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Pre-opening Comments for Wednesday October 21st
U.S. equity index futures are lower this morning. S&P 500 futures are down 4 points in pre-opening trade. Weakness can be attributed to a modest recovery in the U.S. Dollar plus profit taking on news when major companies report third quarter earnings.
Strength in the U.S. Dollar has triggered weakness in commodities priced in U.S. Dollars. Gold, silver and crude oil are trading lower before the opening. Gold is down $8 per ounce U.S. and likely will record a Stochastics sell signal today on a break below the 80% level. The sell signal will close out the period of seasonal strength that started on July 10th .
![clip_image001[1]](http://www.timingthemarket.ca/techtalk/wp-content/uploads/2009/10/clip_image001110.gif "clip_image001[1]")
Chart courtesy of StockCharts.com www.stockcharts.com
Selected S&P 500 companies are trading higher after beating third quarter consensus estimates substantially. They include Yahoo and SanDisk.
Most S&P 500 companies that reported third quarter results this morning met or slightly exceeded consensus estimates. They include Altria, Eli Lilly, Canadian National Railway, Boeing, Wells Fargo, Northern Trust, Northrop Grumman and US Bancorp. Most are trading lower when traders decided to sell on news.
Lockheed Martin was downgraded to Neutral from Buy by Morgan Keagan despite reporting better than consensus third quarter earnings yesterday. The stock is lower again on technical selling. The stock broke support yesterday.
![clip_image002[1]](http://www.timingthemarket.ca/techtalk/wp-content/uploads/2009/10/clip_image002110.gif "clip_image002[1]")
Chart courtesy of StockCharts.com www.stockcharts.com
The Canadian Dollar is under pressure again this morning, down another 0.25 cents U.S. Dennis Gartman recommended selling the Canadian Dollar this morning.
Technical Action Yesterday
Technical action by S&P 500 stocks was mixed yesterday. Nine S&P 500 stocks broke resistance (Comerica, Denbury Resources, Intuitive Surgical, MasterCard, M&T Bank, Parker Hannifin, Sealed Air, Tesoro Petroleum and Whirlpool) and six stocks broke support (Autozone, Boston Scientific, Lockheed, Marshall & Ilsley, St. Jude Medical and State Street). However, because only one stock breaking resistance changed trend and four of the six stocks breaking support changed from an uptrend to a downtrend, the Up/Down ratio fell from 9.34 to (407/48=) 8.48. More disturbing: five of the six stocks breaking support reported third quarter earnings yesterday that were in line or slightly better than consensus estimates. These are early warning signs that recent upward momentum in U.S. equity markets is waning.
Technical action by TSX Composite stocks was quiet yesterday. Two stocks broke resistance (Trinidad Drilling and Cameco) and none broke support. The Up/Down ratio was unchanged at (124/18=) 6.89.
Interesting Charts
The U.S. Information Technology sector continues to surprise on the upside. ‘Tis the season for the sector to move higher until the Las Vegas Consumer Electronic show in mid January. After the close yesterday, Yahoo, Inc (NASDAQ:YHOO) – $18.08 reported higher that expected third quarter earnings. Consensus was $0.07 versus $0.04 per share last year. Actual was $0.15 per share. After release of the news, the stock quickly moved above resistance at $17.94. Next technical target is $19.60.
Chart courtesy of StockCharts.com www.stockcharts.com
SanDisk Corp (NASDAQ:SNDK) – $23.60, a semiconductor producer also reported higher than expected third quarter earnings. Consensus was $0.25 versus a loss $0.74.per share last year. Actual operating profit was $0.75 per share. The stock quickly broke resistance at $23.20. Next technical target is $27.40
Chart courtesy of StockCharts.com www.stockcharts.com
Strength in SanDisk is expected to spill into the Philadelphia Semi-conductor Index at the opening.
Chart courtesy of StockCharts.com www.stockcharts.com
Uranium stocks came alive yesterday on news that the spot price of uranium gained another $1.75. per lb last week.
Chart courtesy of www.Uxc.com
Cameco Corp (CCO:TSE) – $32.51 broke resistance at $32.97. Next technical target is $39.00.
Chart courtesy of StockCharts.com www.stockcharts.com
Uranium Participation Corp units (U:TSE) – $7.16 broke resistance at $7.00. Next technical target is $8.00.
Chart courtesy of StockCharts.com www.stockcharts.com
Merv Burak has turned short and intermediate bullish on the sector. Following is an excerpt from his letter written last night (available at http://techuranium.blogspot.com/ )
Merv’s Daily Commentary 20 Oct 2009
After The Close, 20 Oct 2009
Merv’s Daily Uranium Index
Market Data
Open: 185.25
High: 195.76
Low: 181.53
Close: 179.81
Volume: 13660
Note that the volume is an average volume of round lot sales for the 5 0 component stocks. For total volume, multiply by 5000.
Well, you can’t knock the action. The Daily Index took another swipe at the up side and is now within striking distance from a new recovery high. The volume indicator has already moved into new recovery highs for a very good technical sign of strength behind the move. Speculators are again getting into uranium stocks. Uranium itself has moved higher this week by $1.75 after more than a $2 move last week. It seems to have bottomed out exactly where the head and shoulder pattern said it should. Still far more upside in uranium price is required before it makes its upside break, but the direction lately has been positive.
The Merv’s Daily Uranium Index closed on the up side by 5.67 points or 3.08%. There were 31 winners, 10 losers and 9 going no place. We could do with still slightly better figures here but we’ll take what we got. As for those five largest stocks, they were all gung-ho on the up side. Cameco gained 6.7%, First Uranium gained 3.6%, Paladin gained 8.8%, Uranium One gained 5.5% and Uranium Participation gained 5.5%. The best daily winner was Uracan Resources with a gain of 26.0% while the loser in the bunch was US Energy with a loss of 7.2%. Even this loss was high. The other losers were in the 4% or less bracket.
As one can imagine, everything continues to be on the positive side for the intermediate and short term. The ratings for both periods remain BULLISH.
Relative Strength in Sector SPDRs since the first week in August
Four sectors currently are outperforming the S&P 500 Index: Consumer Discretionary, Industrials, Energy and Consumer Staples. Three sectors are market performers: Materials, Information Technology and Financial Services. Two sectors continue to underperform: Health Care and Utilities.
Chart courtesy of StockCharts.com www.stockcharts.com
Chart courtesy of StockCharts.com www.stockcharts.com
Chart courtesy of StockCharts.com www.stockcharts.com
Chart courtesy of StockCharts.com www.stockcharts.com
Chart courtesy of StockCharts.com www.stockcharts.com
Chart courtesy of StockCharts.com www.stockcharts.com
Chart courtesy of StockCharts.com www.stockcharts.com
Chart courtesy of StockCharts.com www.stockcharts.com
Chart courtesy of StockCharts.com www.stockcharts.com
FP Trading Desk Comment
National Bank’s quantitative analyst says that small cap stocks have history on their side. Following is an FP Trading Desk link to the comment:
Thackray’s 2010 Investor’s guide notes that the small cap sector has a period of seasonal strength from December 19th to March 7th. Small cap stocks tend to come under pressure near year end as investors take tax losses in stocks that once were medium to large caps. They frequently are the first stocks to recover late in December and into January.
Editor’s Note: A limited number of Thackray’s 2010 Investor’s Guide will be available for sale after Tech Talk’s presentation at the Toronto World Money Show on Thursday at 1:30 PM (The book officially is available for distribution in book stores for the first time on October 25th ).
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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Tags - Previous posts for stock ticker: CCO, U
October 21st, 2009 at 1:23 am
Hi Don,
Is there any ETF for small cap stocks in canada?
October 21st, 2009 at 4:41 am
Hi Sunil. IShares offers a Canadian small cap ETF. Symbol is XCS listed on the TMX.
October 21st, 2009 at 6:17 am
Hi Don,
Is the seasonal strength for agriculture stocks over yet?
October 21st, 2009 at 7:05 am
Don,
Is there a liquid ETF for North American tech that is hedged back into Canadian dollars?
October 21st, 2009 at 9:37 am
Don,
During the Money Show in Toronto, does Tech Talk have a booth or only a single workshop on Oct. 22 at 1.30 PM?
As well you mentioned that 2010 Inverstor’s Guide will be on sale there. Will Brooke T. will be available for a chat?
Thanks and see there.
October 21st, 2009 at 9:38 am
Hi Don
Wheres support for BVF and VT? Thanks
October 21st, 2009 at 10:25 am
Hi Don,
I have been following your comments on gold. You mention the seasonality from the end of November to beginning of February. What is the seasonality for gold stocks? Do stocks and bullion follow in step? As I am invested in gold stocks at this point, and for a trade, do you think it more prudent to exit this position and look for a better entry point for gold stocks? It doesn’t look like we are going to get the stochastics sell signal today on a break below the 80% level for gold. Would you wait for this signal to exit a stock position? I note stockastics can stay about the 80% level for an extended period of time.
Thank you, DaveA
October 21st, 2009 at 10:31 am
Hi Don,
Can you please shed some light on RIM’s outlook in terms of support and resistance in Cnd? I’ve been buying at the $72 and $69 range and was wondering if I should wait longer to take a full position. Much thanks for your time and daily dose of insight.
October 21st, 2009 at 10:38 am
Hi Roy. Support for BVF is at $13.50 Cdn. Support for VT is at $9.06 Cdn.
October 21st, 2009 at 10:40 am
Hi DG. Tech Talk is offering a workshop only. Brooke Thackray will not be there, but his father will be there to sell the books.
October 21st, 2009 at 10:56 am
Don – Didnt VT just breakout over 11.20 and isnt this the seasonality for Agri stocks? So why the weakness in this one?
October 21st, 2009 at 11:55 am
Hey Roy,
check out this link
http://www.stockhouse.com/Columnists/2009/Oct/21/One-of-the-few-undervalued-sectors-in-this-market
picked up some VT at 10.87
October 21st, 2009 at 12:01 pm
Hi Dave A. Patience is a virtue. Best to wait until the Stochastic sell signal occurs on a closing basis. Also, I look for a downtick price day where price range for the day falls below the previous day’s trading range. A lower close on that day is an extra (confirming) kicker. This strategy may sound conservative because it implies that day of the sell signal could cut into profits, but it also keeps you in a trade when temptations to take an early profit are high. You’re right. It’s not there yet.
October 21st, 2009 at 12:23 pm
Hi Roy. Look for lots of ups and downs in VT between now and the end of December (as there have been since August). The key to seasonal investing is to stick with the discipline. That means holding the stock for now until near the end of the period of seasonal strength.
October 21st, 2009 at 1:11 pm
Don, seems to me your answer to Roy, “The key to seasonal investing is to stick with the discipline.” and to Dave, “…keeps you in a trade when temptations to take an early profit are high.” are cut from the same cloth.” Temptation to sell out now is strong with the markets entering a correction.