Pre-opening comments for Wednesday April 22nd 2009
U.S. equity index futures are lower this morning. S&P 500 futures are down 10 points in pre-opening trade. Traders are responding to first quarter earnings that generally are exceeding consensus estimates. Traders are taking profits shortly after reports are released unless earnings substantially exceed consensus.
Three Dow Jones Industrial Average companies reported higher than consensus first quarter earnings: Altria, AT&T and Morgan Stanley. In Canada, Encana reported substantially better than consensus first quarter results thanks partially to hedges on part of its production.
On the other hand, Boeing, another Dow company reported less than consensus first quarter earnings.
This morning Treasury Secretary Tim Geithner noted that the world recession continues to worsen. He summarized various measures that the U.S. Administration has taken to encourage an economic recovery. S&P 500 futures moved lower during his comments.
Canada’s economy also is showing additional signs of deterioration. Canada’s Leading Economic Indicators fell 1.3% in March. Consensus was a drop of 0.8%.
The Wall Street Journal reports that the Obama administration is proposing to tax offshore profits realized by U. S. based companies. The proposal, if implemented, would double-tax profits realized by U.S. companies with extensive international operations. Companies with international operations already are paying taxes on profits realized outside of the U.S. albeit at a lower tax rate. Companies in this category include most of the companies that are part of the Dow Jones Industrial Average including Pfizer, Johnson & Johnson, Cisco Systems, Coca Cola, Hewlett Packard, IBM and McDonalds. The proposal originally appeared in Obama’s preliminary budget released in February. The issue recently has come under intense opposition by companies with extensive international operations. The Dow Jones Industrial Average has responded by underperforming the S&P 500 Index in recent weeks.
Chart courtesy of StockCharts.com www.stockcharts.com
Technical Action Yesterday
Technical action by S&P 500 stocks was mixed yesterday. Four S&P 500 stocks broke resistance and three financial service stocks broke support. The Up/Down ratio improved from 1.27 to (230/178=) 1.29.
S&P 500 stocks breaking resistance
S&P 500 stocks breaking support
Technical action by TSX Composite stocks also was mixed yesterday. One TSX stock broke resistance and two stocks broke support. The Up/Down ratio slipped from 1.96 to (86/47=) 1.87.
TSX Composite stocks breaking resistance
TSX Composite stocks breaking support
Exchange Traded Fund News
Four New Direxion ETFs List on NYSE Arca
ETFs Designed to Track the NYSE Current U.S. Treasury Indexes
April 16, 2009–Direxion Funds, a pioneer in providing alternative investment strategies to sophisticated investors, today began trading four new ETFs designed to track the recently debuted NYSE Current U.S. Treasury Indexes.
The four new Direxion ETFs are:
Fund Name -Symbol
Direxion Daily 10-Year Treasury Bull 3X Shares- TYD
Direxion Daily 10-Year Treasury Bear 3X Shares – TYO
Direxion Daily 30-Year Treasury Bull 3X Shares -TMF
Direxion Daily 30-Year Treasury Bear 3X Shares – TMV
State Street Global Advisors Lists SPDR® Barclays Capital Convertible Bond ETF
April 16, 2009 –NYSE Euronext (NYX) announced that its wholly-owned subsidiary, NYSE Arca, today began trading the SPDR® Barclays Capital Convertible Bond ETF under the ticker symbol “CWB.” The ETF is sponsored by State Street Global Advisors, the investment management arm of State Street Corporation (NYSE: STT).
Indexes beat most managers
Standard & Poor’s says few active funds outdo its benchmarks
By Sam Mamudi, MarketWatch
Last update: 3:15 p.m. EDT April 21, 2009
NEW YORK (MarketWatch) — Investors in actively managed mutual funds the last five years have reason to wonder what they’ve been paying for: A new study from Standard & Poor’s finds that 70% of large-cap fund managers who use the S&P 500 as a benchmark for comparison have failed to match the performance of the index over that time.
That’s double bad news, given that the index was down 19% in the five years that ended Dec. 31.
Tech Talk comment: Better to stick to ETFs!
Interesting Charts
More evidence that uranium prices are trying to recover! The spot price for uranium rose another $1.50 U.S. per lb. last week. Chinese buying?
Chart courtesy of www.Uxc.com
Cameco strengthened on the news.
![clip_image002[1]](http://www.timingthemarket.ca/techtalk/wp-content/uploads/2009/04/clip-image00219.gif "clip_image002[1]")
Chart courtesy of StockCharts.com www.stockcharts.com
Selected Bullish Percent indices are showing early signs of rolling over from intermediate overbought levels. Most notable is the Bullish Percent Index for the Financial Service sector.
Chart courtesy of StockCharts.com www.stockcharts.com
Financial SPDRs are showing early technical signs of weakness despite strength yesterday. MACD is overbought and close to recording a sell signal.
![clip_image004[1]](http://www.timingthemarket.ca/techtalk/wp-content/uploads/2009/04/clip-image00415.gif "clip_image004[1]")
Chart courtesy of StockCharts.com www.stockcharts.com
Weakness in the U.S. Financial Service sector likely will continue this morning following news after the close that Capital One reported worse than expected first quarter earnings. Consensus was a loss of $0.08 per share versus a profit of $1.47 per share last year. Actual was a loss of $0.39 per share. Of greater importance, the company noted that losses from its credit card operations will be greater in 2009 than previously predicted. The stock fell 7% in overnight trade. Equity markets are starting to be concerned that the “next shoe to fall” in credit markets will be growing credit card defaults.
Another Bullish Percent index showing early signs of rolling over is the Index on the Dow Jones Industrial Average. The Index broke below its 15 day moving average yesterday from an intermediate overbought level.
Chart courtesy of StockCharts.com www.stockcharts.com
FP Trading Desk Headline
Headline reads, “Sentiment should prove resilient despite weak earnings”. Following is a link to the report:
Tech Talk comment: Scotia is calling for strength in equity markets later this year with the caveat that the S&P 500 could return to its 50 day moving average at 790. That implies downside risk in the S&P 500 Index of 7.0% from current levels. That is a reasonable expectation for the S&P 500 between now and September.
![clip_image006[1]](http://www.timingthemarket.ca/techtalk/wp-content/uploads/2009/04/clip-image00612.gif "clip_image006[1]")
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.
April 22nd, 2009 at 2:23 am
Hi Mr. Vialoux,
In the Tech Talk for the 20th you wrote that “early technical signs of an intermediate peak appeared last week in several equity indices and sectors.” And I’m gathering that the Nikkei (remarks from the 20th) and the Dow (remarks from today) are among the indices showing the strongest signs of intermediate peaking. Am I interpreting correctly? I also wondered whether you cover the technicals for the Hang Seng and MSCI Far Eastern. Thanks.
April 22nd, 2009 at 2:27 am
Excellent report Don. I took a position in HFD yesterday at the close. I see a pullback in the financials and the overall market over the near term. The news after the bell last night is a bonus. The charts are all looking a little tired . . .
April 22nd, 2009 at 7:36 am
Hi James. Just confirming that short term momentum indicators for the Nikkei and Hang Seng are rolling over from overbought levels.
April 22nd, 2009 at 8:06 am
Hi Don, is there any seasonality aspect to financials we should take into consideration now?
April 22nd, 2009 at 8:13 am
As the old saying goes: “Sell in May and go away”… and it may well prove to be the correct strategy…. although if one has not taken profits already, IMO “now” is a very good time.
One must keep in mind that we are still in a Bear Market and Bull Market strategies will not work.
In here one has to be nimble: keep tight stops and book profits often.
April 22nd, 2009 at 8:28 am
What surprise me most in the current bear market rally is the strength of the tech sector. This is not supposed to be the seasonality play for the sector. Instead it should be a underperformer with significant pullback since last month. With this regard I will be bullish on it and consider it a leading sector when the market finally recovers.
April 22nd, 2009 at 8:49 am
Well said Canuak2004. I to see a bear market drop coming soon. Just hope I do not get stopped out of HFD before the fall.
April 22nd, 2009 at 9:38 am
It seems everyone is calling for a correction. That in itself must be a bullish sign. Not to say it won’t come, but perhaps not for awhile. IMHO
Dave
April 22nd, 2009 at 9:51 am
Dave:
I know what you mean about ‘everyone is calling for a correction’, but here the view is technical, which is a minority vote in the market. Check $CPC on stockcharts.com for PUT/CALL sentiment – it’s back at an all-time low, which translates to extreme bullishness (where traders are laying down their cash, not just talk). Time will tell…
April 22nd, 2009 at 11:58 am
Ken A . . . I’m a chart guy for sure and I cannot understand how you read the $CPC. Where do you see the all time low on the chart? If you can, please try and explain it to me.
April 22nd, 2009 at 12:20 pm
Nick:
Well, maybe ‘all-time low’ is misleading – it’s currently at 0.75 which is lower than all of 2008, and 2009 except for 7 other days. Be sure to show it as a ‘line’, not candlesticks (which looks like garbage). Market turns often occur when most of the market sentiment is biased to the opposite extreme.
April 22nd, 2009 at 12:34 pm
Thank you Ken A. The line chart makes it much cleaner. I had it on candlestick. One question I have: March 17 it was at .65 and the mrkt has gone straight up since then. At .75, is it not saying we go higher ?
April 22nd, 2009 at 12:39 pm
Hi Ken A,
The highest six volume option contracts today, according to Yahoo finance, are puts. Specifically, SPY May 85 puts trading volume over 60,000 contracts! The highest open interest for SPY are May 78’s. Not sure why that would be. This says to me, short term traders are betting on down. IMHO I find my golden retriever to be reliable! If he barks once to go for a walk, it’s a bullish day! He is accurate 8 times out of ten, through the months of May to September!
I have a question about Elliot Wave Theory? You appear to follow it. This link gives an example of what the software does, that Don V. referenced yesterday. (3 minute tick since the drop since Monday) http://tradesystemguru.com/content/blogcategory/39/73/
You can see, at least it appears to be right as of this time. I’m very skeptical of these things, but do you have, (or anyone else) have an opinion on this software. Do you know anyone that uses it?
You can go to http://www.elliottician.com/RETCLifestyleVideos.aspx and click on the short video called “understanding the patterns” that is somewhat interesting. They basically trade zig zags with this system. 5 zigs followed by 3 zags are their entry points and the software filters through markets to find these patterns.
Thanks in advance,
Dave
April 22nd, 2009 at 12:54 pm
Nick: Well it’s only one of many sentiment indicators. Note that it was quite accurate during many of the peaks on the way down – eg. Feb 9, Feb 24. Of course, it will also show this behaviour when the market rushes up like it did for most of March.
April 22nd, 2009 at 7:56 pm
Hi Mikey. The financial services sector on both sides of the border has a period of seasonal strength ending in May.
April 22nd, 2009 at 10:35 pm
Hi Don,
Could you recommend some websites that can check the stock chart of Hang Seng Index with
all kinds of technical indicateors.
Thank you.