ShareThisPre-opening Comments for Thursday June 18th
U.S. equity markets are slightly higher this morning. S&P 500 futures are up 2 points in pre-opening trade. Investors are anticipating a report before a Congressional committee this morning by Treasury Secretary Tim Geithner. He is expected to offer an update on the TARP.
Response to the weekly jobless claims released at 8:30 AM EDT was muted. Jobless claims remain stubbornly high. Last week they rose 3,000 to 608,000. Continuing claims were 6.69 million.
Inflation in Canada is rising. Canada’s Consumer Price Index jumped 0.7% in May on a month to month basis. Higher gasoline prices were a major contributor. The Canadian Dollar strengthened on the news.
Research in Motion is up 1% in pre-market opening. The company is scheduled to release fiscal first quarter earnings after the close. Consensus is $0.93 U.S. versus $0.84 U.S. per share last year.
JM Smucker is up 2% this morning after releasing better than expected fiscal fourth quarter earnings and after offering positive guidance for fiscal 2010. Consensus was $0.69 versus $0.73 per share last year. Actual earnings were $0.80 per share.
Technical Action Yesterday
Technical action by S&P 500 stocks was bearish again yesterday. One S&P 500 stock broke resistance and fifteen stocks broke support. Notable on the list of stocks breaking support were financial service stocks (particularly insurance stocks). The Up/Down ratio plunged from 4.29 to (343/93=) 3.69.
S&P 500 stocks breaking resistance
S&P 500 stocks breaking support
Technical action by TSX Composite stocks was mildly bearish yesterday. No TSX stocks broke resistance and three stocks broke support. The Up/Down ratio fell from 3.47 to (108/35=) 3.09
TSX Composite stocks breaking support
Interesting Charts
U.S. financial service stocks dominated the list of S&P 500 stocks breaking support yesterday (M&T Bank, Wells Fargo, Capital One, Moody’s). Many more stocks in the sector are trading just above support. Minor weakness will trigger breakdowns by many more stocks in the sector.
Chart courtesy of StockCharts.com www.stockcharts.com
Insurance stocks, a subsector of the financial service sector were notably weaker (Aflac, MetLife, Unum, Marshall & Ilsley)
Chart courtesy of StockCharts.com www.stockcharts.com
Chart courtesy of StockCharts.com www.stockcharts.com
Energy stocks on both sides of the border (including oil service stocks) also were notable on the list of stocks breaking support. Many more energy stocks are trading just above key support levels and are vulnerable to breakdowns. The period of seasonal strength for energy stocks has expired.
Chart courtesy of StockCharts.com www.stockcharts.com
Chart courtesy of StockCharts.com www.stockcharts.com
Bullish Percent Index for TSX Composite stock finally recorded an intermediate sell signal after breaking below its 15 day moving average from an overbought level.
Chart courtesy of StockCharts.com www.stockcharts.com
Bullish Percent Indices for the S&P Consumer Staples Index and S&P Industrial Index also recorded a new intermediate sell signal.
Chart courtesy of StockCharts.com www.stockcharts.com
Chart courtesy of StockCharts.com www.stockcharts.com
Consensus Second Quarter Earnings Estimates for the TSX 60 Companies
Consensus estimates for Canada’s largest listed companies show a pattern similar to the Dow Jones Industrial companies. Average (median) loss in the second quarter on a year over year basis is 11.1%. Seventeen of the 60 companies are expected to report higher earnings and 40 companies are expected to report lower earnings. Prominent on the list of companies expected to report higher earnings are gold companies. Prominent on the list of companies expected to report lower earnings are energy and material companies. Honourable mention can be given to Canada’s financial service companies.
* U.S. Dollars
** Median
Source: www.globeinvestors.com
Bill Carrigan’s Blog
Bill completed a stock filter that selected 16 Canadian stocks that have displayed strength during past periods of general weakness. Gold stocks dominate the list. Following is a link to his blog that lists the stocks:
http://www.gettingtechnicalinfo.blogspot.com/
THE CASTLEMOORE “CLASS” PORTFOLIO
What does CastleMoore think its typical Canadian investors should be invested in NOW?
CLASS MODERATE PORTFOLIO
We have re-established positions in bonds on both sides of the border. Economic data suggests that the recovery is still not within grasp, thus cooling off, at least for the moment, inflationary expectations.
As well, seasonal tendencies favour a top in bond yields (June) and the Canadian dollar vis-à-vis its U.S. counterpart (July).
And speaking of seasonal tendencies, equity markets tend to languish during summer months, as we have noted previously in this column. Granted, there has been little over the past year to suggest that markets have any interest in sticking to the script, but our tendency is to believe that tendencies persist—though not perfectly—until shown otherwise.
Indeed, equity markets do seem to be losing momentum. Our expectation is for a pullback towards the March lows. Whether or not those levels are breached will go far in determining our stance for the intermediate term; a successful test would indicate that the market is poised to head higher.
Today’s Conference Board release may add fuel to the deflationary fire that was reignited this week. We still generally maintain that in spite of the crowded trades of selling US greenbacks and selling treasuries that deflationary forces are still at work. We will get clarity as on this with more data and just how the markets correct. On this note, it appears as if the S&P has discounted $75 in earnings into 2010-11. Today we may be in the mid $40s. As Don pointed out earlier in the week Morgan Stanley moved it 2009 estimate from $40 to $51 per share and 2010 estimate from $57 to $62 per share. It seems like earnings are better but can sales increase? That’s the rub.
CASTLEMOORE CLIENT CENTRE SIGN UP
If you like to receive bi-monthly newsletter, know more about our model portfolios or access an audio file of our investment philosophy, “Modern Financial Fiascos”, click on the link http://www.castlemoore.com/investorcentre/signup.php.
CastleMoore Inc. uses a proprietary Risk/Reward Matrix that places clients within one of 12 discretionary portfolios based on risk tolerance, investment objectives, income, net worth and past investing experience. For more information on our discipline and methodology please contact us.
CastleMoore Inc.
Buy, Hold…and Know When to Sell
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Disclosure: Mr. Vialoux does not own securities mentioned in this report.
Disclaimer: Comments and opinions offered in this report at www.timingthemarket.ca are for information only. They should not be considered as advice to purchase or to sell mentioned securities. Data offered in this report is believed to be accurate, but is not guaranteed.
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Discussions from the Tech Talk Forum:
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June 18th, 2009 at 1:37 am
Hi Don,
Is it good idea to short market with either “HIX” or “HXD”.
Thanks
Sunil
June 18th, 2009 at 2:02 am
Don,
Considering the weak result of Potash Corp and its outlook, you think we should not be buying “COW”.
Sunil
June 18th, 2009 at 3:31 am
Do you have any thoughts on nat gas specifically HNU.t ans FCG.ny Good morning and thanks
June 18th, 2009 at 7:21 am
hello don, I was wondering if there was a U.S.currency play or version of xsb and cmr where I currently have my money. When U.S. dollar going down use cmr and xsb; When u.s. dollar going up switch to what ???
June 18th, 2009 at 7:25 am
Don
What are some vehicles to buy USD$? I would like to get 20% of my cash in USD$
Greg
June 18th, 2009 at 7:41 am
Greg DS
USD CASH: Open up a USD account at your bank. Or buy a USD Money Market fund….
June 18th, 2009 at 9:40 am
Hi Greg,
There are ETFs with Horizon Beta Pro that have the bear and bull US Dollar leveraged X2 but liquidity is a problem.
Better yet there is the UUP(US Dollar Bull) or UDN(US Dollar Bear) to play.
I am with you on one more rise in the USD to the 95 handle which goes against all logic and so many are bearish on the USD right now……I assume you noticed the USD broke out of a bullish falling wedge last summer and the move is potentially 20 points which would lead all the way up to 95 on the USD and which coincidentally equal an exact 50% retracement of the 2002 USD and start of the bear market in the USD……..I think that is exactly what will play out coinciding with another stock market/commodities crash sometime this fall/winter……..Once we reach the peak the countertrend rally in the USD will be over and then game over……..Bear market trend will resume and could see the collapse of the currency in the years ahead…all imo.
June 18th, 2009 at 3:46 pm
Thanks for the comments hunterpaul – I agree. The correlations of USD with commodities markets is on the agenda at the BRIC summit in Russia. In this regard today I learned that average duration of US debt is 4 years, an historic low and 43% of US treasuries will be rolling over in the 12 months which portends troubles with monetization of this debt…inflation anyone?
June 18th, 2009 at 6:47 pm
Don, is this a good time to buy TRP? What is the seasonal strength period for this stock? Thank you
June 18th, 2009 at 7:50 pm
oil / gas seasonality yes … but what of the US$ and when it starts to slide again,,,, oil WILL go up, not sure when but is there a seasonal influence with the dollar??
June 18th, 2009 at 9:26 pm
Don, how are the technicals shaping up for the seasonal play in the US Biotech sector(XBI)? Thanks.
June 19th, 2009 at 4:48 am
TRP issued shares at $31.50. I would not pay more than the issue price for TRP.
Also look for a down leg in this sector and in resources, so that will add pressure to TRP.