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Pre-opening Comments for Tuesday April 21st
U.S. equity futures continue to move lower despite better than expected first quarter earnings released by several major companies. S&P 500 Index are down another 7 points. Unfortunately, most of the first quarter earnings reports also include negative guidance for the second quarter and the remainder of 2009.
Traders are waiting for an update by Treasury Secretary Tim Geithner on the TARP. He will be reporting to a Congressional committee at 10:00 AM EDT.
This morning, the Bank of Canada reduced its overnight lending rate to major Canadian banks from 0.50% to 0.25%. In addition, the Bank of Canada is planning a move to quantitative easing. More information is expected to be released later this week. The Canadian Dollar is down 2.10 to 80.26 on the news. Bank of Montreal reduced its prime lending rate by 0.25%.
First quarter earnings reports released overnight generally were impressive. Overnight responses to these reports were not. IBM reported $1.71 versus $1.64 per share last year. Consensus was $1.66. Texas Instruments reported a profit of $0.01 versus $0.49 per share last year. Consensus was a loss of $0.03 per share. Teck Cominco reported $0.90 versus $0.77 per share last year. Consensus was $0.46 per share. Caterpillar reported operating earning of $0.39 versus $1.45 per share last year. Consensus was $0.06 per share. Dupont reported $0.54 versus $1.31 per share last year. Consensus was $0.52 per share. Lockheed Martin reported $1.68 versus $1.75 per share last year. Consensus was $1.65. Canadian National Railways reported $0.90 versus $0.70 per share last year. Consensus was $0.61 per share.
Technical Action Yesterday
Technical action by S&P 500 stocks was neutral yesterday despite a 4.28% drop by the S&P 500 Index. Three S&P 500 stocks broke resistance and three stocks broke support. The Up/Down ratio improved from 1.26 to (230/181=) 1.27.
S&P 500 stocks breaking resistance
S&P 500 stocks breaking support
Technical action by TSX Composite stocks was non-existent yesterday. No TSX stocks broke resistance or support. The Up/Down ratio remains unchanged at (88/45=) 1.96.
Interesting Charts
Responses to first quarter earnings generally were negative yesterday. Not a good technical sign! Bank of America, Eli Lilly, Halliburton and IBM reported higher than consensus first quarter earnings. All came under profit taking pressures.
Chart courtesy of StockCharts.com www.stockcharts.com
Chart courtesy of StockCharts.com www.stockcharts.com
Strength in the U.S. Dollar was a major reason for weakness in equity markets. It broke above its 50 day moving average to reach a six week high.
Chart courtesy of StockCharts.com www.stockcharts.com
However, one day’s trading does not establish a trend. A review of major technical indicators for broadly based equity indices and sectors (e.g. Up/Down ratios, Bullish Percent Indices, short term momentum indicators) failed to show significant evidence of a change in intermediate trend. Tech Talk will continue to monitor closely.
Matt Blackman’s Blog
Matt asks “Correction coming?”. Following is a link to his blog:
http://tradesystemguru.com/content/blogcategory/34/68/
In addition, Matt and Anant Acharya offer an Elliott Wave count at :
http://tradesystemguru.com/content/blogcategory/39/73/
Questions or comments for Matt? Following is the link:
http://tradesystemguru.wordpress.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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April 21st, 2009 at 5:23 am
Don, what are you thoughts on gold?
April 21st, 2009 at 5:38 am
gold is money – that is why central banks own it – the imf own it. that is why governments are intervening in gold to help make their currencies appear stronger.
that is why deman is at records and there is shortage of allinds in physical coins.
April 21st, 2009 at 6:24 am
Bear rally correction targets based on Elliott Waves are shown here:
S&P target 780: http://www.ad-ons.com/StockMarket/spx30min.jpg
TSX target: 8453: http://www.ad-ons.com/StockMarket/tsx30min.jpg
The rising bearish wedge broke downwards yesterday, confirming that a quick correction back to the start of the wedge should occur next, before the rally continues higher.
April 21st, 2009 at 7:41 am
ANY NEWS FROM IAN FRASER ?
WHAT ABOUT HIS INVESTMENT LETTER ?? STILL RUNNING ???
TKS
April 21st, 2009 at 8:42 am
Hi Don,
I’m trying to find your “What to do” comments as noted in the weekend Financial Post. Can you assist me in finding your recommendations? Thank you.
April 21st, 2009 at 10:27 am
Ken, why dont you read past comments and posts instead of bugging Don about the same old stuff….
April 21st, 2009 at 11:13 am
To: KEN A
Thanks for the update.
April 21st, 2009 at 12:00 pm
Don, I note the US 10 year treasuries yield on Stockcharts shows an almost perfect reverse head and shoulders pattern since about April 10th. But I don’t know exactly how to interpret that. Since it is the yield, not the value, does this mean the yield can be expected to rise?
I was reading Thackray’s 2009 Investor’s Guide for May, particularly the use of the 10 year treasuries yield as an indicator. It does look ominous for equities going forward into the summer, since Thackry says the indicator has been successful 13 out of 15 times.
April 21st, 2009 at 2:33 pm
Don
Regarding oih, todays range was outside yesterday and it closed above yesterdays high. Is this a very bullish sign?
thx Allan M.
April 21st, 2009 at 2:42 pm
Ken good post…too bad the search didn’t find it for Stag_de_flation (sp)?
April 22nd, 2009 at 7:40 am
Hi Blondin. Sorry, I have lost contact with Iain Fraser.
April 22nd, 2009 at 7:42 am
Hi John Kys. All Financial Post columns that include “What to do” sections are published in Tech Talk each Monday. Back editions of Tech Talk are available in the archive.
April 22nd, 2009 at 7:49 am
Hi Ken. Seasonal influences on gold currently are neutral. The next period of seasonal strength is from July to September. Technicals are mixed. Support at its 200 day moving average at $860 is likely. Short term momentum indicators are neutral to slightly oversold. Gold stocks continue to struggle. XGD broke support last week. GDX is testing support. Bullish Percent Index for XGD recorded a sell signal three weeks ago and continues to trend lower from an intemediate overbought level. Be patient. Chances of a seasonal trade this summer are higher than average.
April 22nd, 2009 at 7:54 am
Hi Ken A. Following is a link to an Elliott Wave count released last night by Anath Acharya through Matt Blackman’s site. The comment supports a short term upside move by the S&P 500 followed by a significant correction.
http://tradesystemguru.com:80/content/blogcategory/39/73/
April 22nd, 2009 at 8:02 am
Hi Fred. U.S.10 year Treasuries have tested the 3.00% yield level on several occasions during the past three months. Resistance is at 3.07%. Resistance is unlikely to be broken in the short term because the Federal Reserve has pledged to buy treasuries in the 2 to 10 year maturity range. A break above resistance would be ominous for equity and bond markets because it would imply either that the Federal Reserve has abandoned its purchase program or international investors (notably the Chinese) are significant sellers.