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Pre-opening Comments for Wednesday November 25th
U.S. equity index futures are higher this morning after release of encouraging economic news at 8:30 AM EST. S&P500 futures were up 4 points. Weekly jobless claims finally broke below the 500,000 level. They dropped to 466,000. October personal spending was in line with expectations. Consensus was a gain of 0.2% versus 0.0% in September. Actual was a gain of 0.2%. October personal spending was higher than expected. Consensus was a gain of 0.5% versus -0.5% in September. Actual was a gain of 0.7%. October durable goods orders were less than expected. Consensus was a gain of 0.5% versus a gain of 1.0% in September. Actual was a decline of 0.6%.
Economic news further weakened the U.S. Dollar. The U.S. Dollar fell to a 15 month low at 74.49 after breaking through short term support at 74.68.
![clip_image001[1]](http://www.timingthemarket.ca/techtalk/wp-content/uploads/2009/11/clip_image001111.gif "clip_image001[1]")
Chart courtesy of StockCharts.com www.stockcharts.com
Conversely, the Euro broke resistance at150.47 to reach a 15 month high.
![clip_image002[1]](http://www.timingthemarket.ca/techtalk/wp-content/uploads/2009/11/clip_image002111.gif "clip_image002[1]")
Chart courtesy of StockCharts.com www.stockcharts.com
Commodities priced in U.S. Dollars were stronger. Gold and natural gas were notably stronger. Gold added $15 to another all time high. Natural gas jumped $0.11 per MBtu. ‘Tis the season for natural gas prices to move higher in December!
![clip_image003[1]](http://www.timingthemarket.ca/techtalk/wp-content/uploads/2009/11/clip_image003110.gif "clip_image003[1]")
Chart courtesy of StockCharts.com www.stockcharts.com
Companies reporting higher than expected calendar third quarter earnings overnight included Tiffany, J Cruse and Deere.
JDS Uniphase added 2% after Citigroup initiated coverage on the stock with a Buy recommendation.
Activity in equity markets on both sides of the border is expected to wind down this afternoon prior to start of the U.S. Thanksgiving holiday.
Editor’s Note: Mr. Vialoux is scheduled to appear on BNN Television tomorrow at approximately 4:15 PM EST. Topic is equity market performance around the U.S. Thanksgiving holiday.
Technical Action Yesterday
Technical action by S&P 500 stocks remained quietly bullish yesterday. Five S&P 500 stocks broke resistance (Analog Devices, Frontier Communications, Verizon, Forest Labs and Progress Energy and two stocks broke support (Limited Brands and Tenet Healthcare). The Up/Down ratio improved from 2.69 to (312/114=) 2.74.
Technical action by TSX Composite stocks also remained quietly bullish. Two TSX Composite stocks broke resistance (Detour Gold and Scotia Bank) and none broke support. The Up/Down ratio improved from 3.43 to (135/39=) 3.46.
Interesting Charts
Canadian bank stocks are looking for an excuse to move higher. Better than expected fourth quarter results by Bank of Montreal released early yesterday triggered an initial positive response, but was not sustained. Scotia Bank managed to break resistance to reach a 13 month high. Most of Canada’s big banks report fiscal fourth quarter earnings next Thursday. Bank analysts have been ramping up fourth quarter expectations during the past week. ‘Tis the season to own the sector!
Chart courtesy of StockCharts.com www.stockcharts.com
The seasonal trade in the Transportation sector has come to an end. According to Thackray’s 2010 Investor’s Guide, the average optimal date each year to enter the trade is September 24th and the average optimal date to exit the trade is November 13th. Technical analysis fine tunes the trade. Entry this year was triggered on October 5th. Exit based on technicals was triggered yesterday. Gain from the trade was 5.1% plus dividends.
Chart courtesy of StockCharts.com www.stockcharts.com
Weekly Relative Strength Review of Sector SPDRs
Not much change during the past week! Outperforming sectors were Information Technology, Consumer Staples, Energy, Industrials, Consumer Discretionary and Health Care. Materials was market perform. Underperforming sectors were Financials and Utilities. Energy showed the greatest deterioration during the past week.
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
U.S. Thanksgiving Holiday Trade
According to Thackray’s 2010 Investor’s Guide, the two strongest day of the year for U.S. equity markets historically have been the day before the U.S. Thanksgiving holiday (i.e. today) and the day after the U.S. Thanksgiving holiday (Friday). Average gain per period since 1950 is 0.8%. The trade has been profitable 78% of the time. What about this year? U. S equity markets are significantly short term overbought this year. Chances are less than average that the trade will be profitable this year.
Thackray’s 2010 Investor’s Guide
Tech Talk frequently mentions Brooke Thackray and his book entitled, “Thackray’s 2010 Investor’s Guide”. The book summarizes attractive seasonal trades that are available during the year. The book can be purchased electronically or directly at Chapters, Amazon.ca, Barnes & Noble and Amazon.com. Following are links to these book stores:
http://www.chapters.indigo.ca/books/Thackrays-2010-Investors-Guide-Brooke-Thackray/9780978220037-item.html?ref=Search+Books:+%27thackray%27s%27
http://www.amazon.ca/gp/product/097822003X/ref=s9_sims_gw_s0_p14_i1?pf_rd_m=A3DWYIK6Y9EEQB&pf_rd_s=center-1&pf_rd_r=0773ED3P045NMSDK94ZA&pf_rd_t=101&pf_rd_p=465532811&pf_rd_i=915398
http://search.barnesandnoble.com/Thackrays-2010-Investors-Guide/Brooke-Thackray/e/9780978220037/?itm=1
http://www.amazon.com/Thackrays-2010-Investors-Guide-Seasonal/dp/097822003X/ref=sr_1_1?ie=UTF8&s=books&qid=1252640152&sr=8-1
Seasonal trades in the book that currently are active include Agriculture, Information Technology, Consumer Discretionary, Retail and Metals & Mining.
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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November 25th, 2009 at 6:14 am
Markets are over extended. But is anyone going to play HSU for the Thanksgiving Holiday trade??
November 25th, 2009 at 7:03 am
Good morning Don,
Have you ever done a study on trading in and out during periods of seasonal strength? Using the Transports and the same entry and exit criteria, there would have been two trades. I know it is very easy to trade after the fact, but just wondering if there is any research on this?
Thanks
Ken
November 25th, 2009 at 7:21 am
Hi Don
You mentioned a few weeks ago that a new product would be coming out soon that would help investors that buy U.S. equities to hedge the currency risk. Do you know more about this,when the product will come out, or where I can find out more?
Thanks
Jeff
November 25th, 2009 at 7:23 am
Don , any thoughts as to the weeker performance of the Dow Transportation sector even with oil dropping over the last week or so ??
Regards
George
November 25th, 2009 at 7:28 am
Hi Ken. Technical information between seasonal trades is provided, but is not used to initiate or end seasonal trades. The intention is to show investors how to use a disciplined approach to enter and to exit seasonal trades. Are there multiple opportunities to trade in and out during a period of seasonal strength? Definitely, and many short term traders will take advantage. Feel free. However, recommending short term trades of this nature are beyond the scope of Tech Talk services.
November 25th, 2009 at 7:31 am
Hi Jeff. Our new ETF provides this service. We have an opportunity to fully hedge U.S. ETF positions in the fund (if we choose). Canadian investors owning HAC now have the potential to own the U.S. information technology sector, the U.S. Healthcare sector, etc. in a fund that protects them against currency risk.
November 25th, 2009 at 7:33 am
Hi George. Today’s Tech Talk notes that the period of seasonal strength for the Transportation sector has ended. Technicals for major stocks in the sector are rolling over. It’s time to move to another seasonal trade.
November 25th, 2009 at 9:46 am
Don, you point out the Transportation sector issued a sell signal yesterday. I hold CP, which was late to the party. I am not seeing a sell yet. Would you concur?
November 25th, 2009 at 9:58 am
Hi Don
Thanks as always for your insights. I have put a position in HAC based on your involvement. Could you please advise as to whether the trading price for the etf is determined by the value of the securities held or is it simply based on what the public is willing to pay for the etf. I read the prospectus (always fun) and it seemed to suggest the former but it wasn’t entirely clear (to me). Thank you.
November 25th, 2009 at 10:17 am
Don – Could you please provide TA for POT.TO? Thanks as always.
November 25th, 2009 at 10:40 am
Neil, if I may be so presumptious as to answer your question, the NAV or trading price of all open ended funds including ETFs and mutual funds, is based on the total value of the underlying securities held, as the fund buys and sells those securities according to the cash coming into or going out of the fund; it has nothing to do with what people are willing to pay for the fund only what people are willing to pay for those underlying securities. Closed-end funds on the other hand, buy a specified quantity of the equity and sells units accordingly so the price of the fund does not represent precisely the value of the underlying security.
November 25th, 2009 at 11:15 am
Hello,
This is the only Q&A that I follow, so I apologize for the stupid question but I don’t know where else to ask: what do you do with your cash in between the trades? Do you keep it in cash or do you buy something, if you buy then what (example)?
Thanks a lot and thank you Don for all your effort, it is very much appreciated.
November 25th, 2009 at 11:54 am
Hi Fred. That’s a correct reading on CP. Close, but no cigar.
November 25th, 2009 at 11:56 am
Hi Isabela. Lots of places to put cash, but not much yield. Depends upon the size and the need for liquidity. Possibilities include bank deposits, T-bills, money market instruments and ETFs invested in short term debt instruments.
November 25th, 2009 at 12:03 pm
Hi Roy. POT currently has a positive intermediate profile. Intermediate trend is up. The stock trades above its 50 and 200 day moving averages. Seasonal influences are positive until the end of December. Its short term technical profile is less positive. Short term momentum indictors are overbought. RSI and Stochastics are showing early signs of rolling over. Preferred strategy is to hold until close to the end of the period of seasonal strength. However, short term investors may want to act sooner based on negative short term momentum indicators when they happen (e.g. a move by Stochastics below 80% and/or a negative MACD crossover). That’s your call.
November 25th, 2009 at 3:40 pm
Thanks Fred
I appreciate you taking the time to explain such a basic concept.
November 25th, 2009 at 5:51 pm
Hi Don,
I want to first thank you for a fresh look at investing in these markets good and bad. My questions is regarding the new ETF, you advise on. So can one assume that the Horizon AlphaPro Seasonal Rotation ETF (HAC), is the couch Potato approach to the Seasonality and Technical investing we follow here? Or for someone novice is a good way to get exposure to this style of investing.
November 25th, 2009 at 6:19 pm
Dear Don, It is hard for me to make sense of all this sophisticated analysis. I am sitting on cash I collected by selling the market at the bottom. I have seen the market go up but did not have the courage to get back in. Any advice where I can invest this money. I don’t want to lose any more capital but then this money is not a must for my survival. Thanks for your valuable advice.
November 26th, 2009 at 8:27 am
Hi Neil. ETFs trade approximately at their Net Asset Value. Market makers bracket their bid/ask spreads around NAV.
November 26th, 2009 at 8:37 am
Hi Joe. That’s one way of putting it. For the past nine year, I have explained why “Buy and Hold” does not work anymore. Equity markets move in 16 year cycles alternating from good (1950-1966, 1983-1999)when markets trend higher to bad (1934-1950,1966-1982)when markets are choppy with no defined long term trend. The current cycle is a bad cycle that is scheduled to last until 2015. The best way to profit during a bad cycle is to complete trades lasting 1-6 months that take advantage of seasonal trends. HAC is designed for investors who would like someone to do these trades for them in a well defined disciplined way. With this fund, “Buy and Hold” works.
November 26th, 2009 at 8:49 am
Hi Vin. Emotion unfortunately has a significant impact on most investors. That’s why Tech Talk has invited Adrienne Toghraie to offer her “trading coach” column that encourages development of an investment plan and the courage (discipline) to impliment the plan. The intention is to minimize emotion when making investment decisions. Tech Talk’s disciplined approach using a combination of technical, fundamental and seasonality research is one of many possible plans. Best to do your homework by developing a plan that fits your investment style before deciding to re-enter equity markets.