Pre-opening Comments for Wednesday December 23^rd

U.S. equity index futures are higher again this morning. The Santa Claus rally continues. S&P 500 futures added 3 points. Slight weakness in the U.S. Dollar helped. Commodities priced in U.S. Dollars including crude oil, copper and silver were trading slightly higher.

Strength in copper can be attributed partially to a threatened labour strike at one of Chile’s largest copper mines. Base metal stocks in Europe are trading higher. ‘Tis the season for base metal stocks to move higher!

The response to economic news released at 8:30 AM EST was minimal. Consensus for November Personal Income was an increase to 0.5% from 0.2% in October. Actual was an increase to 0.4%. Consensus for November Personal Spending was an increase of 0.7% versus an increase of 0.7% in October. Actual was an increase of 0.5%.

Art Cashin noted on CNBC this morning that the year end shift to small cap stocks has started. The phenomenon is triggered partially by a recovery in equity prices following the end of tax loss selling pressures and usually continues into January.

Canada’s GDP improved in October, but at a slower than expected rate. Consensus was an increase of 0.3%. Actual was an increase of 0.2%.

Despite the lower than expected increase in Canada’s GDP, the Canadian Dollar added more than 1.00 cent U.S. in overnight trading. Rumors are circulating that the Russian central bank and possibly the Chinese central bank are purchasing Canadian Dollars in order to diversify their currency reserves.

Chart courtesy of StockCharts.com www.stockcharts.com

Research in Motion recovered slightly this morning after falling 3.5% in late trading yesterday. The company’s email distribution system crashed late yesterday. Systems are returning to normal this morning.

Potash Corp eased 0.5% after TD Newcrest downgraded the stock from Hold to Reduce. Target is $95 U.S.

Red Hat added 7% after reporting higher than expected quarterly earnings.

Schlumberger added 2% after Barclays upgraded the stock from Equal Weight to Over Weight. Target price was increased from $64 to $73.

Dollar General gained 4% after Merrill, Barclays, Citigroup and Deutsche Bank resumed coverage with a Buy recommendation.

 

Technical Action Yesterday

Technical action by S&P 500 stocks was bullish again yesterday. Another 12 S&P 500 stocks broke resistance (AK Steel, Biogen, Coca Cola Enterprises, EOG Energy, Jabil, King Pharmaceuticals, MBIA, Pioneer Natural Resources, Sears Holdings, State Street, Teradyne and Vulcan Materials) and none broke support. The Up/Down ratio increased from 3.40 to (339/92=) 3.68.

Technical action by TSX Composite Index stocks also was bullish yesterday. Five TSX stocks broke resistance (Celestica, Extendicare, SNC Lavalin, Systems Xcellence and Baytex) and none broke support. The Up/Down ratio increased from 4.55 to (143/29=) 4.93. However, nine more stocks were added to the TSX Composite Index on Monday. All had an uptrend. Accordingly, the adjusted Up/Down ratio rose to (152/29=) 5.24.

Interesting Charts

The S&P 500 Index closed at a 14 month high yesterday.

Chart courtesy of StockCharts.com www.stockcharts.com

iShares on the Russell 2000 Index broke resistance at $62.61 to reach a 14 month high. ‘Tis the season of the sector to move higher!

Chart courtesy of StockCharts.com www.stockcharts.com

Other S&P 500 stocks with favourable seasonal characteristics also broke resistance to reach new highs:

Chart courtesy of StockCharts.com www.stockcharts.com

Chart courtesy of StockCharts.com www.stockcharts.com

Calendar Fourth Quarter Earnings per Share Estimates for TSX 60 Companies

Finally, fourth quarter earnings on a year-over-year basis are expected on average to show gains. Average (median) gain for Canada’s top 60 companies is 6.38%. However, the gains at best are uneven. Twenty two companies are expected to report lower earnings and thirty two companies are expected to report higher earnings. Data for six companies was not available. Notable gains are expected to come from gold companies, Research in Motion, Rogers Communications and SNC Lavalin. Notable declines are expected to come from energy companies, Potash Corp. and Agrium.

 

* U.S. Dollars

** Median

ETF News

Dollar ETF Issuing More Shares as Demand Soars

The PowerShares DB US Dollar Bullish Fund is seeking to issue 240 million new shares to keep up with demand from investors betting the U.S. currency will continue to rally. Volume in the exchange traded fund, which tracks the U.S. dollar, has spiked sharply in recent days. Also known as the UUP fund, the ETF has rallied nearly 5% since late October and has coincided with a bout of strength in the U.S. dollar index.

ETFs Soak in November Asset Inflows

December 17, 2009 at 2:50 pm by ETF.com

Recent Morningstar data finds that investors are leaving the sidelines and buying into riskier instruments. Exchange-traded funds enjoyed a healthy $14 billion in inflows in November alone.

Exchange-traded funds have brought in $77.8 billion year-to-date, with nine straight months of net inflows. Much of the $14 billion in November inflows went to emerging-market and international equity funds, which secured a total of $4 billion, the largest gain of any category, according to the press release. ETF investors were also particularly bullish on the US dollar and generated a total of $1.1 billion in inflows for currency funds.

November was the best month for ETF launches, with a total of 24 new ETFs making their way to the market. The total number of ETFs launched in 2009 rose to 116 funds.

New ETF Taps into China’s Energy

December 17, 2009 at 2:42 pm by ETF.com

Capitalizing on high energy demand in China, Global X Management launched the Global X China Energy ETF (CHIE) on Wednesday. The fund is the first to tap into the strength of energy and utility companies inside mainland China.

The fund will seek to replicate the returns of the S-BOX China Energy Index. The underlying index is composed 42% of oil and gas stocks, 23% of alternative energy investments, 15% in coal, 14% electric and the remainder in energy services companies, according to a press release. It is expected that China will emerge as the largest consumer of energy by 2010, paving the way for rapid growth in China’s infrastructure.

The Global X China Energy ETF is the sixth new fund created by Global X to track independent Chinese sectors. The new fund, as well as the five already issued, come with an annual expense of .65%.

Gold ETF Competition Intensifies with New Filing

December 17, 2009 at 2:35 pm by ETF.com

A Canadian firm is trying its luck with a gold ETF, hoping its niche will shine through the established competition. Sprott Asset Management has filed with the SEC for a $575 million gold trust IPO.

The Sprott Physical Gold Trust (PHYS) will be dual listed on the NYSE and Toronto Stock Exchange, and the ETF will provide investors with exposure to 100% physical metals. The fund seeks to give investors a safe haven investment that is backed entirely by physical metals with no counter-party risks or futures exposure. The fund has an expense ratio capped at .65%, according to the SEC filing.

Sprott Asset Management is no newcomer to gold. The company oversees $4.2 billion in investor assets, with nearly one-sixth of all assets invested in physical metals.

John Hancock Contemplates Active ETF Space

December 17, 2009 at 2:28 pm by ETF.com

Following the trend of other mutual fund companies capitalizing on the ETF platform, a John Hancock spokesperson indicated their consideration of entering the actively-managed space.

Keith Hartstein, president of the fund unit for John Hancock, said internal discussions were continuing regarding the issuance of an actively-managed, John Hancock-branded fund, Investment News reports. In his own statement, Hartstein said, “There is nothing that leads me to believe that actively managed ETFs are going to be successful,” but later added, “I want to be positioned so that I don’t get caught short.”

Hartstein’s comments reflect relative unpopularity of actively-managed funds, which lack both the assets and the track record required for investors to take notice. However, as the space develops, actively-managed funds could open up a new “land grab” that took place when ETFs first arrived on the stock markets. At this time, no SEC filing by John Hancock has been made.

Keith Richards on BNN Television

Keith appeared yesterday. Following is a link to his comment:

http://watch.bnn.ca/clip249058#clip249058

Thackray’s 2010 Investor’s Guide: A great Christmas Present

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 below or by visiting your local bookstore.

U.S. Visitors click here: Thackray’s 2010 Investor’s Guide (from Amazon.com)

Seasonal trades in the book that currently are active include Agriculture, Information Technology, Consumer Discretionary, Small Cap 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.

Don Vialoux is a research analyst for JovInvestment Management Inc. All of the views expressed herein are the personal views of the author and are not necessarily the views of JovInvestment Management Inc., although any of the recommendations found herein may be reflected in positions or transactions in the various client portfolios managed by JovInvestment Management Inc

HAP Seasonal Rotation E.T.F. | HAC-T $10.18 December 22, 2009

 

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