Tech Talk for Monday May 4th 2020

U.S. equity index futures were lower this morning. S&P 500 futures were down 16 points in pre-opening trades.

Shopify added $14.30 to $627.94 after KeyBanc Capital raised its target price from $500 to $700.

PayPal slipped $0.35 to$120.26 despite KeyBanc Capital raising its target price from $115 to $140.

NVIDIA eased $2.40 to $280.38 despite Susquehanna raising its target price from $330 to $55.

Tyson Foods dropped $4.13 to $55.88 after reporting lower than consensus first quarter revenues and earnings.

EquityClock's Daily Comment

Following is a link:

http://www.equityclock.com/2020/05/02/stock-market-outlook-for-may-4-2020/

Note seasonality chart on Construction Spending.

The Bottom Line

Equity markets moved higher early last week, but stalled on Thursday and Friday. From lows on March 23rd to highs on April 28th equity indices recorded the largest five week percent gains in history: The S&P 500 Index gained 34.8%, the Dow Jones Industrial Average advanced 36.0% and the TSX Composite jumped 36.6%. Since March 23rd world equity markets have moved from extreme intermediate oversold levels to intermediate overbought levels and back to intermediate neutral levels on Friday. Spread of the coronavirus continues to be a major influence on equity prices. The VIX Index remains elevated and moved higher late last week.

"Buy when it snows, sell when it goes"! The expression originally appeared in my CMT thesis written in 1992. The thesis noted that since 1950 volatility in North American equity indices is higher each year from end-of-April to mid-October and percent return during the period averages close to zero. Virtually all of North American equity returns were realized each year from mid-October to the end of April.

What about this year? Current equity North American equity indices suggest that history is about to repeat, implying continuation of higher than average volatility and little or no return by equity indices between now and mid-October. However, selected sector opportunities exist between end- of-April and mid-October this year, notably in the Healthcare and Precious Metals sectors.

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Observations

The VIX Index (better known as the Fear Index) peaked in the third week in March, typical of a recovery phase for the U.S. equity market. However, it remains elevated and moved higher on Thursday and Friday.

Seasonal influences for U.S., European and Far East equity indices historically have reached a seasonal peak in late April or early May. Canadian equity indices are the exception with a seasonal peak in late May.

Medium term technical indicators for U.S. equity markets (e.g. Percent of S&P 500 stocks trading above their 50 day moving average) changed from neutral to overbought by mid-week, but rolled over on Thursday and Friday to return to neutral. See end of this report for chart.

Medium term technical indicators for Canadian equity markets changed from oversold to overbought by mid-week, but rolled over on Thursday and Friday to reach a neutral level. See end of this report for chart.

Most short term short term momentum indicators for U.S. markets and sectors (20 day moving averages, short term momentum indicators) turned lower from overbought levels late last week after a brief recovery. Most sectors and indices remain above their 20 day moving average.

Short term momentum indicators for Canadian markets and sectors also rolled late last week over from overbought levels.

Year-over-year consensus earnings for S&P 500 companies were reduced significantly again last week in recognition of a greater impact by the coronavirus: 55% of companies have released quarterly results to date. According to FactSet, blended first quarter 2020 earnings have dropped 13.7% (versus a decline of 15.8% last week) and blended revenues increased 0.7% (versus an increase of 0.1% last week). Second quarter 2020 earnings are expected to fall 36.7% (versus a drop of 31.9% last week) and revenues are expected to drop 9.5% (versus a drop of 8.2% last week). Third quarter earnings are expected to fall 20.1% (versus a fall of 16.9% last week) and revenues are expected to decrease 4.3% (versus a decline of 3.4% last week). Fourth quarter earnings are expected to decrease 9.4% (versus a decrease of 7.4% last week) and revenues are expected to decline 0.5% (versus an increase of 0.1% last week). Earnings for all of 2020 are expected to decrease 17.0% (versus a previous decrease of 15.2%) and revenues are expected to decrease 2.9% (versus a previous decrease of 2.3%).

Economic News This Week

March Factory Orders to be released at 10:00 AM EDT on Monday are expected to drop 9.2% versus no change in February.

March Canadian Trade Balance to be reported at 8:30 AM EDT on Tuesday is expected to reach a deficit of $2.50 billion versus a deficit of $980 million in February.

March U.S. Trade Deficit to be reported at 8:30 AM EDT on Tuesday is expected to increase to $44.4 billion from $39.00 billion in February.

April ISM Services to be reported at 10:00 AM EDT on Tuesday is expected to drop to 44.0 from 52.5 in March.

April ADP Employment Report to be released at 8:30 AM EDT on Wednesday is expected show a decline of 20.20 million from a drop of 27,000 in March.

First Quarter Non-farm Productivity to be released at 8:30 AM EDT on Thursday is expected to drop 5.4% versus a gain of 1.2% in the fourth quarter.

April Canadian Housing Starts to be released at 8:15 AM EDT on Friday are expected to drop to 140,000 from 195,200 in March.

The drop in April Non-farm Payrolls to be released at 8:30 AM EDT on Friday are expected to jump to 22.839 million from 701,000 in March. April Unemployment Rate is expected to jump to 16.1% from 4.4% in March. April Hourly Earnings are expected to increase 0.3% versus a gain of 0.4% in March.

April Canadian Employment to be released at 8:30 AM EDT on Friday is expected to drop 2.5 million from a drop of 1.100 million in March. April Unemployment Rate is expected to increase to 14.0% from 7.8% in March.

Selected Earnings News This Week

Another 148 S&P 500 companies are scheduled to report quarterly earnings this week (including two Dow Jones Industrial companies) Frequency of quarterly reports released by TSX 60 companies reaches a peak this week.

Trader's Corner

Equity Indices and related ETFs

Daily Seasonal/Technical Equity Trends for May 1st 2020

Green: Increase from previous day

Red: Decrease from previous day

Commodities

Seasonal/Technical Commodities Trends for May 1st 2020

Green: Increase from previous day

Red: Decrease from previous day

Sectors

Daily Seasonal/Technical Sector Trends for May 1st 2020

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

Interesting that all of the defensive sectors in the market have triggered MACD Sell signals today. Cyclical sectors still a ways off from charting the same. $XLP $XLU $XLV

Liberty Global $LBTYK $LBTYA, a NASDAQ 100 stock moved above $20.66 and $21.62 respectively extending an intermediate uptrend.

The coronavirus impact to Construction Spending in the US was muted in March. Activity was higher by 9.7% (NSA), just below the 10.8% increase that is average for March. $MACRO $STUDY #Economy #ConstructionSeason

S&P 500 Momentum Barometer

The Barometer moved last week from 41.28 to 76.15 on Wednesday to 53.91 on Friday. It changed from intermediate neutral to intermediate overbought on a move above 60.00 and returned to intermediate neutral on Friday. Current trend is down.

TSE Momentum Barometer

The Barometer moved last week from 39.11 to 66.96 on Wednesday to 50.66 on Friday. It changed from intermediate oversold to intermediate overbought on a move above 60.00 and returned to intermediate neutral on Friday. Current trend is 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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