Cracks in U.S. equity markets

Technical action by S&P 500 stocks turned mixed on the charts this morning despite better than expected fiscal third quarter earnings reports. Many reporting companies including Apple, Inc (NASDAQ AAPL) – $200.36, Caterpillar Inc. (NYSE:CAT) – $60.04 opened higher on better than expected quarterly earnings, but quickly came under profit taking pressures. Others including Boston Scientific Corp. (NYSE:BSX) – $8.55, St. Jude Medical Inc. (NYSE: STJ) – $32.41, State Street Corp (NYSE:STT) and Marshall & Ilsley Corp.(NYSE:MI)- $6.42 reported mixed quarterly results, broke support levels and established intermediate downtrends. All, also recorded short term momentum sell signals.

Charts courtesy of StockCharts.com www.stockcharts.com

Canadian Dollar ($CDW 95.37 U.S. cents)

News event: Bank of Canada talks down the Canadian Dollar

Technical comment: Consensus by most economists is that the Canadian Dollar shortly will reach par or higher as the U.S. Dollar trends lower. The charts suggest that a sustained move above par is unlikely in the short term, but eventually will happen (probably by next spring). The Canadian Dollar currently has a positive intermediate technical profile. Intermediate trend is up. It trades above its 50 and 200 day moving average. However, it recently found resistance at the bottom of a range of resistance between 97 and 103. In addition, short term momentum indicators this morning have rolled over from overbought levels. RSI recorded a sell signal today after falling below 70%. MACD is about to record a sell signal on a cross over of moving averages. Stochastics will record a sell signal on a close below 80%. Downside risk is to its 50 day moving average at 93.00 cents U.S..

U.S. equity markets

News event: BCA Research predicts a deep and vicious correction in the second half of 2010

FP Trading Desk link:

http://network.nationalpost.com/np/blogs/tradingdesk/archive/2009/10/19/a-deep-and-vicious-correction-to-come.aspx#

Technical comment: The prediction by BCA Research is early, but could prove to be accurate if the U.S. Presidential Cycle repeats. Historically, the weakest quarter in the U.S. Presidential Cycle is the third quarter in the second year after a President is elected. Political and economic uncertainties grow during this period as the U.S. mid-term election in early November approaches. Controversial issues such as higher government spending and the higher cost of “cap and trade”, health care and regulation will be hot topics next summer.

Chart courtesy of SeasonalCharts.com www.seasonalcharts.com

Don Vialoux

Director of the Canadian Society of Technical Analysts

Comments offered in this report are for information only. They should not be considered as advice to purchase or to sell mentioned securities. An attempt to provide accurate data has been made, but accuracy is not guaranteed. Comments are from Don Vialoux and not from the Canadian Society of Technical Analysts.

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Tags - Previous posts for stock ticker: AAPL, bsx, cat, mi, stj, STT

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