Pre-opening Comments for Monday September 26th
U.S. equity index futures were lower this morning. S&P 500 future were down 17 points in pre-opening trade.
The British Pound dropped another 0.0145 to $1.0705 to an all-time low in overnight trading.
![clip_image001[1]](https://timingthemarket.ca/techtalk/wp-content/uploads/2022/09/clip_image0011-13.png "clip_image001[1]")
Micron dropped $0.40 to $49.70 after Wedbush lowered its target price from $85 to $65.
![clip_image002[1]](https://timingthemarket.ca/techtalk/wp-content/uploads/2022/09/clip_image0021-16.png "clip_image002[1]")
PG&E added $0.64 to $13.25 on news that the stock will be added to the S&P 500 Index this Friday.
EquityClock’s Daily Comment
Head line reads “Seeking to manage positions, rather than panic, is vitally important at this juncture as bearish sentiment spikes to the highest levels since March of 2009 and March of 2020”.
http://www.equityclock.com/2022/09/24/stock-market-outlook-for-september-26-2022/
The Bottom Line
Focus this week is on the August PCE Price Index released at 8:30 AM EDT on Friday, the data point that is most closely followed by most members of the FOMC to determine the trend for inflation. Consensus calls for actual and core data points that are unchanged/slightly higher from July. U.S. equity indices will respond strongly higher if the actual data points are lower than consensus.
Seasonal influences suggest that U.S. equity indices normally reach an important intermediate low at the end of September during a mid-term election year in the U.S. Presidential Election Cycle. Will history repeat?
Meanwhile, North American equity markets are extremely oversold by several measures: The CNN Fear & Greed Index dropped to 24 on Friday into the Extreme Fear level. See: https://www.cnn.com/markets/fear-and-greed Intermediate and long term Barometers for S&P 500 and TSX Composite stocks available at the end of this report also are extremely oversold. However, technical signs of a bottom have not arrived yet. Traders are waiting for a reason to become bullish. Patience will be rewarded.
Consensus for Earnings and Revenues for S&P 500 Companies
Analysts lowered earnings estimates slightly again last week. According to www.factset.com third quarter earnings on a year-over-year basis are expected to increase 3.2% (versus previous estimate at 3.5%) and revenues are expected to increase 8.7%. Fourth quarter earnings are expected to increase 4.5% (versus previous estimate at 4.8%) and revenues are expected to increase 6.4%. For 2022 earnings are expected to increase 7.7% and revenues are expected to increase 10.7%.
Preliminary estimates for 2023 also moved slightly lower. According to www.factset.com first quarter 2023 earnings are expected to increase 7.2% (versus previous estimate at 7.3%) and revenues are expected to increase 6.1% (versus previous estimate at 6.2%). Second quarter 2023 earnings are expected to increase 6.0% (versus previous estimate at 6.2%) and revenues are expected to increase 3.4% (versus previous estimate at 3.6%). For all of 2023, earnings are expected to increase 8.1% (versus previous estimate at 8.2%) and revenues are expected to increase 4.5%.
Economic News This Week
August Durable Goods Orders released at 8:30 AM EDT on Tuesday are expected to drop 0.5% versus a decline of 0.1% in July. Excluding transportation orders, August Durable Goods Orders are expected to increase 0.2% versus a gain of 0.2% in July.
August New Home Sales released at 10:00 AM EDT on Tuesday are expected to slip to 500,000 from 511,000 in July.
July Canadian GDP released at 8:30 AM EDT on Thursday is expected to drop 0.1% versus a gain of 0.1% in June.
Next estimate of U.S. annualized second quarter real GDP released at 8:30 AM EDT on Thursday is expected to remain unchanged at -0.6%.
Year-over-year August PCE Price Index released at 8:30 AM EDT on Friday is expected to remain unchanged at 6.3% in July. Excluding food and energy, Index is expected to increase 4.7% versus 4.6% in July.
August Personal Income released at 8:30 AM EDT on Friday is expected to increase 0.3% versus a gain of 0.2% in July. August Personal Spending is expected to increase 0.2% versus a gain of 0.1% in July.
September Chicago PMI released at 9:45 AM EDT on Friday is expected to slip to 52.0 from 52.2 in August
September Michigan Consumer Sentiment released at 10:00 AM EDT is expected to remain unchanged from August at 59.5.
Earnings News This Week
Trader’s Corner
Equity Indices and Related ETFs
Daily Seasonal/Technical Equity Trends for September 23rd 2022
Green: Increase from previous day
Red: Decrease from previous day
Commodities
Daily Seasonal/Technical Commodities Trends for September 23rd 2022
Green: Increase from previous day
Red: Decrease from previous day
Sectors
Daily Seasonal/Technical Sector Trends for September 23rd 2021
Green: Increase from previous day
Red: Decrease from previous day
Chart of the day
On Friday, the Dow Jones Industrial Average moved below intermediate support levels at 29,740.25 and 30,143.93 changing intermediate trend from up to down (Score: from +2 to -2). Almost simultaneously, strength relative to the S&P 500 Index changed from Negative to Positive (Score: from -2 to +2). Short term momentum indicators continued to trend down (Score: -1) and price remained below its 20 day moving average (Score:-1). Accordingly, technical score remained unchanged at (-2 +2-1-1=) -2
Technical Notes for Friday
Indices breaking intermediate support on Friday
Dow Jones Industrial Average moved below 29,888.78 extending an intermediate downtrend.
Dow Jones Transportation Average moved below $12,748.12 extending an intermediate downtrend.
ETFs breaking intermediate support on Friday: DIA, IYT, IYR, KBE, KRE, XLI, GDX, GDXJ, COPX, USO, PICK, SMH, EWA, JETS
Canadian ETFs breaking intermediate support on Friday: XEG, ZEM, ZEO, XIT, XFN, XBM
S&P 100 stock breaking intermediate support on Friday: SLB, BKNG, AIG, BK, MET, MS, SPG, CAT, UPS, GD, IBM
NASDAQ 100 stocks breaking intermediate support on Friday: ROST, DXCM, CSCO, CSX, MELI
TSX 60 stocks breaking intermediate support on Friday: SLF, POW, CNQ, TRP, SU, ENB, GIB.A, PPL BAM.A, CTC.A, GIL, WMI, YRI, SU, MG
Links offered by valued providers
Mark Leibovit link for Sept. 22nd
Gold, Crude Oil, USD, Stock Markets – HoweStreet
Greg Schnell asks “Which way is up”?
https://stockcharts.com/articles/canada/2022/09/which-way-is-up-716.html
Michael Campbell’s MoneyTalks
https://mikesmoneytalks.ca/category/mikes-content/?mc_cid=6ba3ab6f83&mc_eid=592546b4b5
Dave Keller notes the “Exceptionally Bearish Breadth”
Exceptionally Bearish Breadth | The Mindful Investor | StockCharts.com
Mary Ellen McGonagle asks “Will the markets stage a countertrend bounce next week”?
Will The Markets Stage a Countertrend Bounce Next Week? | The MEM Edge | StockCharts.com
John Hopkins says “Let your risk tolerance determine if you buy the dip”.
Let Your Risk Tolerance Determine If You Buy the Dip | Top Advisors Corner | StockCharts.com
Victor Adair’s Trading Notes for September 24rth
Trading Desk Notes for September 24, 2022 – HoweStreet
Links from Mark Bunting and www.uncommonsenseinvestor.com
Seven Canadian "Debt Monsters" Have Bond Markets Worried – Uncommon Sense Investor
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 another 6.80 on Friday and another 20.80 last week to 5.20. It is extremely oversold, but has yet to show signs of bottoming.
The long term Barometer plunged another 5.20 on Friday and 12.60 last week to 15.00. It is extremely oversold, but has yet to show signs of bottoming.
TSX Momentum Barometers
The intermediate term Barometer plunged 16.10 on Friday and 33.30 last week to 8.05. It is extremely oversold, but has yet to show signs of bottoming.
The long term Barometer dropped 7.20 on Friday and 10.46 last week to 19.92. It is extremely Oversold, but has yet to show signs of bottoming.
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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September 26th, 2022 at 9:55 am
Bullish Double Bottom forming on all major indexes since Friday, maybe it will hold, maybe not. I don’t see a strong case for a Bull Market with 40 year high inflation, aggressive FED and BOC rate hikes, an inverted yield curve and looming classic recession….At least not yet. I suspect a relief rally, short covering or sucker’s rally, for the short term, but I don’t think we are starting a new Bull Market.
However, historically, the market does recover at the start of a real recession, when earnings are declining, unemployment and bankruptcies rising, etc. as the market is looking beyond the recession into the recovery.
We will see how it develops…..
Sir John Templeton:
“Bull markets are born on pessimism, grown on scepticism, mature on optimism and die on euphoria. The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.”
https://www.investopedia.com/terms/d/doublebottom.asp
September 26th, 2022 at 10:25 am
Nibbling on a few names today….good yields, quality names. Good for long term.
September 26th, 2022 at 12:33 pm
I should add, I’m still mostly in cash, 75-80% range. I think we should see a technical bounce soon, I may sell into it or not, we will see….Keeping all my options open.
September 26th, 2022 at 1:59 pm
The $SPX is presently testing the 3600 double bottom of the June low. No obvious positive divergence on the oscillators. If the “big boys” want to create a rally here they are going to have to create a bullish news story to get a bounce and a lot of short covering. I’m sure they can do it as they create the financial news. I would if I were them. Then we can all jump up and down and wave our arms around and say “that was a relief”. There are a lot easier ways to make a buck………..
(The Dow is breaking its June low.)
https://stockcharts.com/h-sc/ui?s=%24SPX&p=D&yr=2&mn=0&dy=0&id=p82538603649&a=939923011
September 26th, 2022 at 4:55 pm
Ron,
Yep, correct….we should get a bounce in here soon….maybe….lol. Short term oversold, seller’s fatigue….I would expect maybe to see at best, a 50% retracement from lowest low to most recent high, then further selling to a new low, or something like that.
Fundamentally, there is no reason for the markets to do anything better here, not until the FED and BOC decide they will taper or pause their rate hikes. I don’t see that until early in the new year, but who knows, it’s up to them.
We are still in a Bear Market, so we will see relief rallies.
September 26th, 2022 at 5:11 pm
Thanks Guys – greatly appreciated. APPL closing up is a positive. No trading for me today, preparing for storm moving in tomorrow here just north of Miami. No hurricane but will get lots of wind and rain and need to tie everything down.
September 26th, 2022 at 7:28 pm
Here is a 3 year chart of the $SPX.Notice while price has double bottomed at the June low that everyone is focusing on price is no where near the March 2020 low which was a major price low. Also note using the Fibonacci retracement levels price has only retraced a Fibonacci 38.2% retracement which is just a mild pullback. The entire year of 2022 has been overall bearish in most ways but there hasn’t been a lot of damage done to the broad market Indexes overall.
https://stockcharts.com/h-sc/ui?s=%24SPX&p=D&yr=3&mn=0&dy=0&id=p06224033329&a=1131926615
Here is the Nasdaq Composite $COMP. Price has retraced a Fibonnacci 61.8% retracement of the bull market and is oversold.
https://stockcharts.com/h-sc/ui?s=%24COMPQ&p=D&yr=3&mn=0&dy=0&id=p05268530352&a=1041803119
September 26th, 2022 at 7:34 pm
#7 should read :Also note using the Fibonacci retracement levels the $SPX has only retraced a Fibonacci 38.2% to 50% retracement. Good time for a bounce but not the end of a bear market either in spite of being very oversold.
September 26th, 2022 at 10:23 pm
Ron,
I agree 100%….I would not be surprised to eventually see a test of the pre-covid high of 3393 before this is all over (maybe even lower). There is way too much complacency in the market, not enough fear….i.e. no headlines in the paper….lol.
After all, we haven’t seen 5% interest rates since the year 2000….And have had 14 years of near zero rates in a row….Historically quite abnormal. Too much liquidity for far too long; way too much debt. This just can’t end well….
I recently read that today 60% of all mortgages in Canada are short term variables, and 20% of all mortgage types renew every year. This was confirmed to me by a local agent I talked to couple days ago, 25 years in the biz. Lots of people out there with multi-million dollar mortgages who will see their monthly payments double, triple or worse, just about the same time lay-offs start and unemployment rises. There’s a disaster waiting in Real Estate for sure. Good thing I haven’t had a mortgage in 20 years…lol
This computer program is smelling a relief rally coming soon…we will see. Getting interesting….lol
https://www.americanbulls.com/SignalPage.aspx?lang=en&Ticker=SPY
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Flo-Rida…Hopefully things will work out for you and the storm will pass you by. I have a younger brother who owns a winter home in Pompano Beach Fl. Wilma did a number on his house a few years back. Been there many times. I’m looking at the CAD hitting .72 cents today, man this will cost me this winter when we go back to Mesa, AZ on Nov. 1st. Nothing I can do about it….Good Luck!