The Bottom Line:
Now is the time to START taking at least partial profits in a wide variety of seasonal trades that reach the end of their period of seasonal strength in May including seasonal trades in the market and in sectors (including seasonal trades in platinum, silver, mines & metals, energy, oil services, consumer discretionary and materials). Profit taking on strength is preferred.
U.S. equity index futures are lower this morning. S&P 500 futures are down 5 points in pre-opening comments. Equity markets around the world are responding to continuing concerns on several issues including the SEC charge against Goldman Sachs, continuing concerns about Greece’s sovereign debt and fallout from the volcano eruption in Iceland. Weakest international equity index overnight was the Shanghai Composite Index, down 4.8%. And now the latest news! This morning, the United Kingdom and Germany opened investigations on Goldman Sach’s corporate finance activities. In addition, negotiations with Greece on a possible bailout have been delayed due to travel disruptions related to the volcano eruption in Iceland.
European based airline stocks are down sharply this morning. Commercial flights throughout northern Europe no longer are flying due to concerns about possible damage to aircraft if they fly through volcanic ash.
Goldman Sachs slipped another 2% in overnight trading.
The U.S. Dollar strengthened and the Euro weakened on overnight events. Commodities priced in U.S. Dollars including crude oil, gold, silver and copper traded lower.
Index futures moved lower despite better than expected first quarter earnings released this morning by Halliburton, M&T Bank, Hasbro, Eli Lilly and Citigroup. Only Citigroup moved higher on the news.
Cenovus fell 2% after BMO Capital downgraded the stock from Outperform to Market Perform.
Economic News This Week
Economic news is positive again this week.
March Leading Economic Indicators to be released at 10:00 AM EDT on Monday is expected to improve 1.0% versus a gain of 0.1% in February.
March Producer Prices to be released at 8:30 AM EDT on Thursday is expected to increase 0.5% versus a decline of 0.6% in February. Core PPI is expected to increase 0.1% versus a 0.1% increase in February.
March Existing Home Sales to be released at 10:00 AM EDT on Thursday are expected to increase to 5.30 million units from 5.02 million units in February.
March Durable Goods Orders to be released at 8:30 AM EDT on Friday are expected to remain unchanged versus a 0.9% gain in February. Excluding transportation, Orders are expected to increase 0.8% versus a gain of 1.4% in February.
March New Home Sales to be released at 10:00 AM EDT on Friday are expected to increase to 320,000 from 308,000 in February.
Earnings Reports This Week
Expect lots of good news!
Monday sees Citigroup, Eli Lilly, Halliburton and IBM.
Tuesday sees AK Steel, Apple, Coca Cola, Goldman Sachs, Johnson & Johnson, State Street, Teck Resources and Yahoo.
Wednesday sees Abbott Labs, Amgen, AT&T, Boeing, EBay, Encana, Freeport McMoran Copper & Gold, McDonald’s, Morgan Stanley and Wells Fargo.
Thursday sees Amazon.com, Capital One, Celestica, Microsoft, Pepsico, Philip Morris, Union Pacific and Verizon.
Friday sees Honeywell and Travelers.
Equity Index Trends
The ratio of S&P 500 stocks in an uptrend to a downtrend increased last week from 7.22 to (410/54=) 7.59. However, it deteriorated slightly on Friday. The ratio remains intermediate overbought.
Bullish Percent Index for S&P 500 stocks increased from 86.00% to 87.00% last week and remained above its 15 day moving average. The Index remains intermediate overbought, but continues to trend higher.
Ed Note: 5 of the 46 Charts Don Vialoux analyzes below. Go HERE to view them all.
The Dow Jones Industrial Average improved 21.31 points (0.19%) last week. It reached an 18 month high on Thursday. Intermediate trend is up. Short term momentum indicators are overbought and showing signs of rolling over. Seasonal influences are positive, but approaching the end of their period of seasonal strength in May. Strength relative to the S&P 500 Index remains negative. Intermediate downside risk is to its 50 day moving average currently at 10,598.20.
The TSX Composite Index fell 106.18 points (0.87%) last week. The Index reached an 18 month high on Thursday. Intermediate trend is up. Short term momentum indicators are overbought and have rolled over. Seasonal influences remain positive. Strength relative to the S&P 500 Index remains negative. Intermediate downside risk is to its 50 day moving average currently at 11,847.41.
The U.S. Dollar slipped 0.15 last week and tested support at 79.51. Resistance has formed at 82.24. Short term momentum indicators continue to trend lower. ‘Tis the season for the U.S. Dollar to move lower.
Gold has a brief period of seasonal strength in the month of May. However, its best seasonal sweet spot is from August to December.
Silver’s seasonal strength is approaching an end in May.SI) Seasonal Chart
Go HERE to view all 46 Charts and Commentary
Don Vialoux has 37 years of experience in the Investment Industry. He is a past president of the Canadian Society of Technical Analysts (www.csta.org) and a former technical analyst at RBC Investments. Don earned his Chartered Market Technician (CMT) designation from the Market Technician Association in 1995. His CMT paper entitled “Seasonality in Canadian Equity Markets” was published in the Spring-Summer 1996 edition of the MTA Journal. Don also has extensive experience with Exchange Traded Funds (also know as Index Participation Units) as well as conservative option strategies. In 1990 he wrote a report that was released in the International Federation of Technical Analyst Journal entitled “Profiting from a Combination of Technical and Fundamental Analysis”. The report introduced ” The Eight Phases of the Stock Market Cycle”, an investment concept that continues to identify profitable entry and exit points for North American equity markets. He is currently a member of the Toronto Society of Fundamental Analyst’s Derivatives Committee. Now he is the author of a daily letter on equity markets available free on the internet. The reports can be accessed daily right here at www.dvtechtalk.com.