.47 from 55.92. The Index remains intermediate neutral and trending down.

TSX Momentum Barometers

Percent of TSX stocks trading above their 50 day moving average increased last week to 38.24 from 36.55. Percent remains intermediate oversold and trending down.

Bullish Percent Index for TSX stocks dropped last week to 53.47 from 55.92. The Index remains intermediate neutral and trending 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

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