Pre-opening Comments

U.S. equity index futures were mixed this morning. S&P 500 futures were unchanged in pre-opening trade.

First Solar added $1.77 to $71.79 after Baird upgraded the stock to outperform from neutral. Target was raised to $82 from $69.

Caterpillar gained $0.24 to $144.10 after JP Morgan raised its target price to $144 from $135.

Waste Management improved $0.43 to $85.00 after Stifel Nicolaus upgraded the stock to Buy from Hold.

ADP (ADP $116.02) is expected to open higher after Goldman Sachs upgraded the stock to buy from neutral. Target was raised to $135 from $110

EquityClock’s Daily Market Comment

Following is a link:

http://www.equityclock.com/2017/12/08/stock-market-outlook-for-december-11-2017/

Note seasonality charts on the Biotech industry, Non-Farm Payrolls, Hourly Earnings, Wholesale Sales, Wholesale Inventories and Gas Utilities industry.

WALL STREET RAW RADIO – SATURDAY, DECEMBER 9, 2017:

GUESTS INCLUDE DON VIALOUX, RAY MERRIMAN, HENRY WEINGARTEN and SINCLAIR NOE

https://tinyurl.com/ybecxgsm

 

Colin Cieszynski on BNN Television on Friday

The author of www.thefundamentaltechnician.com offered an upbeat comment on U.S. and Canadian equity markets on Friday after the close. Will the Santa Claus rally come this year? What about Bitcoin? Following is a link:

https://www.bnn.ca/video/broad-based-tsx-rally-a-sign-of-sustainable-gains-market-analyst~1280918

 

The Bottom Line

Several of the broadly based U.S. equity indices closed at or near all-time closing highs on Friday. Short term technical indicators moved higher. Seasonal influences for most world equity markets turned positive in mid-October and remain positive until the first week in January. Traditional seasonal sensitive sectors (e.g. Consumer Discretionary, Industrials and Financials) are leading the market higher. The Technology sector also recorded a strong rebound last week. However, medium term technical indicators for the S&P 500 Index, NASDAQ Composite Index, Dow Jones Industrial Average as well as TSX Composite Index remain overbought. Preferred strategy is to take at least partial profits on strength in seasonally attractive equities and Exchange Traded Funds during the expected “Santa Claus rally” period with the understanding that their next significant intermediate upside move likely will not resurface until next February.

Tax loss selling pressures in the underperforming energy, oil service and precious metal sectors are expected to continue until the end of the second week in December. Weakness is expected to provide a buying opportunity for a seasonal trade in these sectors into spring. Energy and oil service stocks began showing technical signs of outperformance late last week, an encouraging technical sign prior to entering their period of seasonal strength.

 

Economic News This Week

November Producer Prices to be released at 8:30 AM EST on Tuesday are expected to increase 0.3% versus a gain of 0.4% in October. Excluding food and energy, November Producer Prices are expected to increase 0.2% versus a gain of 0.2% in October

November Consumer Prices to be released at 8:30 AM EST on Wednesday are expected to increase 0.4% versus a gain of 0.1% in October. Excluding food and energy, November Producer Prices are expected to increase 0.2% versus a gain of 0.2% in October.

FOMC announces its interest rate decision at 2:00 PM EST on Wednesday. Consensus is that the Fed Fund Rate will increase the rate by another 0.25% to 1.25%. Conference call with Chairperson Yellen is scheduled at 2:30 PM EST

Weekly Jobless Claims to be released at 8:30 AM EST on Thursday are expected to increase to 239,000 from 236,000 last week.

November Retail Sales to be released at 8:30 AM EST on Thursday are expected to increase 0.3% versus a gain of 0.2% in October. Excluding auto sales, November Retail Sales are expected to increase 0.7% versus a gain of 0.1% in October.

November Canadian Existing Home Sales to be released at 9:00 AM EST on Thursday are expected to increase 2.0% on a year-over-year basis versus a decline of 4.3% in October.

October Business Inventories to be released at 10:00 AM EST on Thursday are expected to slip 0.1% versus no change in September.

December Empire State Manufacturing Survey to be released at 8:30 AM EST on Friday is expected to drop to -0.1 from +19.4 in November.

November Industrial Production to be released at 9:15 AM EST on Friday is expected to increase 0.3% versus a gain of 0.9% in October. November Capacity Utilization is expected to increase to 77.2% from 77.0% in Octoberrrrr

Quadruple Witching happens at the close on Friday.

 

Earnings News This Week

Virtually Nil

 

Observations

Technical action by individual S&P 500 stocks was mildly bearish last week despite a small gain by the Index. Number of stocks breaking resistance totaled 21 while number of stocks breaking support totaled 33. Number of stocks trading in an uptrend dropped to 304 from 317, number of stocks trading in a neutral trend increased to 61 from 57 and number of stocks in a downtrend increased to 135 from 126. The Up/Down ratio slipped last week to (304/135=) 2.25 from 2.52.

Economic news this week focuses on the FOMC announcement on Wednesday. The Fed Fund rate is expected to increase by 0.25% to 1.25%. Media attention likely will focus on the increase in inflation (PPI and CPI).

Medium term technical indicators (Percent of stocks trading above their 50 day moving average, Bullish Percent Index) remain at intermediate overbought levels

Short term technical indicators (short term momentum, above/below 20 day moving average) for equity indices generally moved higher, but are overbought.

Seasonality on a wide variety of equity indices, commodities and sectors began to turn neutral/positive in early October and continues to improve. During the past 20 years, the S&P 500 Index and TSX Composite Index bottomed on average on October 10th. Historically, December has been one of the strongest months (the “Santa Claus rally” from December 16th to January 5th is the strongest period in the year for U.S. and Canadian equity indices).

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Earnings reports by major U.S. and Canadian companies are virtually nil this week (3 S&P 500 companies).

The outlook for S&P earnings and sales remains positive. Fourth quarter earnings are expected to increase 10.6% on a year-over-year basis (up from 10.5% last week on a 6.4% increase in sales. First quarter 2018 earnings are expected to increase 10.6% on a 6.4% increase in sales. Second quarter 2018 earnings are expected to increase 10.2% (up from 10.1% last week) on a 6.2% increase in revenues (down from 6.3%). Third quarter earnings are expected to increase 11.6% on a 5.4% increase in revenues. Fourth quarter 2018 earnings are expected to increase 11.1% (down from 11.2%) on a 4.3% increase in revenues. For all of 2018, earnings are expected to increase 11.2% (up from 11.1%) on a 5.4% increase in sales.

Exceptional strength in the U.S. Dollar Index last week triggered weakness in commodity prices across the board (e.g. crude oil, natural gas, gasoline, copper, gold, silver, platinum, palladium, lumber, corn, wheat, coffee, sugar). Strength is related to anticipation of an increase in the Fed Fund rate on Wednesday. Following the increase in the Fed Fund rate, commodity prices are likely to recover from deeply oversold levels.

Short term political uncertainties remain, including North Korean “sabre rattling”, passing of a budget before the end of the year, struggling NAFTA negotiations and increased scrutiny by special council on Russia’s influence on the Presidential election

Earnings and revenue prospects beyond the third quarter report season are exceptional for U.S. based companies with international exposure. Consensus for S&P 500 earnings on a year-over-year are expected to exceed 10% in the fourth quarter of 2017 and throughout 2018. Earnings will benefit significantly from weakness in the U.S. Dollar on a year-over-year basis when revenues and earnings from international operations will benefit from higher valued foreign currencies. The U.S. Dollar Index averaged 100 in the fourth quarter of 2016 and 101 in the first quarter of 2017.

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Recent tax loss selling pressures in selected sectors is setting up a buying opportunity prior to the second half of December when their period of seasonal strength normally begins. The sectors that have been under the most downside tax loss selling pressures are the energy, oil services and gold sectors. Selected stocks the energy and oil services sectors moved strongly higher late last week implying that seasonal influences may be coming sooner than normal this year.

Oil services ETF (OIH $24.76) is forming a potential reverse Head & Shoulders pattern. The pattern is completed on a move above $26.27. Another increase in rig count usage announced on Friday afternoon provides additional encouragement for the sector.

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Equity Indices and Related ETFs

Daily Seasonal/Technical Equity Trends for December 8th 2017

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Green: Increase from previous day

Red: Decrease from previous day

 

Calculating Technical Scores

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 gained 9.28 points (0.35%) last week to close at an all-time closing high. Intermediate trend remains up. The Index remains above its 20 day moving average. Short term momentum indicators have rolled over from overbought levels.

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Percent of S&P 500 stocks trading above their 50 day moving average (also known as the S&P 500 Momentum Barometer) slipped last week to 75.60 from 78.60 . Percent remains intermediate overbought and moving lower.

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Percent of S&P 500 stocks trading above their 200 day moving average increased last week to 78.20 from 77.40. Percent remains intermediate overbought.

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Bullish Percent Index for S&P 500 stocks dropped last week to 75.80 from 77.40, but remained above its 20 day moving average. The Index remains intermediate overbought.

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Bullish Percent Index for TSX stocks dropped last week to 65.46 from 66.67 and remained below its 20 day moving average. The Index remains intermediate overbought and trending down.

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TSX Index added 57.10 points (0.36%) last week. The Index remains in an intermediate uptrend (Score: 2), but below its high set on November 7th. Strength relative to the S&P 500 Index remains negative (Score: -2). The Index remained above its 20 day moving average last week (Score: 1). Short term momentum indicators turned up on Friday (Score: 1). Technical score increased last week to 2 from 0.

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Percent of TSX stocks trading above their 50 day moving average (Also known as the TSX Momentum Barometer) dropped last week to 49.38 from 53.53. Percent is intermediate neutral and trending down.

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Percent of TSX stocks trading above their 200 day moving average slipped last week to 59.34 from 59.75. Percent remains intermediate overbought and trending down.

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Dow Jones Industrial Average added 97.57 points (0.40%) last week to close at an all-time closing high. Intermediate trend remains up. Strength relative to the S&P 500 Index remains positive. The Average remains above its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to 4 from 6.

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Bullish Percent Index for Dow Jones Industrial stocks increased last week to 93.33 from 90.00 and remained above its 20 day moving average. The Index remains intermediate overbought.

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Bullish Percent Index for NASDAQ Composite stocks dropped last week to 62.15 from 63.20, but remained above its 20 day moving average. The Index remains intermediate overbought.

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NASDAQ Composite Index dropped 7.31 points (0.11%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains negative. The Index recovered back above its 20 day moving average. Short term momentum indicators are trending down. Technical score remained last week at 0.

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Russell 2000 Index dropped 15.28 points (1.00%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed last week to neutral from positive. The Index remained above its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to 2 from 6.

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Dow Jones Transportation Average gained 215.88 points (2.12%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains positive. The Average remains above its 20 day moving average. Short term momentum indicators are rolling over. Technical score slipped last week to 4 from 6.

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Australia All Ordinaries Composite Index added 4.70 points (0.08%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains negative. The Index returned to above its 20 day moving average. Short term momentum indicators are trending down. Technical score slipped last week to 0 from 2.

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Nikkei Average slipped 7.95 points (0.03%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to negative from neutral. The Average moved back above its 20 day moving average on Friday. Short term momentum indicators changed to down from up. Technical score slipped last week to 0 from 4.

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Europe iShares added $0.04 (0.85%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index remains negative. Units moved back above their 20 day moving average. Short term momentum indicators are trending down. Technical score remained last week at -2.

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Shanghai Composite Index lost another 27.63 points (0.83%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index remains negative. The Index remains below its 20 day moving average. Short term momentum indicators are trending down. Technical score remained last week at -4.

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Emerging Markets iShares added $0.10 (0.22%) last week. Intermediate trend changed to down from up on moves below support at 45.43 and 45.45. Strength relative to the S&P 500 Index remains negative. Units remain below their 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -6 from -2.

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Currencies

The U.S. Dollar Index jumped 1.03 (1.11%) last week in anticipation of an increased in the Fed Fund Rate this Wednesday. Intermediate trend remains up. The Index moved above its 20 day moving average. Short term momentum indicators are trending up.

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The Euro dropped 1.24 (1.04%) last week. Intermediate trend remains neutral. The Euro dropped below its 20 day moving average. Short term momentum indicators are trending down.

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Canadian Dollar dropped US 0.95 cents (1.21%) last week. Intermediate trend remains neutral. The Canuck Buck dropped below its 20 day moving average. Short term momentum indicators are trending down.

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Japanese Yen dropped 1.04 (1.17%) last week. Intermediate trend remains up. The Yen dropped below its 20 day moving average. Short term momentum indicators are trending down.

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British Pound dropped 0.78 (0.58%) last week. Intermediate trend remains up. The Pound remains above its 20 day moving average. Short term momentum indicators have rolled over.

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Commodities and Related ETFs

Daily Seasonal/Technical Commodities Trends for December 8th 2017

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Green: Increase from previous day

Red: Decrease from previous day

* Excludes adjustment from rollover of futures contracts

 

The CRB Index dropped 5.67 points (2.97%) last week. Intermediate trend changed to down from up on a move below 188.03. Strength relative to the S&P 500 Index remains negative. The Index remained below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -6 from -2.

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Gasoline dropped $0.02 per gallon (1.15%) last week. Intermediate trend changed to down from up on a move below 1.7106. Strength relative to the S&P 500 Index remains negative. Gas remains below its 20 day moving average. Short term momentum indicators are trending down. Technical score remained last week at -6.

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Crude Oil dropped $1.00 per barrel (1.71%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to neutral from positive. Crude recovered back above its 20 day moving average on Friday. Short term momentum indicators are trending down. Technical score dropped last week to 2 from 4.

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Natural Gas plunged $0.29 per MBtu (9.48%) last week. Intermediate trend changed last week to down from up on moves below $2.903 and 2.773. Strength relative to the S&P 500 Index changed to negative from neutral. “Natty” remained below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -6 from 2.

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S&P Energy Index dropped 5.56 points (0.69%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains neutral. The Index remained above its 20 day moving average. Short term momentum indicators are trending up. The Index remained last week at 4.

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Philadelphia Oil Service Index dropped 3.80 points (2.76%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index remains neutral. The Index moved back above its 20 day moving average on Friday. Short term momentum indicators are trending down. Technical score slipped last week to 0 from 2.

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Gold dropped $33.90 per ounce (2.64%) last week. Intermediate trend changed to down from up on a move below 1,262.80. Strength relative to the S&P 500 Index remained negative. Gold remained below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -6 from -2.

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Silver plunged $0.57 per ounce (3.48%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains negative. Silver remained below its 20 day moving average. Short term momentum indicators are trending down. Technical score remained last week at -6.

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AMEX Gold Bug Index dropped another 8.60 points (4.66%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains negative. The Index remains below its 20 day moving average. Short term momentum indicators are trending down. Technical score remained last week at -6.

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Platinum dropped $56.90 per ounce (6.05%) last week. Trend changed to down. Relative strength turned negative. Remained below its 20 day MA. Momentum: down. Score:-6

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Palladium dropped 419.85 per ounce (1.95%) last week. Trend remains up. Relative strength turned negative. Moved back above its 20 day MA. Momentum turned negative.

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Copper dropped $0.11 per lb. (3.56%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains negative. Copper remains below its 20 day moving average. Short term momentum indicators are trending down. Technical score remained last week at -6.

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BMO Base Metals ETF dropped $0.09 (0.78%) last week. Intermediate trend remains down. Strength relative to the S&P 500 Index remains negative. Units remain below their 20 day moving average. Short term momentum indicators are trending down. Technical score remained last week at -6.

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Lumber dropped 5.70 (1.31%) last week. Trend remains up. Relative strength remains negative. Lumber remains below its 20 day MA. Momentum is up. Technical score remained 0

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Grain ETN dropped $0.53 (2.10%) last week. Trend remains down. Relative strength remains negative. Moved below its 20 day MA. Momentum turned down. Score dropped to -6

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Agriculture ETF slipped $0.29 (0.47%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to neutral from positive. Units remained above their 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to 2 from 6.

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Interest Rates

Yield on 10 year Treasuries increased 2.1 basis points (0.89%) last week. Intermediate trend remains up. Yield remains above its 20 day moving average. Short term momentum indicators are trending up

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Price of the long term Treasury Bond ETF added $0.14 (1.11%) last week. Intermediate trend remains up. Units remain above their 20 day moving average.

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Volatility

The VIX Index plunged 1.85 (16.19%) last week. The Index dropped back below its 20 day moving average.

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Sectors

Daily Seasonal/Technical Sector Trends for December 8th 2017

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Green: Increase from previous day

Red: Decrease from previous day

StockTwits Released on Friday @EquityClock

Brookfield Asset Management $BAM, a TSX 60 stock moved above $43.01 to all-time high extending an intermediate uptrend.

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Technical action by S&P 500 stock to 10:00: Quiet. Breakouts: $CELG $CF $LYB. Breakdown: $COO

Editor’s Note: After 10:00 AM EST, breakouts included AKAM and NUE. Breakdowns included MON and A.

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Durable goods production reamins a significant driver of economic activity. equityclock.com/2017/12/08/… $STUDY $MACRO

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Wholesale Sales up 6.3% in October, 2.2% above average for month. Now only 0.7% below average YTD. #Economy $MACRO

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Nonfarm payrolls higher by 0.4% in November, a tenth of a percent above average. #NFP #Employment $MACRO

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Another Milestone

Number of StockTwits@EquityClock followers exceeded 46,000 yesterday. Previous milestone at 45,000 followers was reached on November 22nd

 

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