Pre-opening Comments for Friday September 19th
9:00 AM EDT: World equity markets are sharply higher on news that the Federal Reserve and Treasury have a proposed bail out of illiquid U.S. financial service debt. Congressional approval is anticipated by early next week. Record upside moves have been recorded in early trading. For example, the London FT Index is up over 400 points, the largest one day point gain in its history. S&P 500 futures are up 54 points before the opening.
Financial service stocks are the focus. Added to upside pressure is news this morning from the SEC that short selling of key financial service stocks has been banned until October 2nd. Also, the Attorney General of New York has launched an investigation on recent short selling activities. The focus is on illegal naked short selling on stocks such as AIG, Morgan Stanley and Goldman Sachs. The S&P Financial Service Index is expected to open sharply higher. The Index at 273 has formed a base building pattern during the past two months between 226 and 310. Strength this morning could push the Index above the 310 level and establish an intermediate uptrend.
Chart courtesy of StockCharts.com www.stockcharts.com
Oracle reported better than expected fiscal first quarter earnings after the close yesterday. Consensus was $0.27 versus $0.22 per share. Actual was $0.29 per share. Demand for high tech services continues to grow around the world. On the charts, Oracle is trying to bounce from support just below $18.00. Short term momentum indicators (RSI, MACD and Stochastics) are substantially oversold. Like most big cap technology stocks, Oracle has a history of moving higher from near the end of September to the middle of January.
Technical Action Yesterday
A wild day! Thirteen S&P 500 stocks broke resistance and 44 stocks broke support, Most of the break downs occurred at mid day when U.S. equity markets briefly moved to negative territory. Most of the upside breakout occurred during the last hour of trading when discussion about a possible Resolution Trust was released to the market. Paulson and Bernanke discussed the proposal with Congressional leaders last night. The Up/Down ratio fell from 0.66 to (151/264=) 0.57. The list of stocks breaking resistance and support was too long to include in this report.
Technical action by TSX Composite stocks also was bearish. Three stocks broke resistance and seven stocks broke support. The Up/Down ratio slipped from 0.38 to (44/122=) 0.36.
TSX stocks breaking resistance
TSX stocks breaking support
Tech Talk Comments on the FP Trading Desk site
(Available at http://www.financialpost.com/trading_desk/index.html Charts have been updated to yesterday’s close)
11:45 AM EDT: FP Trading Desk headline reads, “Gold prices could double or triple”. Following is a link to the report: http://network.nationalpost.com/np/blogs/tradingdesk/archive/2008/09/18/gold-prices-could-double-or-triple.aspx
The “Gold Bugs” are back! Gold analysts once again are offering glimmering comments. Technicals have improved significantly during the past two days. Yesterday gold broke above resistance at $849.70. This morning gold moved above its 50 day moving average at $865 and is testing its 200 day moving average at $892. Short term momentum indicators (RSI, MACD and Stochastics) are recovering from oversold levels. Resistance is indicated at $989.60 and its all time high at $1,033.90.
Chart courtesy of StockCharts.com www.stockcharts.com
FP Trading Desk headline reads, “Kraft to replace AIG in Dow Jones Industrial Average”. Following is a link to the report: http://network.nationalpost.com/np/blogs/tradingdesk/archive/2008/09/18/kraft-to-replace-aig-in-dow-jones-industrial-average.aspx
Kraft is schedule to replace AIG in the Dow Jones Industrial Average on Monday September 22nd. Kraft currently has a positive technical profile. Intermediate trend is up. The stock trades above its 50 and 200 day moving averages. Strength relative to the S&P 500 Index has been positive since mid July.
Chart courtesy of StockCharts.com www.stockcharts.com
FP Trading Desk headline reads, “Linamar better off private: RBC”. Following is a link to the report: http://network.nationalpost.com/np/blogs/tradingdesk/archive/2008/09/18/linamar-better-off-private-rbc.aspx
Linamar currently has a negative technical profile. Intermediate trend is down. The stock trades below its 50 and 200 day moving averages. Strength relative to the TSX Composite Index has been negative during the past year.
Chart courtesy of StockCharts.com www.stockcharts.com
Bullish Percent Indices for U.S. Sectors
Weak U.S. equity markets prompted weakness in most sector bullish percent indices last week. Three indices moved higher and seven moved lower. Only two indices traded above their 15 day moving average. However, number of overbought indices declined from three to zero and number of oversold indices increased from three to five.
Bolded items are changes from last week
All Charts courtesy of StockCharts.com www.stockcharts.com
Weekly Technical Report for Claymore ETFs
Technicals for Claymore’s Exchange Traded Funds were virtually unchanged last week. More ETFs became oversold. Only one ETF showed early signs of recovery: natural gas. The only “saving grace” is that the technical picture can only improve from current levels. No specific recommendations this week!
Following are the technicals on Claymore’s ETFs based on the close on Thursday:
Bolded items are changes from last week
RS Relative Strength
+ Number of months with positive performance relative to its benchmark
- Number of months with negative performance relative to its benchmark
N Number of months with neutral performance
Tech Talk’s Column in Saturday’s Financial Post
The column focuses on the U.S. technology sector. The column is available in hard copy or by paid subscription at www.nationalpost.com
Quadruple Witching
Today is Quadruple Witching day, the final day of trading for September equity and index futures and options. Look for volume and volatility to be higher than average.
Interesting Chart
More technical signs that the U.S. equity market has reached the capitulation stage! The VIX Index reached a five year high yesterday by reaching 42.2%. The Index quickly dropped near the end of trading to close at 33.1%.
Chart courtesy of StockCharts.com www.stockcharts.com
Disclosure: Mr. Vialoux does not own securities mentioned in this report.
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.
September 19th, 2008 at 5:39 am
Don,
With the markets reaching capitulation (practically), does this imply a rally/bullish trend will form shortly thereafter? Based on past capitulations I would say this is the case.
September 19th, 2008 at 6:54 am
I remember reading somewhere that the market has a tendency to either go up or is it down the next 3 days after a triple or quadruple witching can someone elaborate??
September 21st, 2008 at 6:51 pm
Brooke Thackray wrote in his book entitled, “Thackray’s 2007 Investor’s Calendar” that U.S. equity markets have a history of moving lower on the first day after Witches’Day, the third Friday of each month. Weakness is most notable on the day after Triple (Quadruple?)Witches’ Day in March, June, September and December. Brooke has a term for the Monday after Witches’ Day: Witches’ Hangover Day.