Pre-opening Comments for Monday March 30^th

U.S. equity index futures are lower this morning. S&P 500 futures are off 20 points in pre-opening trade. Traders are mulling over action taken by the U.S. government over the weekend to make changes at General Motors and Chrysler.

Lots of news about General Motors and Chrysler this morning! Rick Wagner, Chief Executive Officer of General Motors has resigned immediately at the request of the White House. General Motors has been provided sufficient funding to continue operations for the next two months pending further changes in its rescue plan. Members of the Board of Directors are to be changed at General Motor’s next annual meeting. Chrysler has been given sufficient funding to continue operations for another month pending a possible merger with Fiat. Warranties on cars manufactured by General Motors and Chrysler have been guaranteed by the U.S. government. General Motors is down 20% in pre-opening trade. President Obama is expected to officially announce the changes at 11:00 AM EDT in a television address.

U.S. Financial service stocks are lower this morning following comments by Treasury Secretary Geithner that selected U.S. banks may need additional funding from TARP. Citigroup and Bank of America are down 10% in pre-opening trade.

The U.S. Dollar is slightly higher this morning. Commodities priced in U.S. Dollars are slightly lower.

Next month, U.S. exchanges plan to begin trading Macro Shares that track the prices of single family homes.

Matt Blackman’s Blog

Matt discusses “The bear re-awakening?”. Following is a link to his blog:

http://tradesystemguru.com/content/blogcategory/34/68/

Comments and questions on Matt’s blog can be forwarded to

http://tradesystemguru.wordpress.com:80/

 

Outlook this week

The focus this week is on the March employment report to be released on Friday.

Source: www.marketwatch.com

Earnings reports are relatively sparse this week. The focus is on Research in Motion.

Trends

The ratio of S&P 500 stocks in an uptrend to a downtrend (i.e. the Up/Down ratio) improved from 0.23 to (100/303=) 0.33 last week. Fifty four S&P 500 stocks broke resistance last week (including five stocks on Friday) and one stock broke support. The Index continues to recover from an intermediate oversold level and has significant upside potential from current levels.

Bullish Percent Index for S&P 500 stocks improved from 38.20% to 45.80% last week and remains above its 15 day moving average. The Index continues to recover from an intermediate oversold level, but already has returned to a neutral level.

Chart courtesy of StockCharts.com www.stockcharts.com

The Up/Down ratio for TSX Composite stocks rose from 0.76 to (64/66=) 0.97 last week. Sixteen stocks broke resistance last week (including four stocks on Friday) and one stock broke support. The ratio is rapidly approaching the 1.00 level where the market will move to the Mark Up phase.

Bullish Percent Index for TSX Composite stocks improved from 40.00% to 44.65% last week and remains above its 15 day moving average. The Index continues to recover from an intermediate oversold level but already has recovered to a neutral level.

Chart courtesy of StockCharts.com www.stockcharts.com

The S&P 500 Index gained 47.40 points (6.17%) last week. Intermediate trend remains down. Support is at 664.79. Resistance is at 943.85. The Index moved above its 50 day moving average last week, a positive technical sign. MACD has recovered to a neutral level. RSI is approaching a short term overbought level. Stochastics are short term overbought. Intermediate upside technical target remains at its January 6^th high at 943.85.

Chart courtesy of StockCharts.com www.stockcharts.com

Percent of S&P 500 stocks trading above their 50 day moving average rose from 37.40% to 66.20% last week. Percent is approaching an intermediate overbought level.

Chart courtesy of StockCharts.com www.stockcharts.com

Percent of S&P 500 stocks trading above their 200 day moving average finally is showing signs of establishing an intermediate uptrend. Last week, Percent improved from 4.40% to 9.40%. Percent remains oversold.

Chart courtesy of StockCharts.com www.stockcharts.com

The Dow Jones Industrial Average improved 497.80 points (6.84%) last week. Intermediate trend remains down. Support is at 6,469.95. Resistance is at 9,088.06. The Average broke above its 50 day moving average last week, an encouraging technical sign. MACD has recovered to a neutral level. RSI is approaching a short term overbought level. Stochastics are short term overbought. Strength relative to the S&P 500 Index remains negative.

Chart courtesy of StockCharts.com www.stockcharts.com

Bullish Percent Index for Dow Jones Industrial Average stocks increased from 33.33% to 40.67% last week and remains above its 15 day moving average. Percent has recovered from an intermediate oversold level to a neutral level.

Chart courtesy of StockCharts.com www.stockcharts.com

Bullish Percent Index for NASDAQ Composite stocks rose from 29.41% to 36.83% last week and remains above its 15 day moving average. The Index continues to recover from an intermediate oversold level.

Chart courtesy of StockCharts.com www.stockcharts.com

The NASDAQ Composite Index jumped 87.93 points (6.03%) last week. The Index remains in an intermediate downtrend. Support is at 1,265.52. Resistance is at 1,665.63. The Index remains above its 50 day moving average, an encouraging technical sign. MACD has recovered to a neutral level. RSI is approaching a short term overbought level. Stochastics are short term overbought. Strength relative to the S&P 500 Index remains positive. Intermediate technical target is 1,665.63.

Chart courtesy of StockCharts.com www.stockcharts.com

The Russell 2000 Index gained 28.89 points (7.22%) last week. Intermediate trend remains down. Support is at 342.59. Resistance is at 519.00. The Index moved above its 50 day moving average last week, an encouraging technical sign. MACD has recovered to a neutral level. RSI is approaching a short term oversold level. Stochastics are short term overbought. Strength relative to the S&P 500 Index remains neutral.

Chart courtesy of StockCharts.com www.stockcharts.com

The Dow Jones Transportation Average jumped 260.99 points (10.37%) last week. Intermediate trend remains down. Support is at 2,134.21. Resistance is at 3,737.01. The Index moved above its 50 day moving average last week, an encouraging technical sign. MACD has recovered to a neutral level. RSI is approaching a short term overbought level. Stochastics are short term overbought. Strength relative to the S&P 500 Index remains negative.

Chart courtesy of StockCharts.com www.stockcharts.com

The TSX Composite Index added 314.71 points (3.71%) last week. Intermediate trend remains down. Support is at 7,479.96. Resistance is at 9,505. 72. The Index remains above its 50 day moving average, an encouraging technical sign. MACD has recovered to a neutral level. RSI is approaching a short term overbought level. Stochastics are short term overbought. Strength relative to the S&P 500 Index remains positive. Intermediate technical target is to resistance at 9,505.72.

Chart courtesy of StockCharts.com www.stockcharts.com

Percent of TSX stocks above their 50 day moving average increased from 40.00% to 53.49% last week. Percent has recovered to a slightly overbought level.

Chart courtesy of StockCharts.com www.stockcharts.com

Percent of TSX Composite stock trading above their 200 day moving average rose from 10.23% to 13.02% last week. Percent finally is showing technical signs of recovery.

Chart courtesy of StockCharts.com www.stockcharts.com

The Australian All Ordinaries Index gained 210.90 points (6.19%) last week. Intermediate trend remains down. Support is at 3,052.50. Resistance is at 3,762.50. The Index remains above its 50 day moving average. MACD and RSI are approaching short term overbought. Stochastics are short term overbought. Strength relative to the S&P 500 Index remains positive.

Chart courtesy of StockCharts.com www.stockcharts.com

The Nikkei Average improved 681.01 points (8.57%) last week. Intermediate trend remains down. Support is at 6,994.90. Resistance is at 9,521.24. MACD has recovered to a slightly overbought level. RSI and Stochastics are short term overbought. Strength relative to the S&P 500 Index remains positive.

Chart courtesy of StockCharts.com www.stockcharts.com

The Shanghai Composite Index rose 93.35 points (4.09%) last week. Intermediate trend is up. The Index currently is testing resistance at 2,402.80. Support is at 2,037.02. Intermediate technical target on a break above resistance is 2,830. MACD and RSI are approaching short term overbought levels. Stochastics are short term overbought. Strength relative to the S&P 500 Index remains positive.

Chart courtesy of StockCharts.com www.stockcharts.com

The:London FT Index rose 56.00 points (1.46%), the Frankfurt FT Index added 134.81 points (3.31%) and the Paris CAC Index improved 49.48 points (1.77%).

All charts courtesy of StockCharts.com

The U.S. Dollar rose 1.28 (1.53%) last week. Intermediate trend remains up. The Dollar remains below its 50 day moving average. Resistance is at 89.62. Support could be forming at 82.63, close to its 200 day moving average at 81.12. MACD is short term oversold and trying to bottom. RSI and Stochastics are recovering from short term oversold levels.

Chart courtesy of StockCharts.com www.stockcharts.com

Conversely, the Euro slipped 3.25 (2.14%) last week. Support is at 123.94 and 125.01. Resistance could be forming at 137.35. Short term momentum indicators are overbought and rolling over.

Chart courtesy of StockCharts.com www.stockcharts.com

The Japanese Yen is holding above support at 100.59 and its 200 day moving average at 100.72. Short term momentum indicators are trying to recover from oversold levels.

Chart courtesy of StockCharts.com www.stockcharts.com

The Canadian Dollar was virtually unchanged last week. Support is near 77.00. Resistance is at 85.02. Short term momentum indicators are trending higher.

Chart courtesy of StockCharts.com www.stockcharts.com

The CRB Index eased slightly last week with strength in the U.S. Dollar. It remains above its 50 day moving average.

Chart courtesy of StockCharts.com www.stockcharts.com

Crude oil remains in an intermediate uptrend. It closed slightly higher on the week after reaching $54.66. A short term return to the breakout level at $50.47 is possible. Intermediate technical target remains at $66.00 U.S. per barrel.

Crude oil has excellent value relative to gold. The Crude Oil/Gold ratio continues to recover from a deeply oversold level.

Chart courtesy of StockCharts.com www.stockcharts.com

Chart courtesy of StockCharts.com www.stockcharts.com

Gasoline continues to trend higher following completion of a reverse head and shoulders pattern. Upside intermediate technical target is to its 200 day moving average at $1.99.

Chart courtesy of StockCharts.com www.stockcharts.com

Heating Oil continues to trend higher. It remains above its 50 day moving average.

Chart courtesy of StockCharts.com www.stockcharts.com

Natural gas touched a seven year low on Friday. It resumed a short, intermediate and long term downtrend. Natural gas inventories remain well above their 5 year average for this time of the year.

Chart courtesy of StockCharts.com www.stockcharts.com

The technical profile for U.S. energy indices continues to improve. The S&P Energy Index moved above its 50 day moving average last week. MACD continues to trend higher. Resistance is at 420.95.

Chart courtesy of StockCharts.com www.stockcharts.com

Ditto for the Canadian energy equity sector! The TSX Energy Index moved above its 50 day moving average last week. Resistance is at 246.65. MACD is trending higher.

Charts courtesy of StockCharts.com www.stockcharts.com

Gold continues to struggle. It fell $28.34 U.S. last week. Seasonal influences are neutral to slightly negative until June. Trading range is between $884.14 and $1,007.70.

Silver has a similar technical profile. Trading range is between $11.93 and $14.61. MACD has declined to a neutral level.

Chart courtesy of StockCharts.com www.stockcharts.com

Platinum remains the precious metal of choice. It continues to outperform gold and silver. Rumors are circulating that the U.S. administration will encourage new car sales by offering a $3,000 rebate to new car buyers who send their nine year (or more) clunker to the scrap heap. Each new car will need a catalytic converter that includes platinum or palladium.

Chart courtesy of StockCharts.com www.stockcharts.com

Demand for Palladium also will increase for the same reason. Nice breakout on Friday! An intermediate uptrend was established on the breakout!

Chart courtesy of StockCharts.com www.stockcharts.com

Copper continues to move higher following completion of a base building pattern. A key economic figure to be released this week in China potentially showing additional economic growth could boost copper prices further.

Chart courtesy of StockCharts.com

Other base metals also are starting to trend higher. Zinc broke above a five month base building pattern on Thursday and established an intermediate uptrend.

Chart courtesy of Kitco.com www.kitco.com

Other Factors

The VIX Index (better known as the Fear Index) fell from 45.89% to 41.04% last week, an encouraging technical sign.

Chart courtesy of StockCharts.com www.stockcharts.com

The U.S. credit market was mixed last week. Yields fell slightly for one month and three month Treasuries. They rose slightly for two year, five year and ten year Treasuries. The TED spread and LIBOR were virtually unchanged. Price of the Treasury ETF was virtually unchanged.

Chart courtesy of StockCharts.com www.stockcharts.com

The S&P Financial Service Index rose another 12.2% last week and moved above its 50 day moving average. Short term momentum indicators are overbought.

Chart courtesy of StockCharts.com www.stockcharts.com

The TSX Financial Service Index gained another 5.7% last week. Short term momentum indicators are overbought.

Chart courtesy of StockCharts.com www.stockcharts.com

Economic news this week generally will follow the trend established during the past two weeks. Economic news has been bad, but has been less bad than the previous month (e.g. Existing Home Sales, Durable Goods Orders, New Home Sales, Revised GDP, Consumer Sentiment). Look for more of the same this week including Consumer Confidence, Construction Spending, Factory Orders, Non-farm Payrolls and ISM Services.

Political news is expected to be relatively quiet this week. The focus is on the G20 meeting starting on Thursday. Post meeting comments already are being drafted. The most controversial issue is the proposal by China and Russia to consider a multi-currency world monetary system to replace the U.S. Dollar as the world’s primary currency. The issue will be discussed internally, but is unlikely to be part of post meeting comments. Obama will be a focus as “the new boy” among world leaders. One small positive: Pay cheques received by most U.S. employees on April 1^st will be slightly higher reflecting changes in withholding tax included in the recent Economic Stimulation Program.

First quarter earnings reports and annual meetings enter the radar screen this week. Analysts are bracing for the worst. Most companies currently are in their “quiet period” prior to release of results. A few companies will provide new guidance if consensus estimates are significantly different than reality. New guidance for this quarter is likely to be negative rather than positive. Anticipation of “difficult” first quarter results likely will limit upside potential by North American equity markets between now and mid-April. That’s unusual. According to Thackray’s 2009 Investor’s Guide, U.S. equity markets historically have moved higher from near the end of March to mid April. That’s because another important event occurs when first quarter earning are released, annual meetings where CEOs frequently offer encouraging comments about prospects for the current year. Will CEOs give us good news this year? They will try. Look for frequent comments that their corporate outlook is “less bad” than the fourth quarter of 2008 and the first quarter of 2009. Their comments will be sufficient to move stock prices to higher levels. Another possible positive influence is the likelihood that U.S. analysts may have overshot their first quarter estimates to the downside. Recent weakness in the U.S. Dollar since the beginning of March could add to earnings (particularly earnings of companies with international operations).

Seasonal influences for most broadly based indices and sectors remain positive. However, favourable seasonal influences for many sectors and equity indices historically have ended during the late April/late May period.

Huge cash positions on the sidelines have started to commit to equity markets.

Technical action by equity and sector indices remains positive with qualification. Intermediate technical indicators continued to improve last week (Up/Down ratios, Bullish Percent Indices, MACDs). However, most already have recovered to near a neutral level. That means they continue to have upside potential, but they already have recovered significantly from their March 6^th lows. Meanwhile, short term momentum indictors (Stochastics, RSI) either are at or near overbought levels. Accordingly, purchases need to be more selective than previous.

Currencies will remain a focus. Questions about the viability of the U.S. Dollar as the world’s primary currency have been raised by the Chinese to the official level for the first time. More questions will be raised as the U.S. issues more Treasuries in the months ahead. The U.S. Dollar probably reached a long term high early in March. Short term strength is transitory at best. The real move in commodities priced in U.S. Dollars will occur when the U.S. Dollar establishes an intermediate downtrend. That hasn’t happened yet.

The Bottom Line

Chances are high that equity markets will consolidate during the next two weeks following their hefty gain. Thereafter, the second half of the current intermediate upswing is likely to occur. Preferred strategy is to retain current equity positions with an intermediate time horizon (particularly if they are benefiting from favourable seasonal influences). Very short term traders may want to take some money off the table with expectations of returning to positions following short term weakness.

The following chart is a good road map for equity markets during the next few weeks.

Dow Jones Post-Election Years

Chart courtesy of SeasonalCharts.com www.seasonalcharts.com

 

Tech Talk’s Weekly Column in the Financial Post

(Published on Saturday March 28^th and available by paid subscription at www.nationalpost.com )

Investing in Brazil

Brazil is one of the fastest growing emerging nations in the world. However, like the rest of the world, it currently is suffering from a deep recession. Is now a good time to invest in Brazil?

Seasonal influences

The Brazilian Bovespa Stock Index has a period of seasonal strength from the end of October to the end of May. The Index has advanced in seven of the past eight periods. Average gain per period was 16.4%. Favourable seasonal influences surfaced on schedule during the current period. The Index bottomed at 29,435 on October 27^th 2008 and has continued to strengthen since then.

Technical influences

The Bovespa Index has an improving technical profile. Intermediate trend is up. Support is indicated at 35,722. Resistance is indicated at 43,441. The Index recently moved above its 50 day moving average, an encouraging sign. Strength relative to the S&P 500 Index has been positive since the end of October. Moving Average Convergence Divergence, a momentum indicator recently resumed an uptrend. Intermediate technical target on a break above 43,441 is 52,800 where previous resistance exists.

Fundamental influences

Brazil currently is in an enviable position in the world. It is a major producer of commodities such as copper, crude oil, gold, silver, iron ore and coal. Demand for these commodities particularly by China is increasing and commodity prices are rising. Brazil’s economy has suffered with the rest of the world and currently is in recession. However, an improving outlook for commodities suggests that Brazil will be one of the first major nations to recover from the recession. Despite the recession, the Brazilian government optimistically is projected Gross Domestic Product growth in 2009 at 2.0%.

What to do

Several investment vehicles are available for individuals considering an investment in Brazil. Shares in several of Brazil’s largest companies trade on U.S. exchanges as well as in Brazil. In addition, Exchange Traded Funds heavily weighted in Brazilian shares are available including the BRIC (Brazil, Russia, India, China) ETF (Symbol: CBQ on the TMX Exchange). However, the preferred investment vehicle is iShares on the MSCI Brazil Index Fund (Symbol: EWZ). This ETF holds a diversified basket of Brazilian stocks. It tracks the Bovespa Stock Index closely. Major holdings and their weights in the ETF are as follows:

iShares MSCI Brazil content and weights

Top sectors by weight are Energy (28.68%), Materials (25.73%) and Financials (8.34%).

Management Expense Ratio (MER) for units is relatively low at 0.63%.

iShares on the MSCI Brazil Index have an improving technical profile. Support is at $31.14. Resistance is at $41.44. A reverse head and shoulders pattern is completed on a break above the neckline at $41.44. Intermediate technical target on the break out is $57.40.

Chart courtesy of StockCharts.com www.stockcharts.com

 

Bill Carrigan’s Toronto Star Column

(Published on Saturday March 28^th)

Bill says, “Count me in on this golden stock buying opportunity”. Following is a link to his column: http://www.thestar.com/comment/columnists/94635

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Disclosure: Don 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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