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Technical Action Yesterday
Technical action by S&P 500 stocks was mixed yesterday. Six S&P 500 stocks broke resistance and six stocks broke support. The Up/Down ratio eased from 3.69 to (340/95=) 3.58.
S&P 500 stocks breaking resistance
S&P 500 stocks breaking support
Technical action by TSX Composite Index was quiet. No TSX Composite stocks broke resistance and one stock broke support.
TSX Composite Index stocks breaking support
Weekly Sector Bullish Percent Index Review
Bullish Percent indices showed significant deterioration during the past week. Ten of the 12 indices fell last week. Eight indices fell below their 15 day moving average. Four more indices recorded sell signals when they fell below their 15 day moving average from an intermediate overbought level. Ten indices now have registered sell signals. Following are the data and charts:
Bolded items are changes from last week.
All Charts courtesy of 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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June 19th, 2009 at 5:13 am
Don,
if the signals all suggest some consolidation in gains, would you use the March low as the re-test level? Fundamentally, LIBOR spread is ~0 and banks are supposedly all running business as usual. That means things are not as bad as it was in March. Conversely, this perception of banks being okay may be due to the market rally.
June 19th, 2009 at 7:33 am
Hi Chris,
I know that your question is directed at Don and I would always defer to Don, but I thought I would add my 2 cents.
If you remember back in March, Analysts/Economists of all sorts were speculating about things like:
- the entire US banking system is insolvent;
- GM & Chrysler might be liquidated & this will put 3 million people out of work;
- GE is bankrupt;
- oil is heading to $15/barrel;
- the S&P 500 is heading to 450;
- the DJI is heading to 2500;
In hindsight, many of these things are obviously fear mongering and will most likely not come true. Although I think we can get a 10-15% pullback, I really don’t think that we will see the S&P at 666 again. Many people will disagree with me, but that’s the benefit of an open forum – everyone is entitled to an opinion.
- Gary
June 19th, 2009 at 8:03 am
The market rally from March 9 is due to Fed manipulation and extreme forms of monetary policy like “quantitative easing”. The rally is artificial in nature and not based on sound economic fundamentals. It is therefore subject to greater volatility, false signals and the possibility of a more substantial correction, since there is little holding it up, except for Fed manipulation.
IMO this is a “dead cat bounce” from an extreme bottom in a bear rally, and until we have retested it successfully, the rally is fragile. It may take a year, like 1929-30, which then went even lower by 1932. I am not expecting this scenario; and I suspect the worse is over, however… as a rule, the market always throws one a curve.
Doesn’t mean one can’t make money here, but one has to be aware of the extreme fragility of the market. One can’t go in blindly with a Pollyanna-ish approach.
This is a trader’s market.
June 19th, 2009 at 9:28 am
Well said Canuck.
June 19th, 2009 at 9:44 am
like what you said, canuck; agree with what you said. you rarely comment on long bond such as 10yr 30yr US T-bill. Can you comment on it? and will it re-test the low in Mar. thx.
June 19th, 2009 at 9:49 am
To Gary & Chris:
The worst is over. BNN reported BMO shared the same opinion and went further to declare a new bull market has started. Since March till now if we listened to the bears and held off or traded with a very tight stop, you know what , you would not own stocks and most likely you gained pennies. A waste of time. I do not mean one should not be prudent. However, in order to participate in this market we should be aware of the data and have an atitude of forward looking. The market is always forward looking. That is why it crashed so deep with the fear that the world will collapse thereon. Now the market psychology has changed – it looks forward to hints of recovery. Pullbacks as happening right now is as predicted and could be more to come by September – October. But in no way, as I see, the market to crash (like the bears describe it may do). As an investor, not trader, my take is to be forward looking. If you are a trader you still need to be bullish to buy on the dip as you hope to sell at a higher price.
By the way, this is my last writing to this column for a while. I and my family are going for a cruise trip to Southern Europe so as to enjoy my newly gain from the market rally since March. Thanks Don for creating this column and all those who care to read my opinion, whether you agree or not.
June 19th, 2009 at 10:23 am
I dont’ know anymore? If ftse is agreeing with me, there’s gotta be something wrong here
Anyways, like I said I’m no expert, but my view on pullbacks is similar to ftse’s. If people are speculating there will be a 10-15% pullback, we’ll probably get a 5-10% pullback at most. This is because traders will be afraid of this type of pullback, but investors won’t be. IMO, a true investor would not mind risking a 5-10% short-term loss, in order to make a 30-40% gain over the next 2-3 years. Like ftse is saying, the market low in March was amidst the fear of total market catastrophe and both traders and investors were selling hand over fist. But IMO, the market outlook has improved dramatically since then.
- Gary
June 19th, 2009 at 11:24 am
“The market outlook has improved dramatically since then.”
Do you think the economic outlook has improved dramatically?…….I don’t think so…..In many respects you can argue it has gotten much worse…….For those of you not thinking we can’t have a panic, how many of you thought that last summer as well??
I thought so just as the vast majority(ie. BMO) didn’t either…..The only think I listen to analysts anymore is sentiment and sentiment is the biggest driver in cyclical markets(bull or bear)…….I don’t care who you are, you can’t argue that we aren’t in a bear market still and until we get another wave of fear I won’t be buying…..I think at this time it is much more prudent to be in mostly cash or even gold……..and you ask what might be the next shoe to drop?? How about California defaulting on their debt or US debt being downgraded……..that is a very high probability in the short term…….think about it.
June 19th, 2009 at 12:00 pm
Hi Don,
I noticed that Fertilizer ( Ag) stocks peaked May 20th for Agrium & Monsanto; May 26th for Potash and June 11th for Syngenta. You indicated in your recent appearance on BNN that June is the time to buy the Ag stocks as their seasonality is June to Dec. Can you clarify the timing of purchases in light of their recent 52 week highs?
I bought Agrium beg. of June at 51.50 and am wondering if I should sell it now? In my cash account so trading this one.
I own Syngenta but should I be selling it now or holding for the June to Dec. period.
( in my RSP – so I can hold it for longer).
Thanks in advance !
Mary
June 19th, 2009 at 12:30 pm
The Elliott Wave pattern suggests that we correct down to 870-880 (SPX) and then back up to about 1050. That should be a top in late summer (Oct?) followed by a test of 666 and a break down to new lows. Updated charts at:
SPX: http://www.ad-ons.com/StockMarket/spx30min.jpg, http://www.ad-ons.com/StockMarket/spx.jpg,
TSX: http://ad-ons.com/StockMarket/tsx30min.jpg, http://ad-ons.com/StockMarket/tsx.jpg
June 19th, 2009 at 1:08 pm
Great discussion! I tend to agree with the ‘dead cat bounce’ scenario. If you listen to Don’s ‘Horizon Beta Pro’ video presentation, he provides convincing arguments that we are just past the half way point in a 16 year secular bear market. With this in mind, I’m investing a portion of my portfolio following Don’s philosophy. Correct me if I’m wrong but I think right now, that’s cash. That would mean waiting for the three stars to align prior to jumping in. This makes sense to me as more conservative and prudent. I guess it all comes down to ones appetite for risk. Right now I see the risk on the long side. However, speaking of ‘buy and hold’ I would be interested in anyone’s opinion of good Canadian Stocks to buy and hold long term. I am looking at ‘Transcanda Corp’ at these levels thinking it might be a good time to accumulate.
June 19th, 2009 at 3:29 pm
Dear Dave,
Would you please direct me to the site of “Don’s ‘Horizon Beta Pro’ video?” I have been out of the market since March………therefore I missed out on the 40% rise in stocks and need to catch up on the latest of information.
Thank you.
Ana
June 19th, 2009 at 4:07 pm
Hi Ana,
The Horizon Beta Pro web site is:
http://www.hbpetfs.com/index2.asp
The April 29th workshop by Don is:
https://admin.na3.acrobat.com/_a753039750/p22375328/
You have to give it some time to load.
Dave
June 19th, 2009 at 4:34 pm
Hi Ana,
I tried posting the links for you but it says ‘my comment is awaiting moderation’ I’ve had that happen before and the links never get posted. Just go to the ‘horizon beta pro web site’ and do a search on Don Vialoux. You will see the April 29th workshop presentation by Don. The video takes time to load, but is well worth the watch.
Dave
June 19th, 2009 at 5:31 pm
ftse
Watch that hubris son…. newbies are always prone to that. Anybody who has been around for a while will know what I mean.
June 19th, 2009 at 6:24 pm
Hello Ana,
If you can’t find it then try this link http://www.hbpetfs.com/index2.asp for Don’s presentation and look under where it says: “HBP Resources”
June 19th, 2009 at 8:21 pm
I agree with Canuck2004 in that this market is going to be cagey for possibly years. I am educating myself through this forum after I saw Don talk on BNN and realized how the “great deleveraging” that is occurring will take some time and ranging markets require a deeper understanding of what influences sectors.
I do not believe in forecasting but strategizing based on scenario planning, the anticipation of regret or opportunity costs of a given trade and an understanding of how the assets you own will respond under different scenarios. Seasonal-technical-fundamental investing clearly helps one achieve these ends and I see how this forum is invaluable in this regard. As Canuck2004 said above – this is a traders market.
That being said I see great potential portfolio risks from inflation and lower equity risk premiums so I am looking toward long term investment holds in inflation sensitive stocks in well managed companies that have a history of paying dividends and raising dividends, developing a portfolio of other inflation sensitive instruments such as real return bonds and commodities, particularly energy trusts and REITs and trading the market sectors on a seasonal technical basis for capital gains.
June 19th, 2009 at 10:24 pm
Dear Dave and George,
Thank you for the for all of the information! There is quite a lot of information to digest……..I just wish there was a workshop that was available to people who are entering the market. Are all traders self educators? Thank you again.
Ana
June 20th, 2009 at 8:57 am
Hi Don,
Is there seasonality to International ship stocks? There tempting with their juicy dividends but highly volatile.
Thanks
June 20th, 2009 at 2:09 pm
What happened to the TSX Friday at 4pm??
Can anyone tell me why the TSX gapped over 30 points at the close? Can buy-on-close orders account for that big a jump? Thanks.
June 20th, 2009 at 3:36 pm
Ken, At 3:50 it was 10234. It didn’t really gap on close, but in the last 35 min basically gained the 40 points.
Dave
June 21st, 2009 at 2:09 am
Dead Cat Bounce
June 21st, 2009 at 9:30 am
Anyone care to comment on the Canadian infrastructure stocks (STN,SNC) including the ETF and their charts?
June 21st, 2009 at 9:35 am
Re: “buy when it snows,sell when it goes” Isn’t this year absolutely unique in that we have enormous amounts of stimulus money pouring into businesses all around the world right now?
June 21st, 2009 at 10:20 am
I think the good news on infrastructure is already baked into the stock prices. Buy the dips, sell the rips!
June 21st, 2009 at 3:46 pm
Great comments! Thanks to everyone who participated. Dennis Gartman frequently talks about “the box” when discussing corrections. The box is a trading range that a chart can correct after a significant intermediate upside move. The assumption is that the chart will continue its current upward trend after the correction has been completed. Gartman’s box implies a correction of 40%-60% of the previous upside move. For simplicity sake, let’s use 50%. Both the TSX Composite Index and the S&P 500 Index have gained 43.4% from their March lows to their recent highs. A normal correction suggests downside risk of 21.7%. That is a significant hit from current levels(812 on the S&P 500 and 9103 for the TSX Composite. Likely time horizon for the correction is between June 11th when recent highs were reached and November. Notice that I used the term “Downside risk”. Best guess is that the downside target will not be reached because likely weakness in the U.S. Dollar starting later this summer and continuing into fall likely will mute downside risk. A lower U.S. Dollar has a psychological positive impact on U.S. equity
markets without changing the actual outlook for corporate earnings. What likely will be the fundamental trigger for the correction? Probably earnings! Consensus estimates for the third and particularly the fourth quarter are too high. Analysts will adjust after seeing “difficult” second quarter earnings reports. Second quarter earnings reports wiil be “less bad”, but guidance for the rest of the year will be “less good”. Second quarter earnings reports start to flow in volume in the second week in July. Stay tuned!
June 21st, 2009 at 5:44 pm
Hi Mary Broderick. The period of seasonal strength for fertilizer stocks is from the end of June to the end of December. The period of seasonal strength in the Agriculture sector according to Thackray’s 2009 Investor’s guide is from the end of July to the end of December. The seasonal trade is starting to line up nicely prior to the periods of seasonal strength. More information on the trade is provided in Monday’s Tech Talk. Technicals currently do not support entry into the trade. Fertilizer stocks such as Agrium and Potash Corp. have dropped 22% from their highs set in mid May and need to show technical signs of bottoming before buying. Momentum indicators show that these stocks are short term oversold, but have yet to show signs of bottoming. In addition, fundamentals currently do not support entry at this time. Both companies are scheduled to report substantially lower second quarter earnings in late July. Recent comments by both companies suggest that analyst estimates likely are high. Please be patient.
June 21st, 2009 at 7:46 pm
Thanks very much Don for your last posts. I have found often in my investing career that we often are impatient and your comments certainly reinforce the need for patience! It takes time for such a strong short term rally to lose momentum. Also thanks for your continuing excellent market analyses. I have been able to take advantage of some of your seasonal plays over the last several months of following your site. I have been pretty well called away on my recent covered calls and so will wait patiently???!!! for a summer fertilizer opportunity.
June 22nd, 2009 at 6:25 am
The only thing right about ftse’s comment is that this investor is spending his ‘winnings’ from the march rally. Many words used i.e. “always” suggests to me that i hope he sold all his positions before going on vacation with the profits!
Lower earnings and de-leveraging will not mean higher stock prices.