Pre-opening Comments for Monday August 5th
World equity indices are down sharply this morning. S&P 500 dropped 153 to 5,184.56 NASDAQ Composite Index dropped 827 to 15,949.16. Dow Jones Industrial Average dropped 824.90 to 39,055.00. Nikkei Average plunged 3,313.70 to 32,596.00. Shanghai Composite dropped 44.63 to 2,869.70. The London FTSE dropped 195 to 7,981.00 The Paris CAC dropped 152 to 7,099.80. The Frankfurt DAX dropped 470 to 17,191.
Bitcoin dropped $8,136 to $50,000.00
![clip_image001[5]](http://www.timingthemarket.ca/techtalk/wp-content/uploads/2024/08/clip_image0015-1.png "clip_image001[5]")
The VIX index jumped 31.10 to 54.49%.
![clip_image002[5]](http://www.timingthemarket.ca/techtalk/wp-content/uploads/2024/08/clip_image0025-1.png "clip_image002[5]")
The Bottom Line
World equity markets recorded significant technical weakness last week. Weakness on Friday was extended by a disappointing U.S. July Employment report released at 8:30 AM EDT. Breakdowns below intermediate support levels were recorded by North American, European and Far East equity indices and their related Exchange Traded Funds. Best chart to demonstrate is the break down by Europe, Asia, Far East (EAFE) iShares below intermediate support recording a % drop last week. In addition, the S&P 500 Index dropped % last week. Weakness in equity indices was triggered by growing evidence that world economies are about to enter into a recession. Slowing economic growth is expected to slow corporate earnings growth.
On Friday, twenty two S&P 100 and NASDAQ 100 stock broke support extending an intermediate downtrend and four stocks broke resistance extending an intermediate uptrend: DoorDash, Keurig Dr. Pepper, Johnson & Johnson and Regeneron.
On Friday, three TSX 60 stocks broke intermediate support extending a downtrend (Cameco, Bank of Montreal and Shopify). None broke intermediate resistance.
Consensus for Earnings and Revenues for S&P 500 companies
Reports released last week prompted analysts to raise their second quarter earnings and revenue estimates, but lowered their third quarter estimates. Seventy five percent of companies have reported second quarter results to date: 78% have reported higher than consensus quarterly earnings and 59% have reported higher than consensus revenues. Consensus for second quarter earnings increased last week to an 11.5% gain (versus a previous 9.8% gain) and consensus for second quarter revenues increased to a 5.3% gain (versus a previous 5.0% gain). However, Consensus for the third quarter earnings slipped to a 6.1% increase (versus a previous 6.8% increase). Consensus for third quarter revenues dropped to at a 4.9% increase (versus a 5.5% increase last week).
Earnings gains accelerate in the fourth quarter. Consensus calls for a 16.1% increase in earnings (versus a previous 16.7% increase) and a 5.4% increase in revenues (versus previous 5.5% increase)
For all of 2024, consensus calls for a 10.8% earnings increase (versus previous 10.9% increase) and a5.1% revenue increase.
Earnings gains remain elevated in 2025, but at a lower than previous rate. First quarter earnings are expected to increase 14.8 % on a year-over-year basis (versus 15.1% last week) and revenues are expected to increase 5.9% (versus previous 5.8% increase). Second quarter earnings are expected to increase 13.5% (versus previous 14.7% increase) and revenues are expected to increase 5.9% (versus previous 6.0% increase). For all of 2025 earnings are expected to increase 14.8% and revenues are expected to increase 6.0%.
Economic News This Week
Source: www.Investing.com
July Non-manufacturing ISM PMI released at 10:00 AM EDT on Monday is expected to increase to 51.0 from 48.8 in June.
June U.S. Trade to be released at 8:30 AM EDT on Tuesday is expected to improve to a deficit of $72.90 billion from a deficit of $75.10 billion.
June Canadian Trade Balance is released at 8:30 AM EDT on Thursday
July Canadian Employment Change is released at 8:30 AM on Friday.
Selected Earnings Reports This Week
Source: www.Investing.com
Another 79 S&P 500 companies are scheduled to report quarterly results this week (including three Dow Jones Industrial Average companies: Amgen, Caterpillar and Disney). Another eight TSX companies are scheduled to report.
Trader’s Corner
Equity Indices and Related ETFs
Daily Seasonal/Technical Equity Trends for August 2nd 2024
Green: Increase from previous day
Red: Decrease from previous day
Source for all positive seasonality ratings: www.EquityClock.com
Commodities
Daily Seasonal/Technical Commodities Trends for August 2nd 2024
Green: Increase from previous day
Red: Decrease from previous day
Sectors
Daily Seasonal/Technical Sector Trends for August 2nd 2024
Green: Increase from previous day
Red: Decrease from previous day
Links offered by valued providers
Flat Earnings Take Toll on Stock Markets: Mark Leibovit
Flat Earnings Take Toll on Stock Markets – HoweStreet
Growth stocks plummet: David Keller
https://www.youtube.com/watch?v=aB4FI3nNfCk
Michael Campbell’s Money Talks for August 3rd
Michael Campbell’s MoneyTalks – Complete Show (mikesmoneytalks.ca)
VIX Spikes Above 20 as Markets Go Full Risk Off Mode: David Keller
https://www.youtube.com/watch?v=aB4FI3nNfCk
Weekly Update with Larry Berman – August 3rd, 2024
https://www.youtube.com/watch?v=I3GqSlvh400
Stocks Paying the Price for Being Hugely Over Bought: Bob Hoye
Stocks Paying the Price for Being Hugely Over Bought – HoweStreet
Gold The Place To Be For So Many Reasons: Mike Swanson
Gold The Place To Be For So Many Reasons – HoweStreet
Trading Desk Notes for August 3, 2024: Victor Adair
Trading Desk Notes for August 3, 2024 – HoweStreet
Study: Canadians Experiencing Worst Standard of Living in 40 Years: Martin Armstrong
Study: Canadians Experiencing Worst Standard of Living in 40 Years – HoweStreet
American’s #1 Financial Problem in One Chart: Robert Campbell
American’s #1 Financial Problem in One Chart – HoweStreet
Technical Scoop from David Chapman and www.EnrichedInvesting.com
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
S&P 500 Momentum Barometers
The intermediate term Barometer plunged 8.60 on Friday and dropped 13.80 last week to 56.00. It changed from Overbought to Neutral on a drop below 60.00.
The long term Barometer dropped 5.20 on Friday and fell 8.20 last week to 69.60. It remains Overbought.
TSX Momentum Barometers
The intermediate term Barometer plunged 12.39 on Friday and dropped 17.25 last week to 56.64. It changed from Overbought to Neutral by moving below 60.00.
The long term Barometer dropped 7.08 on Friday and dropped 10.18 last week to 71.68. It remains Overbought. Daily trend is down.
Disclaimer: Seasonality ratings 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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August 5th, 2024 at 7:54 pm
Ron/BC,
RE #9 yesterday; Thanks for the weekly TD.TO chart with the RSI 5, 6 and 8. I see what you meant about the shorter RSI working better on the weekly chart.
August 5th, 2024 at 7:58 pm
Bman/VAN,
RE #10 yesterday. Thanks for clarifying and explaining how you short the CAD banks. I agree that with ETFs you can get such a variation in the stocks contained, that they cancel each other out and the net result of the ETF is not much of a move. Good that you watch the ex-dividend dates. That can make a big difference. Years ago, when I traded options, I found that they were much more limited on the TSX than in the US. I am out of that game now.
August 5th, 2024 at 9:28 pm
Paula
The RSI sell signal
s are also good for reducing one’s
position in a market while price is toping out o