Pre-opening Comments for Tuesday November 4^th

9:15 AM EST: U.S. equity index futures are nicely higher before the opening. S&P 500 Index futures rose 20 points in pre-opening trade.

The U.S. Dollar is weaker against major world currencies including the Canadian Dollar. A weak U.S. Dollar has prompted commodities priced in U.S. Dollars to move higher. Gold, silver, crude oil and copper prices are higher. Look for the TSX Composite Index to open nicely higher. The U.S. Dollar continues to show technical signs of rolling over.

Chart courtesy of StockCharts.com www.stockcharts.com

The focus today is on the U.S. election. Markets already have anticipated an Obama victory. The question mark is “Will the Democrats win 60 or more seats in the Senate thereby having the ability to limit bipartisan debate on important bills”? Today, Americans will vote for thirty five senators. The Democrats currently control 12 of the 35 seats and the Republicans control 23 seats. The polls show that 11 seats of the 35 seats are “in play”. All of the 11 seats currently are held by Republicans. The Republicans have virtually ceded losses in three seats. The Democrats need to win 9 additional seats to reach the 60 seat level. Best case scenario for equity markets is Democratic control of less than 60 seats.

Third quarter earnings reports continue to surprise on the upside. After the close yesterday, ADP reported $0.54 versus $0.45 per share last year. Consensus was $0.50. Master Card reported $2.42 versus $1.80 per share last year. Consensus was $2.25. Archer Daniel Midland reported $1.63 versus $0.68 per share last year. Consensus was $0.67.

Natural gas prices appear poised to break above a base building pattern developed during the past month. They are testing resistance at $7.55 this morning.. ‘Tis the season for natural gas prices to move higher.

Chart courtesy of StockCharts.com www.stockcharts.com

Technical Action Yesterday

Technical action remains quiet. Only one S&P 500 Index stock broke resistance yesterday. None broke support. The Up/Down ratio for S&P 500 stocks remains at 0.02

S&P 500 stocks breaking resistance

Many S&P 500 stocks are trading just below resistance levels set on October 14^th. A break above resistance levels will attract technical buying and the Up/Down ratio will gain significantly.

Technical action by TSX Composite Index stocks also remains quiet. Two TSX stocks broke resistance and none broke support.The Up/Down ratio improved from 0.03 to 6/124=) 0.05.

Interesting Charts

The calm before the storm! VIX dropped significantly yesterday in pre-election action. Short term momentum indicators have rolled over.

Chart courtesy of StockCharts.com www.stockcharts.com

Selected sectors (e.g. biotech, energy, utilities) are testing the top of recent trading ranges. Modest strength will trigger technical buying.

Chart courtesy of StockCharts.com www.stockcharts.com

Chart courtesy of StockCharts.com www.stockcharts.com

Chart courtesy of StockCharts.com www.stockcharts.com

Tech Talk Comments on the FP Trading Desk site

(Originally posted at http://www.financialpost.com/trading_desk/index.html )

FP Trading Desk headline reads, “Why Halloween will last until Christmas for the markets”. Following is a link to the report: http://network.nationalpost.com/np/blogs/tradingdesk/archive/2008/10/31/why-halloween-will-last-until-christmas-for-the-markets.aspx

The bears are finding cute ways to send their message to the public. This link has a rather “ghoulish” tone. Reasons for the bearish stance are based on an extension of past events that have impacted equity markets during the past two months. Fortunately, equity markets look at future events rather than past events. The outlook for North American equity markets between now and the end of this year are mildly encouraging. Seasonal influences are positive during the next two months and will be helped by the honeymoon period after the U.S. presidential election. Third quarter corporate earnings surprisingly have exceeded consensus estimates prompting analyst to raise fourth quarter and year end estimates. Technicals (e.g. short term momentum indictors, bullish percent indices) indicate that broadly based North American equity indices and most sectors bottomed on October 10^th and are forming base patterns prior to an upside move.

FP Trading Desk headline reads, “Stocks that benefit from a lower loonie”. Following is a link to the report: http://network.nationalpost.com/np/blogs/tradingdesk/archive/2008/11/03/stocks-that-benefit-from-a-lower-loonie.aspx

George Vasic at UBS has identified fundamentally attractive Canadian equities that will benefit from recent weakness in the Canadian Dollar relative to the U.S. Dollar. George did not comment directly on the sector that has the highest leverage with a change in currency, the Canadian forest product sector. Fundamentals for the forest product sector remain “difficult”. Extents of the difficulties are to be revealed when they release third quarter results during the next two weeks. Seasonal influences for the sector turned positive at the end of October and remain positive until next April. Short term momentum indicators for most stocks in the sector turned positive last week. More information on seasonal, technical and fundamental prospects for the forest product sector is available in a Financial Post article published on October 18^th.

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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.

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