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Pre-opening Comments for Tuesday October 20th
U.S. equity index futures are slightly higher this morning. S&P 500 futures added two points in pre-opening trade. Strength reflects better than expected third quarter earnings by key U.S. companies.
Equity index futures did not respond significantly to economic news released this morning at 8:30 AM EDT. Consensus for September Producer Prices was unchanged versus a gain of 1.7% in August. Actual was a decline of 0.6%. Consensus for September Producer Prices ex food and energy was a gain of 0.1% versus a gain of 0.2% in August. Actual was a decline of 0.1%. Consensus for September Housing Starts was 610,000 versus 587,000 in August. Actual was 590,000.
Key companies reporting exceptional fiscal third quarter earnings gains were Apple, Texas Instruments and Caterpillar. Consensus for Apple’s fiscal fourth quarter was $1.42 versus $1.26 per share last year. Actual was $1.82 per share. Consensus for Texas Instruments was $0.39 versus $0.43 per share last year. Actual was $0.42 per share. Consensus for Caterpillar was $0.06 versus $1.39 per share last year. Actual was $0.64 per share. Each company raised its guidance.
Other companies reporting slightly higher than consensus third quarter earnings included Coach, Quest Diagnostics, Lexmark, Pfizer and Dupont.
Boeing is down 2% after Morgan Stanley downgraded the stock from Equal Weight to Under Weight. Target goes from $50 to $43.
Wendys/Arbys is down 2% after UBS downgraded the stock from Buy to Neutral.
Morgan Stanley upgraded the Cable/Satellite sector from Caution to In Line. Shaw Communications and Cablevision were upgraded and their target prices were raised.
Technical Action Yesterday
Technical action by S&P 500 stocks remains bullish. Another thirty S&P 500 stocks broke resistance yesterday and none broke support. The Up/Down ratio increased from 9.07 to (411/44=) 9.34.
Technical action by TSX Composite stocks also remains bullish. Another three TSX Composite stocks broke resistance (Agrium, Toromont and UTS). None broke support. The Up/Down ratio increased from 6.83 to (124/18=) 6.89.
Interesting Charts
Two sectors, currently enjoying favourable seasonal influences, led North American equity markets yesterday: agriculture and information technology.
Strength in the agriculture sector was triggered by a report from Merrill Lynch that Potash Corp. could be a potential takeover candidate by BHP Billiton. The stock quickly broke a key resistance level in U.S. Dollars on higher than average volume. Next technical target is $121 U.S. where resistance exists.
Chart courtesy of StockCharts.com www.stockcharts.com
Other fertilizer stocks quickly responded. The sector is recovering from short term oversold levels. Agrium broke above a key resistance level at $54.43. Next technical target is $64.50 U.S.
Chart courtesy of StockCharts.com
Both COW and MOO, the agriculture equity ETFs recorded exceptional gains.
Chart courtesy of StockCharts.com www.stockcharts.com
The Information Technology sector was given a major boost after the close yesterday when Apple reported blow out third quarter earnings and offered positive fourth quarter guidance. Apple broke above its all time high at $202.96 shortly after the announcement. Virtually all analysts following the company raised their target price on the stock.
Chart courtesy of StockCharts.com www.stockcharts.com
Texas Instruments, the second largest U.S. semi-conductor company behind Intel also reported higher than consensus third quarter earnings and raised guidance. The stock quickly rose to $24.50 and is testing resistance at $25.35.
Chart courtesy of StockCharts.com www.stockcharts.com
The Philadelphia Semi-conductor Index (SOX) is expected to open at a 13 month high this morning. See Tech Talk’s report on the sector in yesterday’s Tech Talk.
Chart courtesy of StockCharts.com www.stockcharts.com
On the other hand, companies reporting third quarter results yesterday other than the agriculture and information technology sectors had a difficult time. Traders were selling on news. Examples included Hasbro and BB&T Banks. Both reported slightly better than consensus third quarter results. Both came under significant profit taking pressures.
Chart courtesy of StockCharts.com www.stockcharts.com
Chart courtesy of StockCharts.com www.stockcharts.com
CSTA News
The World Money show taking place in Toronto October 20-22 will feature a host of great technical analysts. Several CSTA Directors will be speaking at this event including, Don Vialoux, William Chin and Larry Berman. The event is FREE so take advantage of this great offer.
Next CSTA Meeting in Ottawa
Presenter: Doug O’Brien, Winner of the 2008-2009 Financial Post Stock Challenge contest
Location: 1140 Morrisson Drive, Suite 220, Nepean
Date: Saturday October 24th
Time: 2:00 PM -4:00 PM
Cost: $0 for members and first time attendees
$20 for others
Registration: www.csta.org
Next CSTA Meeting in Toronto
Presenter: Bill Pinchin
Topic: Of Pivots, Zigzags and Market Direction
Location: The Strathcona Hotel, 60 York St (Across from the Royal York Hotel)
Date: Wednesday October 28th
Time: 4:30-5:30 PM
Cost: $0 for members and first time attendees
$15 for others
Registration: www.csta.org
Adrienne Toghraie’s “Trader’s Coach Column
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Dealing With Mistakes
By Adrienne Toghraie, Trader’s Coach
Everyone makes mistakes. But, for traders, a small mistake can mean a major loss, and a big mistake can mean the loss of a trading career. With so much at stake, it is important how a trader deals with mistakes. It is also just as important how a trader has dealt with mistakes in the past.
The perfection trap
Joseph comes from a long line of perfectionists. As a trader, he finds it necessary to achieve perfect results from a perfect system. Needless to say, he experiences a great deal of frustration and disappointment.
The hardest thing for Joseph to deal with is when he makes a mistake. After he discovers that he has made one, he experiences a rapid fire list of responses that begin with panic and progress to denial and then to anger, which he directs toward some outside source. The object of his anger can be a person who has distracted him (forcing him to make a mistake) or who is somehow responsible. Or, he can become angry at some company or institution or vendor who provided him with support or market data.
Regardless of the object of Joseph’s anger, the point is always that Joseph was not the cause of the mistake. For Joseph to make a mistake would be to acknowledge that he is not perfect. And that would be completely unacceptable in his universe.
Unfortunately, because Joseph can never take responsibility for his trading mistakes, he can never learn from them and is doomed to repeat them.
On the other hand, there is Paul, who falls apart emotionally whenever he makes a mistake. Paul feels overwhelmed by the knowledge that he has made a mistake. Each mistake underscores his feelings of inadequacy, undermining his self-esteem and confidence. Thus, each time he makes a mistake, he loses more and more of his trading acumen, causing him to make even more mistakes.
In each case, our two traders are responding to voices from the past. For Joseph, the voice is that of his parents telling him that he must be perfect, that anything less than perfection is unacceptable, and that he would be unworthy of their love and respect if he were found to be imperfect. His response to this unrealistic set of demands is to deflect all evidence of his imperfection onto others. Therefore, he can never be accused of having made a mistake.
Paul was raised in a similar household. However, his reaction to his family’s demand for perfection was to internalize their disappointment whenever he failed to achieve their expectations. Each time he made a mistake, he felt smaller and smaller, more and more inadequate. He compensated for these feelings by working harder and harder to be more and more perfect, and he did everything in his power to minimize the risk of making a mistake. So, on the outside, everyone who knew him thought of him as a very hard-working, exceptionally intelligent and productive individual. However, he was never able to achieve his potential as a trader because he had reduced his risk levels to near zero.
These are only two of the many different patterns traders have of dealing with mistakes that are not productive, and ultimately self-destructive. In each case, the mistakes of the past have cast long shadows into the future.
Listening to your self talk
How can you tell if your past is determining how you deal with mistakes? Just listen to what you say to yourself when you find that you have made a mistake. Observing your own self-talk is the fastest way to assess your own pattern. For example, do you:
· Rage and swear at some outside individual or entity and blame them for the mistake?
· Pretend that nothing happened?
· Severely condemn yourself for being stupid and inadequate?
· Talk about how hopeless it all is and fall into a depression?
· Take out your upset on those around you?
· Hit, throw or break things?
· Leave your trading station and disappear for hours, go to a movie, drive around town, or find some other way to escape?
· Resort to drinking or taking drugs to forget?
As you can see, all of these responses to making a mistake avoid the reality of the event instead of handling the mistake directly, assessing the actual damage, finding the cause and attempting to correct it (if possible) or minimizing the damage (if possible), and finally, learning from the mistake to make certain you do not repeat it. Once these steps are taken, we move on. This is the protocol for handling a mistake.
Notice that there is no judgment or blame attached to making the mistake. In fact, there is no emotional element in the process at all! Making a mistake is just as natural and inevitable as having the sun come up each morning. As human beings, we are programmed to make mistakes on a periodic basis (since we are not perfect) with some of us having shorter periods than others.
The minute we attach emotion to making a mistake, we signal that we have deep and unresolved issues that need to be addressed. To be a successful trader with a long and happy career, we have to find a way to handle the inevitable mistakes that we are going to make that will result in losses. For that reason, it is essential that you tune into your reaction the next time you make a mistake. If you find yourself reacting in one of the ways outlined above, you might seriously consider working with someone who understands the psychology of trading and has dealt with others who have had similar problems. You want to get at the root of the issue and transform your pattern of reaction to one that is positive and productive.
Adrienne Toghraie, Trader’s Coach
Presents
Overcoming 15 Sabotage Traps in Trading & Investing Workshop
No Charge – Live Event
Wednesday, October 28 – 6:00 pm – 8:00 pm
Washington DC Area
To Register – Call 919-851-8288
Elliott Wave Training Sessions
Elliott Wave International is offering two sessions in Canada as part of a program offered around the world. Following is a link that offers more information:
http://www.elliottwave.com/wave/bmtaff
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 20th, 2009 at 5:18 am
Good Morning Don
Above you mentioned POT has broken above a key resistance in “US” dollars. Does that also mean that it has broken resistance on the CDN exchange and we can now buy on the CDN side as well? If not, why not? Why the discrepancy wrt to this one and RIM (CDN/US)? Thanks in advance for your response.
October 20th, 2009 at 7:04 am
Hi Roy. The difference in price of POT in U.S. versus Canadian exchanges is entirely due to changes in currency. Price is arbitraged between markets. A U.S. Dollar chart is more meaningful than a Canadian Dollar chart because the value of trading in the stock in U.S. Dollars significantly exceeds the value of trading in the stock in Canadian Dollars.
October 20th, 2009 at 8:27 am
Don Thanks for the above reply. My apology if I sound ignorant, but has POT also broken out on the CDN side or where is the breakout for it? I do not have a US account. Thanks.
October 20th, 2009 at 8:57 am
Hi Roy. POT has support at $91.07 Cdn and resistance at $109.53 Cdn.
October 20th, 2009 at 10:08 am
Hi Don,
Natural Prices seems to come up a long way from near bottoms, considering the seasonality is it still good to enter Claymore etf “GAS”.
Regards,
Sunil
October 20th, 2009 at 1:21 pm
Hello Don,
How will the new investment tax on Brazilian investment purchases affect Brazillian ADR’s – will the tax be factored into the purchase price of the ADR, or will the broker need to withdraw an additional 2% from your trading account when you make the purchase?
Thank you,
Richard