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Pre-opening Comments for Wednesday February 25th
U.S. equity index futures are slightly lower this morning. S&P 500 futures are down four points in pre-opening trade. Traders are waiting for testimony by Federal Reserve Chairman Ben Barnenke and comments by Treasury Secretary Tim Geithner. Bernanke is scheduled to appear in front of the House of Representatives Banking Committee. Geithner is scheduled to announce terms of the stress test that will be applied to the top 20 U.S. banks.
AT&T is slightly higher this morning after JP Morgan upgraded the stock from neutral to outperform
Crude oil added $0.55 per barrel in overnight trading. Strength likely will help energy stocks on both sides of the border at the opening. ‘Tis the season for energy stocks to move higher until May. The TSX Energy Index is trying to bounce from the bottom of a three month trading range between 175 and 247. Short term momentum indicators (Relative Strength Index, Stochastics) are recovering from oversold levels.
Chart courtesy of StockCharts.com www.stockcharts.com
Hormel and Ventas are slightly higher in pre-opening trade. Standard and Poor’s announced last night that both stocks are to be added to the S&P 500 Index.
Agrium made a hostile conditional bid to buy CF Industries valued at $3.7 billion U.S. CF is up sharply in pre-opening trade.
Technical Action Yesterday
Technical action by S&P 500 stocks remained bearish yesterday despite an encouraging rally at a critical support level. No S&P 500 stocks broke resistance and ten stocks broke support. The Up/Down ratio eased from 0.44 to (114/275=) 0.41.
S&P 500 stocks breaking support
Technical action by TSX Composite stocks also was quietly bearish yesterday. No TSX stocks broke resistance and three stocks broke support. The Up/Down ratio eased from 0.60 to (53/91=) 0.58.
TSX stocks breaking support
Interesting Charts
Finally, a reprieve for the Japanese economy! The Japanese Yen fell sharply against most major currencies (particularly against the U.S. Dollar) and completed a classic double top pattern.
Chart courtesy of StockCharts.com www.stockcharts.com
The Euro/Yen cross, a short term leading indicator of world equity markets in recent months is showing early technical signs of resuming an upward trend.
Chart courtesy of StockCharts.com www.stockcharts.com
Gold equity indices virtually collapsed after they broke a trend line that completed a bearish rising wedge pattern.
Chart courtesy of StockCharts.com www.stockcharts.com
The energy sector was notably stronger yesterday. According to Brooke Thackray’s 2009 Investor’s Guide, ‘tis the season to own the sector. Today is the optimal entry day for a trade until May 9th. The U.S. Energy sector has advanced in 23 of the past 25 periods for an average gain per period of 8.6%. Technically, the sector is substantially oversold and is showing early signs of trying to recover.
Chart courtesy of StockCharts.com www.stockcharts.com
Related to a recovery in the energy sector was news yesterday that U.S. gasoline inventories already are 6% lower than a year ago partially due to an increase in demand for gasoline during the past month. Weekly data for gasoline inventories to be released at 10:30 AM EST are expected to show another decline. The report will be watched closely.
Bob Prechter from Elliott Wave International has changed his opinion on U.S. equity markets. Following is an article that appeared on Bloomberg yesterday:
Feb. 24 (Bloomberg) — Elliott Wave International Inc.’s Robert
Prechter, who advised shorting U.S. stocks three months before the bear
market began, said investors should now end those bets following the
recent market sell-off.
Prechter, chief executive of the market forecasting firm, warned in this
month’s ‘Elliott Wave Theorist’ that a rebound in stocks could be "sharp
and scary" for anyone who is so-called short. In a short sale, investors
borrow stock and agree to sell them at a later date on hopes of
capturing profit by replacing the shares after prices fall.
"This is an environment of escalating financial chaos," wrote Prechter,
who first shot to fame in the 1980s after cautioning investors that
stocks would crash two weeks before Black Monday. "Our main job is to
keep the money we have. If we exit now, we will do that."
Relative Strength for Sector SPDRs
Lots of volatility in sector SPDRs during the past week! A good time for a review:
Consumer Discretionary SPDRs showed the best recovery relative to the S&P 500 Index during the past week.
Consumer Staples SPDRs broke support during the past week. They are the second SPDR to move below their November 20th lows (The first was Financial SPDRs)
Assuming that the low for the S&P 500 Index was on November 20th, relative strength of the nine sector SPDRs currently is as follows:
Chart courtesy of StockCharts.com www.stockcharts.com
Chart courtesy of StockCharts.com www.stockcharts.com
Chart courtesy of StockCharts.com www.stockcharts.com
Chart courtesy of StockCharts.com www.stockcharts.com
Chart courtesy of StockCharts.com www.stockcharts.com
Chart courtesy of StockCharts.com www.stockcharts.com
Chart courtesy of StockCharts.com www.stockcharts.com
Chart courtesy of StockCharts.com www.stockcharts.com
Chart courtesy of StockCharts.com www.stockcharts.com
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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.
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February 25th, 2009 at 9:08 am
Gold bear ETFs are starting to show signs of life… and looking interesting again…. seasonally speaking, gold usually gets progressively weaker into Spring and early Summer; more often than not.
Oil Bull ETFs are bottoming and starting to look interesting again for the seasonal play into May. Oil usually gets progressively stronger into Spring, more often than not.
Risk reward ratio starting to look good for these two plays. ETFs safer than an individual bet, until markets get back to normal.
S&P 500 seems to be holding into support around 741… so far, therefore I would expect a nice rebound soon… regardless what the polititians say. At this point, higher beta stocks will outperform. Bear market rallies can be very strong…. short covering an added boost.
February 25th, 2009 at 11:38 am
HOU/HOD is the EFT on TSX for oil.
HEU/HED is the EFT on TSX for energy
is there any other mutual fund or stock we can choose to play?
thanks
Kelly
February 25th, 2009 at 1:34 pm
Re: the comment above the chart for XJY “The Japanese Yen fell sharply against most major currencies” — I thought the Yen Index indicated the number of Yen per US$. If so, when the price falls, there are fewer Yen per Dollar, which means the Yen rises rather than falling.
February 25th, 2009 at 2:58 pm
tO kELLY
XEG THE REAL THING that HEU/HED are supposed to mimic but do not. The Horizon offerings are okay for very short trending moves. Longer term (two weeks plus in their case) or with volitility added(and be sure to expect volitility) they do not perform very well. Trade calls and put on XEG to reduce risk and capital outlay.
The same caution should be used on HOU/HOD. There are some prue crude plays in the US but no idea if you want to go there.
February 25th, 2009 at 3:42 pm
Thanks. H.Hunter
I watched HEU/HED, HOU/HOD. they are not suitable for swing trade. that’s why I am cautious to play with them.
thanks for the recommendation.(XEG)
Kelly
February 25th, 2009 at 6:59 pm
re: XEG and HEU
These ETFs have nearly identical 12 months charts. HEU is $3 and topped at $30 but XEG is $11 and had a similar price at the top. Should HEU be a better bet? I have never done this trade before. Could someone with previous experience, please, comment?