Pre-opening Comments for Tuesday February 24th
U.S. equity index futures are slightly higher this morning. S&P 500 futures are up 2 points in pre-opening trade. Investors are hoping for encouraging news from Federal Reserve chairman Ben Bernanke and President Obama. Bernanke is scheduled to testify before the Senate Finance Committee this morning. Obama is scheduled to give a modified “State of the Union” speech before Congress this evening.
The Case Shiller Index for December confirmed that U.S. home prices declined again. The year-over-year decline was 18.5% versus 18.2% in November. However, the decline was less than consensus that predicted a decline of 20.5%.
Home Depot is slightly higher this morning following release of better than expected fourth quarter earnings. Consensus was $0.15 versus $0.40 per share last year. Actual operating earnings were $0.19 per share.
Magna International reported a greater than expected fourth quarter loss. Consensus was a loss of $0.66 versus a profit of $1.45 per share last year. Actual was a loss of $1.33 per share.
Heinz is higher in pre-opening trade after reporting higher than expected fourth quarter earnings. Consensus was $0.67 versus $0.68 per share last year. Actual was $0.76 per share.
JP Morgan moved slightly higher in overnight trading despite announcing a reduction in its dividend.
Technical Action Yesterday
Another brutal day on the charts! Thirty six S&P 500 stocks broke support and none broke resistance. The list was too long to provide full details on technical trend changes. Following is a list of S&P 500 stocks that broke support in alphabetic order:
Agilent, Air Products, Allegheny Tech, Allstate, Baker Hughes, Burlington Northern, Cameron International, CH Robinson, Deere, Dominion Resources, El Paso, Fastenlol, Genuine Parts, Goodrich, Goodyear, H&R Block, Humana, Illinois Tool, Johnson & Johnson, Leggett & Platt, Norfolk Southern, Pall Corp., Office Depot, Parker Hannifin, Progressive Energy, Radio Shack, Range Resources, Rockwell Collins, Schlumberger, Sears Holdings, Tenet Healthcare, United Healthcare, UPS, US Steel, Vulcan and Washington Post
The Up/Down ratio for S&P 500 fell from 0.56 to (120/272=) 0.44
Technical action by TSX Composite stocks also was brutal. Two TSX stocks broke resistance (Nova Chemical on a takeover offer and Tanzanian Royalty Trust) and eighteen stocks broke support. Following is a list of stocks that broke support in alphabetic order
AGF Management, Atco, Celestica, CI Financial, Dundee Bancorp, Emera, Equinox, Fairfax Financial, Finning International, Highpine Oil & Gas, ING Canada, Niko Resources, Richie Brothers, Russell Metals, Suncor, Toromont, Torstar and TransCanada.
The Up/Down ratio fell from 0.76 to (54/90=) 0.60.
Interesting Charts
Failure by the U.S. Treasury to inform the market about details in its proposed financial stabilization program triggered additional weakness yesterday. Broadly based U.S. equity indices closed hard near their lows for the day. The S&P 500 Index closed within 2 points of its November 20th low at 741.02 and likely will break below that level today. However, chances of a sharp decline on a break below support are relatively low. Momentum indicators already are substantially short term oversold.
Chart courtesy of StockCharts.com www.stockcharts.com
Ditto for the TSX Composite Index! The Index briefly broke though its November 20th low at 741.02. It also is substantially short term oversold.
Chart courtesy of StockCharts.com www.stockcharts.com
The VIX Index rose yesterday and remains at an elevated level. However, it remains well below levels reached just prior to November 20th.
Chart courtesy of StockCharts.com www.stockcharts.com
Comments from Jim Cramer’s Mad Money
Cramer was having a difficult time finding a bullish comment during Mad Money last night. He finally settled with a “faint praise” comment on the energy sector. He also interviewed the CEO of Devon Energy and recommended its purchase. Cramer remains an intermediate to long term bull on the energy sector.
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Disclosure: Mr. Vialoux does not own securities mentioned in this report.
Disclaimer: Comments and opinions offered in this report at www.timingthemarket.ca 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.
February 24th, 2009 at 4:41 am
Hi Don,
Another brutal day is right! If the TSX keeps falling at this rate, we’ll be at zero in a month or so. Then the market cap of stocks we’ll be low enough that we could start buying whole companies outright. I can see the ad now, “For sale: TD Bank, $9.99, OBO”!
Note: I always appreciate the free advice. But buying and selling is my decision
- Gary
February 24th, 2009 at 5:48 am
Despite all the recent finger pointing and laying of blame – we must remember that all this great analysis (Tech Talk) comes at no charge. Great value especially when one considers most newsletter writers only sell info (and sketchy info at best) at a cost. Sometimes a substantial cost!
Count your blessings readers! And always remember all investment advices comes with caveat emptor
Richard
February 24th, 2009 at 6:09 am
All stocks have been dragged down by the overall market. After an intermediate bottom has been reached, expect seasonal plays to work until the next intermediate top in the general market.
February 24th, 2009 at 6:34 am
I guess it proves no one has a crystall ball. It should always be buyer beware. You lose some and you win some. I use technicals and some fundamentals to make an Educated guess. Thanks Don for the excellant advice
February 24th, 2009 at 6:51 am
Ditto to Gary’s and Richard’s Comments. This site is an ongoing learning process which hopefully will never stop.
February 24th, 2009 at 8:41 am
Well said Richard.
And thanks Don–TT is terrific.
February 24th, 2009 at 8:43 am
I agree, however, I would get rid of the google ads….they probably make you less than 100 bucks and they are tacky. Good job and please keep up the good work. If you could publish any sector models (rules) that would be great too. I have a very simple rs model I will email you if like – we could put it up on the site for discussion/improvement
February 24th, 2009 at 8:51 am
Can banks and many others continuing to make new recent lows.
Make sure you have stops on all long positions, once support is broken, nobody knows how low they can go. Won’t know where the bottom is until it is well behind us.
IMO, we haven’t seen the BIG capitulation low yet…. THE big shake-out we need to clean house before we move ahead.
Don’t give anything a lot of room, set stops depending on the individual beta, 2-5-8% maximum. You can always buy it back later once the market improves. Better to get stopped now, wait for a new uptrend, than try to ride out a downtrend. Don’t be a hero.
If shorting, same problem in reverse… IF it holds here, we will get a big bounce up.
February 24th, 2009 at 9:28 am
Canuck2004:
I agree – lotsa downside left, but a sizeable correction is due…
By Elliott count SPX shouldn’t breach 765 if it’s heading lower later today.
Details at : http://www.ad-ons.com/StockMarket/spx30min.jpg
SG3 – Then I suggest you send Don $100 if you want rid of the Google ads
Or just ‘look away’ from that area – I don’t even see Google ads anymore – Hmm I bet there is a Google ad blocker out there… guess I could Google it!
February 24th, 2009 at 9:30 am
Hi Don,
Yesterday you have written that the price of gold is going parabolic on the chart versus the Canadian dollar.
When a chart is going parabolic, it means it’s getting way too expensive and a big correction is coming.
Should we check the price of gold versus the CDN $ or vs the US $ ?
February 24th, 2009 at 12:23 pm
Just want to add my thanks. I’m no expert, and have very little time to study more than a bit in TA, but Don makes things very clear. This analysis is helping me be more patient with my few trades and gives me hope we may be near a bottom or maybe a bottoming process. Thanks, Don!!
February 24th, 2009 at 5:46 pm
Hi Don,
I read Tech Talk daily, and the reader reply comments during the day, or during the evening. I find the majority of the questions and comments to be well thought out and educational. Of course, that goes for your answers as well. I hope this section of your site continues add to the overall value of your site.
Specifically on the market action today, I was encouraged by the very positive response of the energy equities to the price of Oil. I think you reported that Thackery’s “day” to enter the energy sector is tomorrow, and this bodes well for the seasonal play on energy. OnWardsAndUpwards !
Thanks Don !
February 24th, 2009 at 6:14 pm
The S&P500 seems to have bounced of it’s Nov. 20 intraday low of 741 and yet all we hear about is lower lows coming. In my view, this be bullish! A smart trade right now would be to go long on XSP or SPY with a stop-loss just below the 741 level.
Any thoughts?
- Gary
February 24th, 2009 at 6:31 pm
hi don, it was really nice while it lasted & i liked it…… i’m referring to the snowflakes on the home page. and wouldn’t you know it…. as soon as you signal that spring is near (by turning the snow off) the market rallies………
i never miss your posts & will now be looking forward to your springtime updates!
February 24th, 2009 at 8:12 pm
Thanks every one for your kind comments. In markets like we have seen during the past two weeks, it really helps.
February 24th, 2009 at 8:24 pm
Hi Misterhoney. Parabolic charts are fascinating, but difficult to play. What is known is that guessing when the peak will occur is next to impossible. What also is known is that the chart will fall sharply after the peak has occurred. The sharp fall in TSX Gold Index today (9.0%)is an example. More information on gold stocks is offered in tomorrow’s Tech Talk.
February 25th, 2009 at 8:38 pm
I’ll gladly send in $20 if four others will.