Pre-opening Comments for Thursday November 20th
9:10 AM EST: U.S. equity index futures are lower again this morning. S&P 500 futures are down 19 points in pre-opening trade. The Dow Jones Industrial Average is testing its October 10th low at 7773.71. Yesterday, it closed 224 points above its previous low.
Efforts to shore up the economy and selected markets came from several sources over night. Prince Alwaleed acquired additional Citigroup shares to raise his interest to 5%. The Swiss Central bank reduced its overnight lending rate by another 1.0%. The Euro and gold strengthened on the news. The Alberta government scaled back controversial plans to raise royalties on conventional oil and gas production on January 1st 2009. The change in plans is designed to encourage exploration and development on wells drilled to a depth between 1,000 and 3,000 metres.
Offsetting favourable news for the energy sector from the Alberta government is weakness in the price of crude oil, down another $3.25 per barrel before the opening.
Equity index futures fell following release of the weekly jobless claims report. Jobless claims rose 27,000 to 542,000, the highest level since July 1992.
Technical Action Yesterday
Technical action by S&P 500 stocks was very bearish yesterday. No S&P 500 stocks broke resistance and thirty six stocks broke support. Financial service stocks were prominent on the list of stocks breaking support. The Up/Down ratio was unchanged at (26/458=) 0.06.
S&P 500 stocks breaking support
Technical action by TSX Composite Index stocks also was very bearish. No TSX stocks broke resistance and 15 stocks broke support. Financial service stocks were prominent on the list of stocks breaking support. The Up/Down ratio eased from 0.09 to (9/116=) 0.08.
Tech Talk’s Comments on the FP Trading Desk site
(Available at http://www.financialpost.com/trading_desk/index.html )
FP Trading Desk headline reads,” The year of the bank write down” Following is a link to the report:
FP Trading Desk headline reads, “Scotia Bank’s early start to bank earnings season”. Following is a link to the report: http://network.nationalpost.com/np/blogs/tradingdesk/archive/2008/11/19/scotiabank-s-early-start-to-bank-earnings-season.aspx
Banks stocks came under pressure this morning following news of Bank of Nova Scotia’s $890 million fiscal fourth quarter write off The TSX Financial Services Index fell to its lowest levels since January 2004. The Index remains well below its 50 and 200 day moving averages Short term momentum indicators (RSI, MACD and Stochastics) are oversold but have yet to show signs of bottoming. Strength relative to the TSX Composite Index has been negative since early October.
Chart courtesy of StockCharts.com www.stockcharts.com
FP Trading Desk headline reads, “Bombardier trading at worst case scenario: Analyst”. Following is a link to the report: http://network.nationalpost.com/np/blogs/tradingdesk/archive/2008/11/19/bombardier-trading-at-worst-case-scenario-analyst.aspx
Bombardier currently has a mixed technical profile. Intermediate trend changed this morning from up to neutral when the stock broke support at $3.95. Resistance exists at $5.40 and support exists at $3.17. The stock remains below its 50 and 200 day moving averages. RSI and MACD currently are neutral. Stochastics are short term oversold, but have yet to show signs of recovery. Strength relative to the TSX Composite Index has been positive since early October.
Chart courtesy of StockCharts.com www.stockcharts.com
Interesting Charts
Not a nice day on the charts!
General Motors fell to a low not seen since 1942 following “difficult” discussions before the House Finance Committee. CEOs from the top three Big Three auto producers pleaded their case for a $25 billion bailout. Their tactics were “less than desired”. Essentially, they claimed that failure to provide the funds will cause a major melt down of the U.S. economy. That was enough to scare equity markets. Senator Chris Dodd, chair of the Senate Finance Committee suggested late in the day that chances of passage of the bailout through the Senate were “remote”. Members of the Committee are looking at possible changes in the bail out bill, but little hope was offered.
Chart courtesy of StockCharts.com www.stockcharts.com
Chart courtesy of StockCharts.com www.stockcharts.com
Selling pressure quickly accelerated following Chris Dodd’s comments. Major U.S. equity indices closed at their lows. The S&P 500 Index fell to a new low. Volume was surprisingly light. Short term momentum indicators are deeply oversold, but have yet to show signs of bottoming.
VIX rose sharply near the close, not a good sign.
Chart courtesy of StockCharts.com www.stockcharts.com
Once again, the Dow Jones Industrial Average is testing its October 10th low at 7773.71. Volume was surprisingly low here as well.
Chart courtesy of StockCharts.com www.stockcharts.com
The TSX Composite Index also broke below its October 27th low (again on surprisingly low volume).
Chart courtesy of StockCharts.com www.stockcharts.com
U.S. Financial Service stocks are leading downside pressure. U.S. equity markets are unlikely to recovery significantly until the sector shows technical signs of bottoming. That hasn’t happened yet.
Chart courtesy of StockCharts.com www.stockcharts.com
The NYSE new highs/new lows index is rising again, but is nowhere close to the index on October 10th, Capitulation Day.
Ditto for the new highs/new lows index for TSX stocks
Chart courtesy of StockCharts.com www.stockcharts.com
Traders are closely watching the Yen/Euro cross for a clue on a thaw in the credit freeze. Slight twitches in this cross almost immediately influence U.S. equity markets. Early yesterday morning just after the opening, the cross briefly broke above the triangle pattern indicated below. The Dow rose about 80 points and gold gained $20. The cross quickly reversed and returned to the triangle pattern. The Dow moved sharply lower and gold closed virtually unchanged.
Chart courtesy of StockCharts.com www.stockcharts.com
Tech Talk comment: Technical action yesterday was painful for the bulls. Follow though on the downside and a break by the Dow below its October 10th low is possible as early as this morning. However, price action (highly volatile) and volume (significantly lower than the Capitulation Day and not rising) continue to suggest that the Dow, S&P 500 and TSX Composite Index are moving through a sideways consolidation with a slightly greater range.
THE CASTLEMOORE “FOCUS” PORTFOLIO
What does CastleMoore think its typical Canadian investors should be invested in NOW?
Read while playing the theme from Jaws in your mind:
The U.S. Consumer Price Index came it at -1.0%, the largest drop on record, seemingly putting to rest for the time being whether inflation or recession was the greatest threat to the fiscal fitness of Americans. The CPI is a coincident economic indicator, and is as telling as any out there. Any decrease in the level is indicative of unplanned inventory build up and the sombre mood of the U.S. consumer heading into this make-or-brake time of the year.
The S&P 500 now sits at a five year, though it’s hardly the first time we’ve had to report this. The TSX on Wednesday touched an intraday 52-week low after a late October-early November rally.
We’ve been active in the analysis of investment candidates, for that point in time when the market stabilizes, and when the true opportunity of a particular security or class of securities becomes more and more recognizable. For this we consult our RSI tables (13 sectors, plus mid & small cap and the major indices) which are constructed on a weekly and monthly basis. We do not invest based on weeklies, but rather on monthlies. Weekly data is orientated towards pure traders, yet may foretell how the monthlies may be changing. The monthly tables in Canada and the US all show consumer staples, telecom and utilities ranked in the top part (income trusts too in Canada) and diversified metals and mining, materials, and energy in the middle or bottom, suggesting that what went down the hardest may bounce the best but there is a changing of the guard occur under foot. As we have respectfully counselled recently here this time should be used for strategic analysis, including whether your dogs still hunt.
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CastleMoore Inc.
Buy, Hold…and Know When to Sell
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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.
November 20th, 2008 at 1:28 am
Well its 8.23am London UK time, and the Dow futures are pointing at a 50 point drop. The Euro markets and UK are down but not a huge amount.
I have a feeling we will have a bounce today or tommorrow, but not sure it will last long. However if the market continues its slide i will continue buying. I refuse to join the stampede. I’ve bought good solvent stocks cheap, most near or below their book value.
I’m in for the long, mid, or shorterm – the market will decide that for me
ABX: its about time gold bullion stocks starting swimming against the tide. Gold looks like its coming out of its slumber – awaken the sleeper!
November 20th, 2008 at 3:16 am
I hear 780 is the s&p level to watch… (out for)…
November 20th, 2008 at 3:20 am
This morning, with gold rising and futures lower, both my gold stocks and s&p short have a chance at rising on the same day! All this, while the USD Index is making new highs. /shrug
November 20th, 2008 at 6:54 am
Zinc is showing preliminary signs of perking up. Copper still hasn’t formed a bottom.
November 20th, 2008 at 8:15 am
S&P 500 hit 2 P&F chart bearish targets early this morning at 800 and 795. Perhaps this would suggest a short term bottom… P&F charts now flashing a weak bullish signal.
IF sometime today, Congress votes on the GM-FORD-CHRYSLER bail-out… that would provide desperate good news for the markets.
Silence from the FED is deafening.
TSX, S&P 500 and DOW now trading below the low Keltner Band, a reversal signal… but it can stay there for a while.
RSI is getting close to 30 on TSX and S&P 500, also a reversal signal but it can go lower yet.
STO below 20 on all three, entering reversal territory… but again can stay there a while.
NO sign of a reversal yet, except the fact that the market gapped down on open, so a very bearish start. This often ends positively as investors regain their senses later in the day. Doesn’t mean it will happen this way today, but more often than not…especially with all indexes way oversold and entering reversal territory. This would create a “hammer” candlestick… which is bullish. We will see… perhaps hopeful dreaming on my part.
STO on VIX is starting to show signs of rolling over….but all other metrics still bullish.
Fundamentally speaking, I see nothing that will keep all three indexes from getting cut in half again.
There is no leadership in the USA, until we get something, the indexes will keep working their way down.
November 20th, 2008 at 9:34 am
Don
It may not be meaningful but I believe the intra-day low on the Dow was 7882.51 and not the 7774 you’ve been mentioning……to-day’s low however is 7774 coincidentaly………..
November 20th, 2008 at 10:21 am
Does anyone else think there has been an overreaction to the TD trade writeoff?
November 20th, 2008 at 11:48 am
Am I the only one that thinks all of these instruments (shorting, bear etf’s and so on and so on)are evil and sinister (where have I heard that before; Kevin)and will end up being the demise of the markets. What ever happened to buying a stock of a good company and enjoying a decent return without some %@(%$# punk hedge fund manager coming along and shorting the crap out of it!
November 20th, 2008 at 12:41 pm
Yea, my 2006 chevy uplander isn’t worth 10$
November 20th, 2008 at 1:52 pm
Is this a capitulation? If so when do the shorts cover? This is wild.
November 20th, 2008 at 2:43 pm
david, it’s not the bear etf’s hurting the market, it is hedge funds who have to unwind their holdings to meet redemption.
key word is de-leveraging. see my blog!
November 20th, 2008 at 2:53 pm
What carnage… TSX down 756 near close.
P&F chart TSX on triple bottom break-down bearish target: 6890 & 2477 …
P&F chart S&P 500 on double bottom break-down bearish target: 469.
In this market, all targets appear quite achievable. No bottom here…. At least not yet and probably no real reversal until Obama’s team takes over, in January. The positive there is fresh blood and old hand Volkner.
Today all 3 indexes TSX, S&P500 and DOW hit new multi-year lows… but on good volume so perhaps a final “capitulation” low. We will not know until much later… but I wouldn’t bet on this being THE low.
…and IF this is “A” bottom, we will still have to re-test this area again sometime in the future…. Not a pretty sight.
November 20th, 2008 at 5:16 pm
Ecxactly my point; we wouldn’t be this leveraged if we didn’t have these weapons of mass leveraging designed to distort and manipulate the fundamentals!! Hence the word HEDGE! It’s all just a bunch of paper!
Don; looks like Gartmans bias is looking a bit more realistic than yours; any comments!
November 20th, 2008 at 5:49 pm
My call to short the s&p (HSD) when the s&p traded below previous lows yesterday was apparently a good call; I made 14% on that today. But the most incredible part was watching gold stocks remain WELL above break even, and even close higher as absolutely EVERYTHING around them was falling like a rock! Is Gold rising due to fear (finally)? Or anticipation of the unsustainable level of the USD? Or both?
November 20th, 2008 at 7:37 pm
Jim sinclair says watch the hui, when it turns the great cover (of the shorts ) is on!
November 21st, 2008 at 8:36 am
Nice move in HUI this morning (November 21st), up over 11%. Looks like a base building pattern with support at 150.27 and resistance at 226.72. Gold and gold stocks are benefitting from a flight to liquidity. Short term momentum indicators (RSI, MACD and Stochastics) are recovering from oversold levels.