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Pre-opening Comments for Friday October 16th
U.S. equity index futures are lower this morning. S&P 500 Index futures were down seven points in pre-opening trade. Weakness can be attributed mainly to strength in the U.S. Dollar and less than expected third quarter results by several key U.S. companies.
Commodities priced in U.S. Dollars including crude oil, gold and silver are trading lower.
Canada’s inflation rate continues to recover from deflationary levels triggered by lower fuel costs last year. Consumer Prices recovered on a year over year basis in September from -1.5% to -0.9%. The month over month rate was unchanged.
A theme for third quarter earnings is developing. Major U.S. companies are reporting higher than expected third quarter earnings, but gains are coming primarily from lower costs instead of higher revenues.
IBM is down 4% following release of better than expected third quarter earnings. Consensus was $2.38 versus $2.04 per share last year. Actual was $2.40. However, revenues were lower than expected.
General Electric is down 3% after reporting better than expected third quarter earnings. Consensus was $0.20 versus $0.43 per share last year. Actual was $0.22 per share. However, revenues were less than expected.
Bank of America is off 3% after reporting a larger than expected third quarter loss. Consensus was a loss of $0.21 versus a profit of $0.15 per share last year. Actual was a loss of $0.26 per share.
Halliburton added 1% after reporting better than expected third quarter earnings. Consensus was $0.25 versus $0.74 per share last year. Actual was $0.31.
Google rose 3% after reporting better than expected third quarter earnings and after raising fourth quarter guidance. Consensus was $5.42 versus $4.06 per share last year. Actual was $5.89 per share. At least six investment dealers raised their one year target price on the stock.
Aecon was upgraded this morning to Outperform by Blackmont.
Rangold was upgraded this morning to Outperform by RBC Capital Markets.
Technical Action Yesterday
Technical action by S&P 500 stocks remains bullish. Another 26 S&P 500 stocks broke resistance and none broke support. The Up/Down ratio increased from 8.83 to (409/44=) 9.30.
Strength was notable in stocks such as Microsoft that are starting to benefit from favourable seasonal influences.
Chart courtesy of StockCharts.com www.stockcharts.com
Technical action remained bullish for TSX Composite Index stocks. Three energy stocks broke resistance levels (Advantage Oil & Gas, Nexen and Talisman). None broke support. The Up/Down ratio was unchanged at (121/17=) 7.12.
Interesting Chart
The seasonal trade from August to December in the Agriculture sector in U.S. Dollars continues to perform exceptionally well. Short term momentum indicators recorded a seasonal buy in mid July. Yesterday, MOO broke resistance and reached a 12 month high. Next upside technical target is $45.
Weekly Bullish Percent Index Sector Review
All Bullish Percent indices are significantly intermediate overbought at current levels. Indeed, many are at or near an all time high. Most are at or slightly above their 15 day moving average. Despite overbought levels, technical signs of an intermediate downturn have yet to surface.
Charts courtesy of StockCharts.com
Tech Talk’s Financial Post Column This Saturday
(Available in hard copy or by paid subscription at www.nationalpost.com )
The column focuses on the U.S. Semi-conductor sector.
A Note From Matt Blackman
This is an update on the TradeSystemGuru.com newsletters and
posts…
We have received a number of inquiries regarding our weekly
TradeSystmGuru market newsletter. Due to a writing conflict,
we discontinued our weeklies last month. The good news is that
we are now publishing the Macro Market Monitor monthly and are
getting ready to post the October newsletter this weekend.
For those of you interested in regular market updates, Matt
Blackman recently set up a Twitter account. It is not necessary
to sign up for an account to get them and if not, please ignore
the requests from Twitter encouraging you to join.
To follow Matt, go to http://twitter.com/Matt__Blackman
(that’s a double underscore between my names – there are a
number of Matt Blackmans on Twitter) and if you have a Twitter
account, click the "Follow" button. If not, you can bookmark
this page and check in periodically to see what we’re tracking.
Here is an example of what you’ll get, from most to least
recent posts today (if your email program does not hyperlink
the URLs below, please copy and paste them into your browser)
Matt’s Twitter posts today…
- The Shanghai Composite looks to be joining the party.. Broke
thru topline resistance on Tues http://fsc.bz/1DD #WORDEN
- Now this is an interesting long-term chart of comparative
trailing 10-yr PEs for the SPX…http://ow.ly/uDa0
- What trillions being pumped into the global economy is doing
to the real estate market http://ow.ly/uCZ0 But will it last?
- Don’t normally read the NYT but this simple theory on why our
financial system nearly collapsed is worth a read…
http://ow.ly/uCV4
- Article: At foreclosure auctions, broken dreams on sale
http://ow.ly/uCt0
- It’s about time that large auto manufacturers took electric
cars seriously… http://ow.ly/uCoA
- A comparative look at the new IMF GDP estimates…
http://ow.ly/uClb
- Where to find value in a liquidity drunk market: Bonds do it,
stocks do it, even educated credit default swaps ..
http://buzzup.com/fheq
- So is this… Q3 foreclosures set a record:
http://bit.ly/vPe3p
- This is interesting… Stock Whizzes Born Not Made
http://tinyurl.com/yjcozp5
Stay tuned for our upcoming Macro Market Monitor this weekend!
Thanks for your interest and if you have any questions or
comments, please email me at tradesysmailbag@gmail.com
Cheers,
Matt Blackman
Host TradeSystemGuru.com
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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October 16th, 2009 at 6:09 am
Morning Don,
Uranium Participation Corp (U.TO) moved up through it’s 50 say MA. Short term momentum indicators appear to be turning positive. Spot Uranium Prices moved higher last week & BHP noted their flagship Olympic Damn Uranium mine experienced a major interruption (more details due out next week). Is this now a case of seasonality, technicals, & fundamentals lining up for the holding company of uranium?
Many Thanks,
Stephen
October 16th, 2009 at 6:21 am
Technicals and fundamentals (uranium price) continue to improve. Sorry, a seasonality study on the sector has not been completed due to a lack of available data. At least 10 years of data on a marketable index is needed to calculate seasonality.
October 16th, 2009 at 7:06 am
Hi Don,
It’s interesting that you are looking at MOO in USD. One gets a different picture in CAD (losses). It is performing closer to COW. If someone had bought at the start of seasonal strength in August they would still be underwater. Why aren’t these performing as expected? Is most of MOO’s performace due to the drop in the USD and there hasn’t been any “real” increase in agri prices?
Thanks,
Gord
October 16th, 2009 at 7:31 am
Don, where do you see the price of OIL going? Now that it has passed $75 where do you see the next resistance? Thanks
October 16th, 2009 at 7:49 am
Hi Don:
Since around mid-August the yield on US 10 year treasuries has trended lower whereas the SP500 has continued higher. Do you see the bond market as a leading indicator of where stocks might be headed?
Regards,
jordy
October 16th, 2009 at 9:21 am
Don
If possible, Could you please provide Resistance and support for POT and RIM? Thanks
October 16th, 2009 at 9:25 am
Jordy
Are you referring to the bond yield / dividend yield ratio?
October 16th, 2009 at 9:53 am
Hi Don,
what is your analysis on Altria (MO)in the short term (6mo) and long term 3-5yrs
October 16th, 2009 at 10:27 am
Double D:
I am referring to the fall in the 10y treasury yield (from around 3.9 in early August to as low as 3.2 last week–since rebounded to 3.5 but moving average is still down) vs the continued rise in the SP500 index (then 1000 now 1080).
October 16th, 2009 at 11:11 am
Hi Mayur. The break out by crude oil above $75 U.S. implies an intermediate upside technical target of $86.50 U.S. However, a word of caution. The break out is highly inversely correlated to the U.S. Dollar and has little to do with the fundamentals of crude oil. Crude oil in most other currencies including the Canadian Dollar and the Euro remains below levels set in June.
October 16th, 2009 at 11:19 am
Hi Jordy. Interesting question. The yield on 10 year treasuries currently is in an intermediate downtrend (i.e. bond prices are in an intermediate uptrend), implying anticipation of a weaker economy. The S&P 500 Index currently is in an intermediate uptrend, implying anticipation of a stronger economy. Divergence is unusual and is unlikely to last for long. Longer term studies by authors such as John Murphy claim that U.S. bond prices tend to lead U.S. equity markets by about six months.
October 16th, 2009 at 11:23 am
Hi Roy. Support and resistance for POT (in U.S. Dollars) are at $83.68 and $102.18 respectively. Nice move today. Supportr and resistance for RIMM (in U.S. Dollars are $64.92 and $88.08 respectively.
October 16th, 2009 at 11:29 am
Hi Marc. MO currently has a positive intermediate technical profile. Intermediate trend is up. The stock trades above its 50 and 200 day moving averages. Short term momentum indicators continue to recover from oversold levels. Strength relative to the S&P 500 Index has been negative since March (typical of most consumer staple stocks). Sorry, Tech Talk does not offer 3-5 year opinions. Too many events can occur during that time horizon to offer a valid opinion.
October 16th, 2009 at 12:03 pm
Thanks Don for your insights on MO. considering the price of the USD and CAD dollars at this time, would one be better off purchasing MO now, collect the dividend, get some growth and sell when the dollar goes back down? I read somewhere that people are looking at purchasing US denominated stocks because of the low US dollar. could you explain that rationale in detail as i don’t understand?
October 16th, 2009 at 12:09 pm
Don
I would like to put some money aside in US dollars…at these rates. What is the best spot to put it – soemthing that is safe but yeilds more than just the currency?
October 16th, 2009 at 5:59 pm
Hi Marc. A low U.S. Dollar has two positive impacts on U.S. based companies. Companies with international operations can consolidate offshore earnings with higher currency value than previous. In addition, companies with sales primarily in the U.S.are able to sell their products in the U.S. at a lower price than their international competitors.