Pre-opening Comments for Tuesday February 20th
U.S. equity index futures were lower this morning. S&P 500 futures were down 18 points at 8:35 AM EST.
The Canadian Dollar dropped 0.20 to US74.00 cents following release of Canada’s January Consumer Price Index at 8:30 AM EST. Consensus was an increase of 0.4% versus a decline of 0.3% in December. Actual was unchanged. On a year-over-year basis, consensus was an increase of 3.2% versus a gain of 3.4% in December. Actual was a gain of 2.9%.
The Shanghai Composite Index added 12.19 to 2,922.73 after resumption of trading following the Chinese New Year celebration. Strength in the Index was helped by news that the Peoples Bank of China cut in its five year prime loan rate for major banks by 0.25% to 3.95%.
Discover Financial Services added $0.16.51 to $127.00 after Capital One Financial announced plans to purchase the company through a share exchange valued at $35.3 billion.
![clip_image002[1]](https://timingthemarket.ca/techtalk/wp-content/uploads/2024/02/clip_image0021-6.png "clip_image002[1]")
Home Depot dropped $8.35 to $354.00 after reporting less than consensus fourth quarter earnings.
Walmart gained $3.64 to $174.00 after reporting higher than consensus fourth quarter earnings.
![clip_image004[1]](https://timingthemarket.ca/techtalk/wp-content/uploads/2024/02/clip_image0041-6.png "clip_image004[1]")
The Bottom Line
Changes by key world equity indices were significant last week: U.S. equity indices moved lower following release of higher than consensus January CPI and PPI reports. Equity indices and related ETFs for India, Japan, China and Europe rose significantly. China iShares completed a double bottom pattern. EAFE iShares touched an all-time high. Sectors that were notably higher were energy and base metals. ‘Tis the season for the industrial commodity prices and related ETFs to move higher until late May!
Consensus for Earnings and Revenues for S&P 500 Companies
Source: www.FactSet.com
Earnings estimates for the fourth quarter of 2023 were raised again. Seventy nine percent of S&P 500 companies have reported to date. Fourth quarter 2023 earnings now are expected to increase 3.2% on a year-over-year basis (versus an increase last week of 2.9%). Estimate for fourth quarter revenues is an increase of 4.0% (versus a gain last week of 3.9%).
Analysts reduced slightly their earnings and revenue estimates for each quarter in 2024:
A significant earnings recovery by S&P 500 companies expands in the first quarter of 2024, but at a slightly lower than previous rate. Consensus for the first quarter on a year-over-year basis calls for an earnings increase of 3.9% (versus increase last week of 4.0%) and a revenue increase of 3.5% (versus an increase last week of 3.6%).
Earnings gains accelerate thereafter to the end of 2024, all-be-it at a slower pace. Consensus for the second quarter calls for a 9.0% earnings increase (versus a 9.1% increase last week) and a 4.6% increase in revenues (versus a 4.8% increase last week). Consensus for the third quarter calls for an 8.0% increase in earnings (versus previous 8.1% increase) and a 5.0% increase in revenues. Consensus for the fourth quarter calls for a 17.6% increase in earnings (versus previous 17.7% increase) and a 5.7% increase in revenues (versus previous 5.6% increase). For all of 2024, consensus calls for a 10.9% increase in earnings and a 5.4% increase in revenues.
Economic News This Week
Source: www.Investing.com
January Canadian Consumer Price Index is released at 8:30 AM EST on Tuesday
January U.S. Leading Economic Indicators released at 10:00 AM EST on Tuesday are expected to decline 0.2% versus a decline of 0.1% in January.
FOMC Meeting Minutes are released at 2:00 PM EST on Wednesday
December Canadian Retail Sales are released at 8:30 AM EST on Thursday
January U.S. Existing Home Sales released at 10:00 AM EST on Thursday are expected to increase to 3.96 million units from 3.78 million units in December.
Selected Earnings News This Week
Source: www.Investing.com
Focus this week is on Nvidia’s quarterly results released on Wednesday.
Another 54 S&P 500 companies are scheduled to release results (including two Dow Jones Industrial Average companies: Wal-Mart and Home Depot on Tuesday). Five TSX 60 companies are scheduled to report.
Trader’s Corner
Equity Indices and Related ETFs
Daily Seasonal/Technical Equity Trends for Feb.16th 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 Feb.16th 2024
Green: Increase from previous day
Red: Decrease from previous day
Sectors
Daily Seasonal/Technical Sector Trends for Feb.16th 2024
Green: Increase from previous day
Red: Decrease from previous day
Links offered by valued providers
How Long Can This Market Sustain All-Time Highs? Bruce Fraser
(including comments on CNN Fear and Greed Index and the Dow Jones Decennial Pattern)
https://www.youtube.com/watch?v=Mipt7PFgIUs
How to Spot an Impending S&P 500 Selloff: Tom Bowley
https://www.youtube.com/watch?v=jWrt1RHnoV0
SMCI Breaks $1,000 Level – What’s Next? David Keller Guest: Bob Lang
https://www.youtube.com/watch?v=u4gS2Vnjjdk
BUY Signals Continue to Diminish: Carl Swenlin
BUY Signals Continue to Diminish | DecisionPoint | StockCharts.com
Russell 2000 creeping higher. Bitcoin going on a tear: Mark Leibovit
Russell 2000 Creeping Higher – HoweStreet
Michael Campbell’s Money Talks for February 17th
Michael Campbell’s MoneyTalks – Complete Show (mikesmoneytalks.ca)
Are Toppy Markets Heading for a 1929 Like Crash? Bob Hoye
Are Toppy Markets Heading for a 1929 Like Crash? – HoweStreet
Trading Desk Notes for February 17th: Victor Adair
Trading Desk Notes For February 17, 2024 – 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
Technical Notes
EAFE iShares $EFA moved above $76.28 to an all-time high extending an intermediate uptrend.
China iShares FXI moved above $23.09 completing a double bottom pattern.
Gilead $GILD an S&P 100 stock moved below $71.88 extending an intermediate downtrend.
Micron MU a NASDAQ 100 stock moved below intermediate support at $80.58.
Base metals stocks and related ETFs (e.g. XBM.TO) are responding to higher base metal prices. See $DBB. Lundin Mining $LUN.TO moved above Cdn$11.71 extending an intermediate uptrend.
Silver ETN $SLV moved above intermediate resistance at $21.35.
S&P 500 Momentum Barometers
The intermediate term Barometer dropped 3.00 on Friday and 1.80 last week to 61.20. It remains Overbought.
The long term Barometer dropped 2.00 on Friday, but added 0.20 last week to 71.00. It remains Overbought.
TSX Momentum Barometers
The intermediate term Barometer added 2.22 to 61.78. It gained 2.22 on Friday and advanced 4.89 last week to 61.78. It changed from Neutral to Overbought on a move above 60.00.
The long term Barometer added 1.33 on Friday and gained 3.55 on Friday to 60.44. It changed from Neutral to Overbought on a move above 60.00.
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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February 20th, 2024 at 2:02 pm
https://stockcharts.com/h-sc/ui?s=%24SPX&p=M&yr=20&mn=0&dy=0&id=p94445313158&a=1090120909
Still looking good overall inspite of periods of lower momentum at higher highs……………………
February 20th, 2024 at 2:18 pm
Ron/BC
Thanks for the updated $SPX monthly chart. I have lost plenty of money selling these negative divergences, only to buy back in later at a higher price. Sometimes the divergences can go on for a very long time before there is any market reaction to them. I think there is a famous market expression about this. Of course, it depends on your time frame, whether it is worthwhile to get in and out.
February 20th, 2024 at 3:01 pm
Paula
Negative Divergences are simply warnings of a loss of momentum not a guarantee of falling prices. And they can go on for some time. Technically one is just supposed to back off on purchasing plus sell whatever you may have that is still profitable. I don’t really like Monthly charts or even Weekly charts as I think much too short term for them so “react” to that type of chart. But it is just supposed to be a “Heads Up” on a loss of momentum. I guess a person shouldn’t read too much into them but pay attention to the decline in momentum. I feel much the same way on condos. I’ve bought a few condos along the way and when I see a good profit I sell and buy another one at a discounted price. I put in a low ball offer on one I’d live in and usually get it. No tax if you live in it. And sellers are often desperate to sell and a cash offer is hard to resist. Gotta love cash,lol. I’ve been in this one for 2.5 years but do like it so not eager to sell but still track the condo market closely. Sorry if those momentum charts have cost you money………..They work best on Daily charts and even shorter term charts.
February 20th, 2024 at 4:02 pm
Ron/BC,
Thanks. As usual, your words of wisdom make sense. I recall that you enjoy buying and selling condos and that you have done well with that strategy. Can’t argue with success!