Tech Talk for Tuesday May 5th 2020

U.S. equity index futures were higher this morning. S&P 500 futures advanced 36 points in pre-opening trade.

Index futures were virtually unchanged following release of the March Trade Deficit at 8:30 AM EDT. Consensus was $44.0 billion versus $39 billion in February. Actual was $44.4 billion.

The Canadian Dollar was virtually unchanged at US 71.31 cents following release of Canada's Trade Balance report at 8:30 AM EDT. Consensus was a deficit of $2.0 billion versus a deficit of $0.898 billion in February. Actual was a deficit of $1.41 billion

Whirlpool gained $1.49 to $107.51 after JP Morgan raised its target price from $100 to $124.

Regeneron Pharma advanced $23.18 to $564.19 after reporting higher than consensus first quarter revenues and earnings.

Pfizer gained $0.63 to $38.25 after announcing its first U.S. trials for their experimental coronavirus vaccine.

EquityClock's Daily Market Comment

Following is a link:

http://www.equityclock.com/2020/05/04/stock-market-outlook-for-may-5-2020/

Note seasonality charts on the DAX and CAC indices.

StockTwits released yesterday @EquityClock

Cameco $CCO.CA $CCJ, a TSX 60 stock moved above $14.60 Cdn. on higher spot uranium prices.

Editor's Note: TD Bank analyst upgraded the stock from Hold to Buy with an $18 target.

Gasoline ETN $UGA moved above $13.36 completing a base building pattern.

US Factory Orders up 0.3% (NSA) in March, much weaker than the 12.5% increase that is average for the month. $MACRO $STUDY #Economy

Trader's Corner

Equity Indices and related ETFs

Daily Seasonal/Technical Equity Trends for May 4th 2020

Green: Increase from previous day

Red: Decrease from previous day

Commodities

Seasonal/Technical Commodities Trends for May 4th 2020

Green: Increase from previous day

Red: Decrease from previous day

Sectors

Daily Seasonal/Technical Sector Trends for May 4th 2020

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 the following weekly comment. Headline reads, "Pandemic waves, April best, bear rally, gold swoon, silver underperformance, oil bear, trading opportunities". Following is the link:

http://enrichedinvesting.com/wp-content/uploads/2020/05/Pandemic-waves-April-best-bear-rally-gold-swoon-silver-underperformance-oil-bear-trading-opportunities.pdf

Notes Used for Saturday's Radio Show with Michael Campbell

Most equity indices around the world normally reach a seasonal peak near the beginning of May. Notable are U.S. indices including the Dow Jones Industrial Average and the S&P 500 Index with a seasonal peak on May 2nd. Exceptions exist: The TSX Composite has a history of peaking at the end of May and the Shanghai Composite has a history of peaking in mid-April.

Most equity markets from early May to mid-October normally move into a period of greater volatility with little or no gain. Seasonal lows normally are reached in mid-October followed by advances to the end of the year.

The seasonal peak near the beginning of May coincides with end of first quarter earnings report season when CEOs love to give a positive earnings and revenue outlook for remainder of the year.

North American equity markets during a U.S. Presidential Election Year tend to be more volatile than usual from April to mid-October when political rhetoric is highest.

North American equity markets have a history during a U.S. Presidential Election year of moving higher from October to the end of the year regardless of who is elected. An important low usually is set two weeks before the U.S. Presidential Election is held.

What about this year? Most major companies during the past three weeks have released diminished, but higher than consensus first quarter results. Stock prices recovered accordingly in April. However, many companies also withdrew guidance for the rest of the year due to economic uncertainties related to COVID 19. According to FactSet, earnings on a year-over-year basis for S&P 500 companies have dropped 13.7% in the first quarter, are expected to drop 36.7% in the second quarter, but are expected to drop only 16.9% in the third quarter. North American equity markets are expected to struggle prior to release of second quarter results in July and August followed by a recovery late this year in anticipation of less negative results.

Selected sectors tend to underperform the market during the May to October period. Economic sensitive sectors such as Materials, Industrials, Financials and Consumer Discretionary are the most vulnerable.

Best performing sectors during the May to October period are Healthcare, Consumer Staples and Gold.

Notable is the Healthcare sector with a period of relative Outperformance from late April to the end of September.

What about this year? Government around the world substantially have increased funding for the Healthcare sector during the COVID 19 crisis. Normal healthcare services such as surgery and usual hospital care (other than COVID 19 services) have been postponed. Pent up demand for a return to normal services will trigger above average revenues and profits for the sector after the COVID crisis is over. In addition, special demand for post COVID 19 services (e.g. a vaccine, tests for antibodies) is expected to grow substantially.

On the charts the Healthcare sector has outperformed the S&P 500 sector since mid-February. That trend is expected to continue.

Easiest way to invest in the sector is to own ETFs listed on U.S. exchanges such as Healthcare SPDRs (XLV).

Canadian investors can consider an internationally based Healthcare ETF that trades in Canadian Dollars. Harvest Healthcare Income Leaders ETF (Symbol: HHL on the TSX) holds an equally weighted basket of 20 well known international healthcare stocks. The fund writes call options against security positions. Cash received from call option premiums and dividends are distributed on a monthly basis to unitholders. Current yield by the ETF is 9.0%. Currency risk is reduced through a currency hedge. On the charts, units have a similar technical pattern to Healthcare SPDRs.

Another sector with a positive seasonal profile at this time of year is gold, gold equities and related indices and ETFs. The TSX Gold Index, NYSE Gold Bug Index and their related ETFs have a period of seasonal strength on a real and relative basis from the end of April to late September.

Interest in the precious metals sector recently has been spurred by substantial monetary and fiscal stimulus by governments around the world to compensate for damage to economies caused by COVID 19. An extensive report on the sector recently published by Martin Murenbeeld predicted a blended model increase in gold to U.S. $1800 per ounce by year-end and to U.S. $1951 per ounce by the end of 2021. Canadian investors can participate by owning gold producing equities directly or by owning a Canadian equity based ETF (e.g. XGD on the TSX).

On the charts, XGD has a positive technical profile. Trend is up. Strength relative to the TSX and S&P 500 Index is positive.

Following is a link to a podcast to Michael Campbell's complete show on Saturday. Don Vialoux's comments appear in the middle of the podcast.

https://mikesmoneytalks.ca/complete-show-may-2nd/?mc_cid=52430433e5&mc_eid=592546b4b5

S&P 500 Momentum Barometer

The Barometer added 1.20 to 55.11 yesterday. It remains intermediate neutral.

TSX Momentum Barometer

The Barometer added 4.65 to 55.31 yesterday. It remains intermediate neutral.

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

Sponsored By...