Pre-opening Comments for Monday June 17th
U.S. equity index futures were lower this morning. S&P 500 futures were down 7 points at 8:35 AM EDT.
S&P 500 Index futures dropped 4 points following release of the June Empire State Manufacturing Survey at 8:30 AM EDT. Consensus called for an improvement to -12.50 from -15.60 in May. Actual was an improvement to -6.00.
Autodesk added $9.73 to $235.60 after Starboard Value took a $500 million stake in the strock.
Best Buy added $2.13 to $100.33 after UBS upgraded the stock from Neutral to Buy.
![clip_image002[5]](https://timingthemarket.ca/techtalk/wp-content/uploads/2024/06/clip_image0025-1.png "clip_image002[5]")
Walt Disney advanced $0.36 to $100.33 after its film “Inside Out 2” opened with $155 million in sales this weekend.
Technical Scoop from David Chapman and www.EnrichedInvesting.com
EquityClock’s Stock Market Outlook for June 17th
Visa continues to indicate that discretionary spending momentum remains very depressed for this time of year.
See: https://equityclock.com/2024/06/15/stock-market-outlook-for-june-17-2024/
The Bottom Line
Editor’s Note: Thanks to Wolfgang Klein and Jack Hardill, Don Vialoux appeared on “Wolf on Bay Street” taped for Corus Radio last Thursday and released on Saturday evening. Following are comments developed prior to the interview. Comments have been updated to include price levels set at market close on Friday.
Investors responded to encouraging U.S. economic news last Wednesday. Core May Consumer Price Index on a year-over-year basis dropped to 3.4%, extending an intermediate downtrend. U.S. equity indices moved higher on the news: the S&P 500 Index and the NASDAQ Composite Index jumped to all-time highs in anticipation of a lower Fed Fund Rate currently at 5.25%-5.50%. Enthusiasm was dampened slightly after when Federal Reserve Chairman suggested that a reduction in the Fed Fund Rate will not happen “any time soon”.
A word of caution on measuring performance of U.S. equity markets since January 1st 2024! Investors have been impressed by a 13.89% gain by the S&P 500 Index and a 17.84% gain by the NASDAQ Composite Index. A closer examination of their content reveals that most of the gains came from their concentration in a small number of securities. A recent study of the S&P 500 found that its top 10 holdings by weight represented 35% of the value of the Index. Their outstanding performance has been driving the exceptional gain by the Index. Other U.S. equity indices have recorded positive but less impressive returns to date: Equally weighted S&P 500 Index is up only 3.53%, Dow Jones Industrial Average is up only 2.39% and the Russell 2000 Index is down 0.43%. The Dow Jones Transportation Average is down 6.87%. Also, the TSX Composite Index is up only 3.25%
The key to performance in the first half of this year by far in U.S. equity markets has been gains by the technology sector.
Historically, the technology sector also has performed above average into the second half of the year. This year the sector is benefitting from a growing enthusiasm for “AI” stocks. Other sectors, that have a history of outperformance in the second half of the year both in Canada and the U.S., include Consumer Discretionary, Industrial, Biotech, Base metals and Gold.
U.S. equity markets have a history of moving higher from the last week in June to the end of July, the so called “Summer Rally” (particularly during U.S. Presidential Election years). Average gain per period for the S&P 500 Index during the past 20 periods is 3.0%. This year, the Index is expected to benefit from accelerating earning gains: Consensus for second quarter 2024 earnings by S&P 500 companies calls for a year-over-year increase of 9.0%, up from a 5.9% increase announced in the first quarter. Anticipation of greater economic activity prior to start of the Olympics also is positive. Not surprising, Booking Holdings (Symbol: BKNG ) touched an all-time high last Wednesday.
Consensus for Earnings and Revenues for S&P 500 Companies
Source: www.FactSet.com
Earnings gains in 2024 on a year-over-year basis accelerate in the second and third quarters from the first quarter when earnings increased only 5.9%. Consensus for the second quarter calls for a 9.0% earnings increase (versus previous 9.2% increase) and a 4.6% increase in revenues (versus previous 4.7% increase). Consensus for the third quarter calls for an 8.2% increase in earnings (versus previous 8.3% increase) and a 4.9% increase in revenues.
Earnings gains accelerate further in the fourth quarter. Consensus calls for a 17.6% increase in earnings (versus previous 17.5% increase) and a 5.6% increase in revenues (versus previous 5.5% increase).
For all of 2024, consensus calls for an 11.3% earnings increase and a 5.0% revenue increase.
Earnings gains accelerate further in 2025. First quarter earnings are expected to increase 15.3% year-over-year and revenues are expected to increase 5.8%. Second quarter earnings are expected to increase 15.2% and revenues are expected to increase 5.9%. For all of 2025 earnings are expected to increase 14.3% (versus previous 14.2% increase) and revenues are expected to increase 6.0% (versus previous 5.9% gain).
Economic News This Week
Source: www.Investing.com
June Empire State Manufacturing Survey is released at 8:30 AM EDT on Monday.
May U.S. Retail Sales released at 8:30 AM EDT on Tuesday are expected to increase 0.3% versus no change in April.
May Capacity Utilization released at 9:15 AM EDT on Tuesday is expected to increase to 78.6 from 78.4 in April. May Industrial Production also is released at 9:15 AM EDT
April U.S. Business Inventories released at 10:00 AM EDT on Tuesday are expected to increase 0.3% versus a 0.1% decline in March
U.S. Holiday is on Wednesday. U.S equity markets are closed.
May U.S. Housing Starts released at 8:30 AM EDT on Thursday are expected to increase to 1.380 million units from 1.360 million units in April.
June Philly Fed Index released at 8:30 AM EDT on Thursday is expected to be unchanged from May at 4.5.
May Canadian Retail Sales are released at 8:30 AM EDT on Friday
May U.S. Existing Home Sales release at 10:00 AM EDT on Friday are expected to slip to 4.10 million units from 4.14 million units in April
May U.S. Leading Economic Indicators released at 10:00 on Friday are expected to be -0.3 versus -0.6 in April.
Federal Reserve Monetary Policy Report is released at 11:00 AM EDT on Friday.
Selected Earnings Reports This Week
Source: www.Investing.com
Trader’s Corner
Equity Indices and Related ETFs
Daily Seasonal/Technical Equity Trends for June 14th 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 June 14th 2024
Green: Increase from previous day
Red: Decrease from previous day
Sectors
Daily Seasonal/Technical Sector Trends for June 14th 2024
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
Technical Notes for Friday
TSX Composite Index moved below intermediate support at 21,536.09
France iShares $EWQ moved below intermediate support at $38.37. A national election has been called.
Agribusiness ETF $MOO moved below $69.68 extending an intermediate downtrend.
Industrial SPDRs $XLI moved below $120.17 completing a double top pattern.
Adobe $ADBE an S&P 100 stock moved above $496.76 setting an intermediate uptrend. The company reported higher than consensus quarterly results.
Target $TGT an S&P 100 stock moved below $139.98 extending an intermediate downtrend.
PayPal $PYPL moved below $60.85 completing a Head & Shoulders pattern
Toronto Dominion Bank $TD.TO a TSX 60 stock moved below Cdn$73.98 extending an intermediate downtrend.
Memorial for Greg Schnell
from StockCharts
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Our charting community lost a great man last week. It is with a very heavy heart that I share the news that our dear friend Greg Schnell has passed. |
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Links offered by valued providers
AI MANIA STILL DRIVING STOCKS (SOME STOCKS) HIGHER: Mark Leibovit
https://www.howestreet.com/2024/06/ai-mania-still-driving-stocks-higher-mark-leibovit
Bearish Divergences in 2 KEY Growth Stocks: BEWARE! David Keller
https://www.youtube.com/watch?v=QjGQgHu-7oY
Michael Campbell’s Money Talks for June 15th
Michael Campbell’s MoneyTalks – Complete Show (mikesmoneytalks.ca)
Equal-Weight Losing Against Cap-Weight SPY: Erin Swenlin
DP Trading Room: Equal-Weight Losing Against Cap-Weight SPY | DecisionPoint | StockCharts.com
Why is 2% inflation so magical? Bob Hoye
Why is 2% Inflation so “Magical”? – HoweStreet
Will the Fed do Multiple Rate Cuts This Year? Danielle Park
Will the Fed do Multiple Rate Cuts This Year? – HoweStreet
S&P 500 Momentum Barometers
The intermediate term Barometer dropped 3.60 on Friday and dropped 5.60 last week to 43.60. It remains Neutral.
The long term Barometer dropped 1.60 on Friday and dropped 1.80 last week to 67.00. It remains Overbought.
TSX Momentum Barometers
The intermediate term Barometer dropped 4.05 on Friday and plunged 29.28 last week to 36.49. It changed from Overbought to Oversold on a drop below 40.00. Daily trend remains down.
The long term Barometer dropped 2.70 on Friday and fell 4.06 last week to 61.71. It remains Overbought. Daily trend has turned 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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June 17th, 2024 at 9:38 am
I’m taking Cramer’s advice. NVDA’s up 40% from it’s breakout from 950 (95). The last pullback was 20%. A 20% pullback from this range would take us down to around 105.
https://www.cnbc.com/2024/06/14/jim-cramer-says-its-time-to-take-some-profits-in-ai-stocks.html
June 17th, 2024 at 12:26 pm
#1
Here is a 1.5 year chart of NVDA. As always I’ve marked it with a vertical dotted line where the RSI 8 re crosses back above the 30 line. This “tends” to be a price low on most charts. Certainly not a high that most people like to buy because of the positive reviews etc. One can see how this has worked well on NVDA like most other charts. The only time it’s not a valid buy signal is when price is falling steadily and below the falling 200ema. The overbought signals also often warn of a price top nearby but is not as timely as when the RSI 8 recrosses back above the 30 line for a buy signal. One doesn’t often get burned when using this indicator. A person can also put in a stop loss after buying a recross of the 30 line to limit losses on any sudden crash. One should always limit any losses regardless of the bullish news. And while nothing is infallible it is a good timely indicator most of the time. Check it out on other charts to see how consistent this indicator is most of the time. At least one wont be buying at extremes. I put on a 2ema on the RSI 8 to smooth it a little but it’s not that necessary.
https://stockcharts.com/sc3/ui/?s=NVDA&a=1625133329&id=p18657789398
June 17th, 2024 at 1:50 pm
There are weird things happening on the components that make up the CNN Market Sentiment Indicator. We are in a “Fear” range while SPX market is making new highs which you don’t see very often. It’s all due to the incredibly narrow number of stocks which are making gains while the majority of stocks languish. Stock breadth is really poor and “safe haven demand” in bonds is high. Historically waning breadth occurs at the end of a rally. At the same time it is impossible to predict the end in short-term momentum in AI stocks and I would say the long term uptrend in these stocks is at an early stage. I just don’t want to be the hog that gets slaughered.