• Tech Talk for Monday February 22nd 2021

     

    The Bottom Line

    Equity markets around the world moved higher last week. Greatest influences on North American equity markets remain growing evidence of a second wave of the coronavirus (negative) and timing of distribution of a vaccine (positive).

    Observations

    TSX Composite Index has a history of outperforming the S&P 500 Index from the last week in December to the first week in March. The main reason: Canadian investors focus on contributing to their RRSPs during the first 60 days in the New Year and subsequently invest more funds into the equity market. As indicated in the chart below, average gain per period for the TSX Composite Index relative to the S&P 500 Index during the past 20 periods was 3.3%. History is repeating: Spread in performance by the S&P 500 Index and TSX Composite Index continued to widen last week. Since December 31st, the S&P 500 Index has gained 4.01% and the TSX Composite Index has advanced 5.45%.

    Short term short term indicators for U.S. equity indices, commodities and sectors (20 day moving averages, short term momentum indicators) rolled over from overbought levels last week.

    Intermediate term technical indicator for U.S. equity markets (e.g. Percent of S&P 500 stocks trading above their 50 day moving average) moved lower last week. It remains intermediate overbought and has started to trend lower. See Barometer chart at the end of this report.

    Long term technical indicator for U.S. equity markets (e.g. Percent of S&P 500 stocks trading above their 200 day moving average) was virtually unchanged last week. It remains at extremely overbought levels. See chart at the end of this report.

    Short term momentum indicators for Canadian indices and sectors remained at elevated levels last week.

    Medium term technical indicator for Canadian equity markets moved lower last week. It remained overbought and has started to trend down. See Barometer chart at the end of this report.

    Long term technical indicator for Canadian equity markets (i.e. Percent of TSX stocks trading above their 200 day moving average) also was virtually unchanged last week. It remains intermediate overbought. See Barometer chart at the end of this report.

    Year-over-year 2020 consensus earnings by S&P 500 companies continued to increase last week. According to www.FactSet.com, fourth quarter earnings on a year-over-year basis are expected to increase 3.2% (versus a gain of 2.9% last week) and revenues are expected to increase 3.1% (versus previous 2.8% increase last week). Earnings for all of 2020 are expected to fall 11.3% (versus previous 11.4%) and revenues are expected to decline 1.1%.

    Consensus estimates for earnings and revenues by S&P 500 companies turn more positive on a year-over-year basis in the first quarter of 2021. According to www.FactSet.com earnings in the first quarter of 2021 on a year-over-year basis are expected to increase 21.2% and revenues are expected to increase 5.7% (versus previous 5.6%). Earnings in the second quarter are expected to increase 49.5 % (versus previous 49.4%) and revenues are expected to increase 15.7% (versus previous 5.6%). Earnings in the third quarter are expected to increase 16.9% (versus previous 16.7% increase) and revenues are expected to increase 9.5%. Earnings in the fourth quarter are expected to increase 13.3% (versus previous 13.4% increase) and revenues are expected to increase 6.7% (versus previous 6.9% increase). Earnings for all of 2021 are expected to increase 23.6% and revenues are expected to increase 9.2% (versus previous 9.1% increase).

     

    Economic News This Week

    January Leading Economic Indicators to be released at 10:00 AM EST on Monday is expected to increase 0.3% versus a gain of 0.3% in December.

    January U.S. New Home Sales to be released at 10:00\ AM EST on Wednesday are expected to increase to 855,000 from 842,000 in December

    January Durable Goods Orders to be released at 8:30 AM EST on Thursday are expected to increase 1.1% versus a gain of 0.5% in December. Excluding transportation orders, January Durable Goods Orders are expected to increase 0.7% versus a gain of 1.1% in December

    Annualized real fourth quarter GDP to be released at 8:30 AM EST on Thursday is expected to grow at a 4.3% rate versus 4.0% in the third quarter.

    January Personal Income to be released at 8:30 AM EST on Friday is expected to increase 10.0% versus a gain of 0.6% in December. January Personal Spending is expected to increase 2.4% versus a decline of 0.2% in December.

    February Chicago Purchasing Managers Index to be released at 9:45 AM EST on Friday is expected to slip to 61.0 from 63.8 in January.

    February Michigan Consumer Sentiment to be released at 10:00 AM EST on Friday is expected to improve to 76.4 from 76.2 in January.

     

    Selected Earnings News This Week

    Frequency of quarterly reports released this week continues to decline. Another 67 S&P 500 companies (including two Dow Jones Industrial Average companies: Home Depot and Salesforce.com) are scheduled to release results. Focuses in Canada are fiscal first quarter reports by Canada’s big banks.

     

    Trader’s Corner

    Equity Indices and Related ETFs

    Daily Seasonal/Technical Equity Trends for February 19th 2021

    Green: Increase from previous day

    Red: Decrease from previous day

     

    Commodities

    Daily Seasonal/Technical Commodities Trends for February 19th 2021

    Green: Increase from previous day

    Red: Decrease from previous day

     

    Sectors

    Daily Seasonal/Technical Sector Trends for February 19th 2021

    Green: Increase from previous day

    Red: Decrease from previous day

     

    Technical Scoop

    Thank you to David Chapman and www.EnrichedInvesting.com for a link to their weekly comment. Headline reads, “New gold, Long rates, Cold chaos, Settling oil, Relentless markets, Metallic divergence”. Following is the link:

    New-gold-long-rates-cold-chaos-settling-oil-relentless-markets-metallic-divergence.pdf (enrichedinvesting.com)

     

    Changes in seasonality ratings

    TSX Base Metals: Positive to Negative to June 18th

    Industrial SPDRs: Positive to Neutral to July 15th

     

    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

    Technical Notes for Friday February 19th

    NextEra Energy (NEE), an S&P 100 stock moved below $79.61 completing a double top pattern. Energy supplier in Texas.

    Booking Holdings (BKNG), an S&P 100 stock moved above $2,290.03 to an all-time high extending an intermediate uptrend.

    Marriott (MAR), an S&P 100 stock moved above $135.84 extending an intermediate uptrend.

    Base metal producer stocks continue to trend higher HudBay Minerals (HBM) moved above $9.85 extending an intermediate uptrend.

    Canadian bank stocks continue to move higher prior to release of fiscal first quarter results later this week. Toronto Dominion Bank (TD), a TSX 60 stock moved above $76.05 to an all-time high extending an intermediate uptrend.

    National Bank (NA), a TSX 60 stock moved above $74.70 to an all-time high extending an intermediate uptrend.

     

    S&P 500 Momentum Barometers

    The intermediate Barometer dropped 1.60 on Friday and 5.41 last week to 66.93. It remains overbought and has started to trend down.

    The long term Barometer fell 1.00 on Friday and 0.60 last week to 87.98. It remains extremely overbought (i.e. above 80.00).

     

    TSX Momentum Barometers

    The intermediate Barometer added 1.26 on Friday and dropped 5.82 last week to 61.17. It returned to overbought on Friday following a recovery above 60.00, but has started to trend down.

    The long term Barometer slipped 1.09 on Friday and 3.40 last week to 75.24. It remains overbought.

     

    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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