Pre-opening Comments for Wednesday September 3^rd

9:10 AM EDT: U.S. equity markets are slightly lower before the opening. S&P 500 futures are off three points. Markets are responding to slightly lower energy prices. Crude oil is down another $0.86 per barrel in pre-opening trade.

Goldman Sachs is starting to take a positive stance on selected stocks in the energy sector following recent weakness in the sector. This morning, Goldman added to British Petroleum to its Buy list and added StatoilHydro to its Conviction Buy list. On the charts, British Petroleum recently broke to a three year low and has yet to show technical signs of recovery.

Chart courtesy of StockCharts.com www.stockcharts.com

This morning the Bank of Canada announced that it will hold its overnight lending rate to major banks at 3.00%. The Bank also noted a decline in inflation pressures due to declining commodity prices and weak economic growth. Its comments implied the possibility of a future reduction in the overnight rate. The Canadian Dollar rose slightly following the news.

Technical Action Yesterday

A really wild day in equity markets on both sides of the border! The negative response to Hurricane Gustav on the energy sector and an early positive response in most other sector initially were to be expected. The subsequent sell off of many sectors was not expected. Net impact was unexpected technical action. In the U.S. thirty four S&P 500 stocks broke resistance and six stocks broke support, a scenario that usually occurs during the Break Out phase. The Up/Down ratio for S&P 500 stocks rose from 0.74 to (197/207=) 0.95. In Canada, eight TSX Composite stocks broke resistance and five stocks broke support. The Up/Down ratio for TSX Composite stocks actually rose from 0.52 to (57/96=) 0.59.

S&P 500 stocks breaking resistance yesterday included AES Corp., Aetna, Allied Waste, Ameriprise, Autozone, Bed, Bath & Beyond, Century Telecom, Centex, Costco, Discovery Financial Services, DR Horton, Dupont, Eaton, El Paso, Fifth Third, Genuine Parts, Host Hotel, Kellogg, Keycorp, Legg Mason, Lennar, Masco, Moody’s, Newell Rubbermaid, Nordstrom, Precision Castparts, PPG Industries, Prudential, Quest Diagnostics, Sears Holdings, Sherwin Williams, Time Warner, US Bancorp, Walmart, Whirlpool and Xerox.

Most notable were breakouts above resistance by U.S. home builder stocks (e.g. Centex, DR Horton, Lennar).

Chart courtesy of StockCharts.com www.stockcharts.com

S&P 500 stocks breaking support yesterday included AES Corp, Alcoa, Dell, El Paso, Nucor and U.S. Steel.

One of the reasons for weakness yesterday after the strong opening was a rumor that a large hedge fund either was about to collapse or was liquidating positions. After the close, The Osprey Fund (sponsored and partially owned by Lehman) announced winding up the fund. The Osprey Fund is a large commodity fund with assets valued at approximately $4 billion. It’s focus was on energy commodities where the Fund is rumored to have lost over $1billion during the past week. Discussion on Fast Money last night suggested that a partial reason for the substantial sell off in crude oil, natural gas, gasoline and heating oil futures at the opening yesterday could have been related to the Fund’s liquidation.

TSX Composite stocks breaking resistance yesterday included CAE, Canadian National Railway, Dundee, Manulife, Power Financial, Royal Bank, Shaw Communications and WestJet.

TSX Composite stocks breaking support included Alamos, Finning International, Golden Energy and MacDonald Dettwiler.

Pre-opening Comments for Tuesday September 2^nd

8:45 AM EDT: U.S. equity indices are higher in overnight trade. S&P 500 futures are up 12points in pre-opening trade in response to less than feared damage from Hurricane Gustav.

Energy markets gave a sigh of relief in overnight trading after Hurricane Gustav moved through Louisiana. The levees in New Orleans have mostly held and the hurricane missed critical areas were oil refiners and petrochemical operators are located. Crude oil prices responded by falling. They reached an overnight low of $105.46 U.S. per barrel in overnight trading before recovering to $107.60, a decline of $7.86. Natural gas dropped $0.56 to $7.39 per MBtu. Crude oil and natural gas broke short term support levels on the charts to reach new five month lows. On the other hand, the hurricane moved through a zone that was highly concentrated with oil and gas producing rigs and the LOOP (Louisiana Offshore Oil Port), an important facility where ships deliver crude oil, heating oil and gasoline. At least some damage has been noted visually to energy facilities, but actual damage will not be known until people are able to return to rigs and facilities in the Gulf. More information will be known during the next couple of days. What is known is that 25% of the production of crude oil and 15% of the production of natural gas in the U.S. has been shut down. At the very least, inventory levels of crude oil and natural gas will decline over the next few weeks until production is fully restored.

Inventory levels on natural gas will be watched particularly close during the next few weeks. This is the time of the year when inventories are building for the winter heating season. Inventories reached the top of their five year range a year ago. Since then, inventory levels in the U.S. have declined and currently are in the middle of their five year range. Lower natural gas prices and a temporary halt in production from the Gulf will cause inventory levels to fall below their five year average and will raise questions about the availability of sufficient natural gas this winter.

Working Gas in Underground Storage Compared with 5-Year Range

That was the scenario in September 2005 after hurricanes Katrina and Rita moved through the Gulf. Crude oil prices fell 15% from the middle of September to the end of December while the price of natural gas more than doubled when availability during the winter heating season became questionable.

Adding to the picture is news about additional hurricanes moving toward the U.S. Hurricane Hanna appears to be heading to the U.S. east coast. Hurricane Ike appears to be heading to the Gulf. At the very least, both hurricanes will reduce the number of ships heading to the LOOP with crude oil, heating oil and gasoline. In addition, the threat of Hurricane Ike could delay resumption of oil and gas production and repair of damage from Hurricane Gustav. The bottom line: Look for volatile oil and natural gas prices during this week.

A comment on Natural Gas

Natural gas was recommended by Tech Talk last week. Indeed, Tech Talk purchased an initial position in GAS on the TSX early last week. Yesterday, natural gas broke support at $7.74. Our timing on the trade was wrong. At the very least we were proven to be premature. Natural gas ETFs gapped lower yesterday and opened near their lows of the day. Accordingly, stop loss orders set just below support levels probably did more harm than good. Technical evidence of a bottom has to appear before new or additional positions should be placed. Short term traders with a time horizon of less than two weeks no longer should retain the trade. Tech Talk will continue to monitor for another possible entry point.

Chart courtesy of StockCharts.com www.stockcharts.com

Thackray’s Market Letter for September

- Know your buys and sells a month in advance-

Brooke has just released his latest monthly report. The report discusses:

• Historic weakness in U.S. equity markets in September
• An update on the biotech sector, a profitable seasonal trade. ‘Tis time to take profits!
• An update on the oil sector. Recent weakness provides an opportunity to add to positions for strength into October.
• An update on the natural gas sector. Natural gas has bottomed in mid September during the past two years and risen sharply to peak in December.
• An update on the gold sector. Gold and gold stocks have bounced from support. Seasonal strength lasts until the end of September.
• An update on the transportation sector. Its period of seasonal strength is from
  September 24^th to November 13^th.

The full report is free and available on request. To subscribe, send an email to subscribe@alphamountain.com with SUBSCRIBE in the subject line. Also, please state your first and last name, city and country.

Iain Fraser’s Column

We have shown the 3-month chart for the Dow Jones Industrial Average. The reason we have shown this chart is that from the low point in mid-July, the Dow has gone up and then sideways. To us, all this looks more like accumulation than distribution. There are two oddities about this chart; the first one is that the bad news that emanates from New York just about everyday makes the Dow go sideways to up; the bad news can hardly get any worse. Particularly in the financial industry. These enormous troubles in
the financial industry are a great positive for Canadian banks. In the past several months Royal Bank, for example, has hired 110 displaced American bank executives; hurray for us.

Chart courtesy of StockCharts.com www.stockcharts.com

The second oddity is that the XIU 3-month chart is just about identical to that of the DIA. In the Canadian financial sector we continue to be thoroughly impressed with Bank of Montreal stock. BMO ($46.09) is selling at less than ten times next year’s earnings. It also has a yield of 6.1%, which with the tax credits, makes yield equal to a 9.1% coupon on a bond. Does the average investor need anymore than this; a bank growth stock with a 6.1% yield and selling at less than ten times earnings

Chart courtesy of StockCharts.com www.stockcharts.com

Editor’s Note: Iain’s services are available at www.fraser-ratings.com . Iain can be contacted at fraserratings@yahoo.ca

Adrienne Toghraie’s “Trader’s Coach” Column

Trading Angry

By Adrienne Toghraie, Trader’s Coach
www.TradingOnTarget.com

Years ago, I worked with a trader who was the perfect model of an angry man. When Tim was angry, which was basically every day, he threw things from his desk across the room, hitting the wall, and yelled terrible things at incompetent and rude drivers, at moderators and their guests on TV, at athletes and umpires who did not measure up to his expectations, at his dogs for not being intelligent, disciplined humans, and at anyone in his wake. Does this sound like you, some of the time? If so, you are like many traders who let anger take over your life and your trading when you have losses. Anger usually leads to further losses and can also affect your health.

When Tim got very sick, his doctor told him that he had to keep the stresses in his life to a minimum. He did not get the message until he had congestive heart failure and destroyed his adrenal system’s ability to respond to stress. Anger ruined his life, besides ruining his health. His temper tantrums alienated some of his best business and personal contacts. Tim’s wife and children were afraid of him and limited their family social contacts to prevent his outbursts from humiliating them in public. And they insulated him from any of the realities of their lives that needed attention. His trading also suffered. Instead of dealing with his losses maturely, Tim would yell and shout until he was exhausted. His ability to focus was impaired and so was his judgment. The result was more losses.

The Anger Diet

In her excellent book, The Anger Diet, Dr. Brenda Shoshanna lists twenty-four forms of anger and provides a 30-day program of constructive ways to counteract these various forms of anger. Based on her book, Tim had a bad case of at least a dozen forms of anger. One prominent form is the straightforward anger, which would come straight out of the blue like a swiftly moving storm, leveling everything in its path. This kind of anger can lead to attacks and acts of violence. When someone is in the throes of this kind of anger, he feels that he has no control over himself or what happens. Tim was often under the spell of straightforward anger. His adrenal system was in overdrive, producing fight-or-flight stress hormones even through the night, when his dreams were angry and violent.

Dr. Shoshanna also lists other forms of anger that occur when we turn our anger against ourselves. From my own experience working with traders, one of the most common reasons for anger is when traders feel powerless and out of control. Resorting to passivity, they withhold the expression of their feelings rather than taking responsibility for them. Then, these unexpressed feelings of resentment build into bottled up rage – a highly volatile condition. Just like steam or the lava in a volcano ready to erupt, the smallest things can trigger an explosion of anger that will seem completely inappropriate. They can also bottle up these feelings of anger that they feel powerless to express to the point of feeling hopeless, depressed, withdrawn, and even suicidal.

Another of Tim’s forms of anger was “playing the martyr.” Once again, Tim was being passive by not taking responsibility for expressing his needs and his feelings. Instead, he would feel unappreciated, disrespected, and put upon. These thoughts, in turn, made his feel like a victim. Most people who feel like victims suffer from the same passivity and rarely take responsibility for the conditions of their lives, but play the blame game with Olympic precision. Then, when they are actually victimized, they tend to dwell on these events to substantiate their position that they are martyrs. And of course, this posture leads to substantial feelings of anger, as well.

The third prominent form of anger that Tim exhibited was judging others. His ability to skewer others for their failure to live up to his standards made everyone around him fearful of making mistakes. But, his judgment came from his own feelings of failure to live up to his standards. Dr. Shoshanna talks about the hypocrisy of anger, and Tim certainly fell into this trap, too. Rather than owning up to his real feelings of anger and resentment, he pretended to like the very people he secretly blamed, criticized and judged behind their backs.

Traders like Tim who do not take responsibility for their feelings of anger, who are not truthful and forthright, run the risk of sabotaging their trading success. Self-sabotage is a by-product, according to Shoshanna, of the loss of faith in oneself that results from one’s inability to deal with one’s feelings and the situations that occur in one’s life as they occur. Passivity erodes self-esteem. Low self-esteem, in turn, leads to self-sabotage, which leads to feelings of victimization and blame, which lead to…you guessed it…more unexpressed anger and/or kinds of passive aggression and/or outright aggression.

Antidotes to anger

For a trader, there are no easy ways out of a lifetime of feeling angry. It takes, first, recognition of the problem, which is always the first step in any transformation. Next, a trader must genuinely want to do what it takes to detoxify his system of the anger that is poisoning his life. To do this, he will have to look at the cost he pays for his anger and all that he will gain by losing it versus the payoffs he derives from withholding his feelings until they boil to the surface. If he sees the scales tipping so far toward the benefits of not losing his anger, he will be motivated to work on his own healing.

Once a trader commits to rooting out anger in his life, he will begin to use alternative strategies for dealing with the situations that make him feel powerless and angry. He will practice voicing his feelings, expressing his needs, and taking responsibility for dealing openly with each situation rather than resorting to subterfuge. He will also engage in daily spiritual practices such as meditation and/or prayer that help him to stay calm, grateful, and present in each situation. As he replaces old reactions with “meaningful substitutions,” he will feel a new sense of control. The result will not only be a great reduction in anger but a great improvement in his trading.

Master Class
Presented by Adrienne Toghraie

Master Trader’s Coach

Author of 9 books on Traders’ Discipline

The aim of the day is to provide you with Winning Psychological Models for Trading

You will learn from Adrienne

• Lessons Adrienne has learned to assist you in overcoming your self imposed limitations
• A success model to direct your mind towards the information you want and need to become a master trader
• A success model to deal with time management and getting things complete
• Lessons of professional traders

Who should attend

• Those who want to learn the pitfalls and lessons before they start to trade real money
• Those who are struggling with earning profits as a trader
• Those who can’t get to the next level of success
• Those who want to speed up the process to become a master trader
  

Tropicana Hotel Las Vegas

Sunday, 23 November 2008 – 9 AM – 12:30 PM

$500 – pro-rated early enrollment – limited seating

NOW $300

Sign up on line – www.TradingOnTarget.com  OR CALL
919 851 8288

Disclosure: Mr. Vialoux does not own securities mentioned in this report.other than a natural gas ETF.

Disclaimer: Comments and opinions offered in this report 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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