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(Editor’s Note: Mr. Vialoux is scheduled to appear on BNN Television today at approximately 10:10 AM EDT)
Technical Action Yesterday
Technical action by S&P 500 stocks was bearish yesterday. One S&P 500 stock broke resistance and 25 stocks broke support. Notable on the list of stocks breaking support were Energy and Financial Service stocks. The Up/Down ratio fell from 3.89 to (317/99=) 3.20. The only stock breaking resistance was Integrys. Stocks breaking support included Boston Properties, Cameron International, Chesapeake Energy, Devon Energy, Disney, Eastman Chemical, Equitable, Fortune Brands, Halliburton, HCP, Host Hotels, Massey Energy, McGraw Hill, Monsanto, Parker Hannifin, Peabody Energy, Pioneer Natural, Pitney Bowes, Praxair, Procter & Gamble, Progressive, Southwestern Energy, Smith International, Vornado, XTO Energy, Zion Bancorp,
Technical action by TSX Composite Index stocks also was bearish. No TSX stocks broke resistance and eight stocks broke support. Energy stocks were notable on the list of stocks breaking support. The Up/Down ratio fell from 4.11 to (108.30=) 3.60.
Interesting Charts
Lots of technical action yesterday that the current intermediate correction is well established:
The VIX Index rose sharply suggesting that investor confidence is eroding. A break above 34.57 will further reduce confidence.
Chart courtesy of StockCharts.com www.stockcharts.com
Energy indices on both sides of the border broke intermediate support levels.
Chart courtesy of StockCharts.com www.stockcharts.com
Chart courtesy of StockCharts.com www.stockcharts.com
Energy prices were notably weaker. Crude oil broke below an intermediate uptrend.
Chart courtesy of StockCharts.com www.stockcharts.com
Financial service equities and ETFs were notable on the list of stocks breaking support. Financial SPDRs are testing support at $11.10. Slight weakness will trigger an avalanche of stocks breaking support.
Chart courtesy of StockCharts.com www.stockcharts.com
Percent of S&P 500 stocks trading above their 50 day moving average plunged yesterday, implying that most stocks in the S&P 500 Index have peaked and are establishing intermediate downtrends.
Chart courtesy of StockCharts.com www.stockcharts.com
Chart courtesy of StockCharts.com www.stockcharts.com
Update on the Biotech Sector
Thackray’s 2009 Investor’s Guide notes that the optimal day for entry into the U.S. Biotech sector is today, June 23rd. Its period of seasonal strength is from June 23rd to September 23rd. The trade has been profitable in 14 of the past 16 periods. Average gain per period was 13.5% versus an average gain by the S&P 500 of only 0.1%. However, the seasonal trade has not lined up well for an entry point this year. On the charts, Biotech SPDRs (XBI) is short term overbought and has found resistance near its 200 day moving average and $50.60. Short term momentum indicators are overbought and showing early signs of rolling over. Fundamental prospects are not encouraging this year. Significant takeovers in the industry during the next three months have been greatly diminished due to an investigation on Merck’s proposed takeover of Schering Plough. Preferred strategy is to wait until at least the technicals show signs of bottoming.
Chart courtesy of StockCharts.com www.stockcharts.com
ETF News
iShares has launched iShares on the S&P Emerging Markets Infrastructure Index on the NASDAQ. Symbol is EMIF.
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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 23rd, 2009 at 8:13 am
Hi Don,
Nice to see you on BNN this morning. Do you have any opinion regarding the tech sectoro in the US? Seasonality or other. Specifically GOOG or CSCO. I guess the CAN/US dollar, would hurt that kind of investment.
Thanks, DaveA – Victoria
June 23rd, 2009 at 8:29 am
Hi Don,
With all the talk about possible shortages of grain in the near future, what can retail investors do to mitigate the effects of this on portfolios ? What are some good plays if inflation of grain prices is expected and what are the buy in levels for those plays ?
Richard
June 23rd, 2009 at 9:28 am
Hi Don, 2 questions, first it seems there is a major rain drought out west which is effecting crops. How will this effect the Arg play. My second question is for July 4th, how are the following trading days effected via seasonality, UP/DN
thanks so much!!!! take care, Joseph
June 23rd, 2009 at 10:21 am
Dear Richard and Joseph,
I am a bit confused with your questions about the grain investment possibilities, because Don devoted almost one page of information about that subject YESTERDAY!!!
June 23rd, 2009 at 11:21 am
Hi, I agree with his post however Im currious on how rain droughts effect fertilizer purchases. There has been Govt involvement to see how they can help the farmers….. If theres no rain then the farmers wont be buying fertilizer. Hence companies that play abroad like MOS, POT and AGU may be fine I gues but local players in this space may get hurt. Hope this clarifies some what of my question, I guess time will tell.
June 23rd, 2009 at 1:56 pm
Don,
Good show on BNN today. I agree with your forecast… TSX P&F charts do show bearish targets: 9350 & 8739…. Golden Cross does provide an indication of a longer term bullish trend line, and as you say, we should not be revisiting the March lows. I’d be very surprised to get down that low with the amount of stimulus propping up the market. One of the main reasons for the March low was that Obama had not gotten his act together yet.
Once we find support and start moving up again, it will be time to be more aggressive.
It’s all about risk/reward.
June 24th, 2009 at 6:18 am
Hi Dave. The Tech trade is lining up nicely this year. Both Microsoft and Apple are launching new software platforms. Launch comes prior to the busy Christmas season. IT managers have been holding back corporate purchases prior to the launch of new software. Hardware and ancilliary software producers are gearing up for the next generation of technology. Seasonality is positive in the sector from the end of September to the end of December (actually to the middle of January when the Las Vegas Consumer Electronic show is held).
June 24th, 2009 at 6:31 am
Hi Joseph. Lower than average temperatures and moisture in the Canadian prairies already is causing a serious problem for farmers. Available forage for cattle is in short supply and planted canola and wheat fields in the southern parts of the prairies are under severe distress. A drought has not been officially declared, but already is reality is some areas. Continuation of cool weather increases the likelihood of lower yields and frost damage near the end of the growing season. Ironically, farmers in northern areas of grain growing areas could benefit. Grain prices will increase significantly if cooler and dryer conditions prevail until this fall. Farmers with a reasonable crop will benefit handsomely. Meanwhile, farmers is drought-impacted areas likely will appeal to Ottawa for relief. Given that a federal election likely will be held this fall, the politicians will be ready, willing and eager to help them out.
June 24th, 2009 at 6:39 am
Hi Joseph. Thackray’s 2009 Investor’s Guide notes that U.S. equity indices have a period of strength from two trading days before the July 4th holiday to five trading days after the holiday. The trade has been profitable 71% of the time for an return of 1%. Chances of a successful trade this year are less than average because intermediate trend for most technical indicators is down.