Pre-opening Comments for Tuesday January 26th
U.S. equity index futures are lower this morning despite encouraging fourth quarter earnings news released overnight. S&P 500 futures slipped 4 points in pre-opening trade.
The S&P/Case Shiller Home Price Index for November showed slight deterioration on a month to month basis but an improvement on a year over year basis. Prices on a month to month basis for the 20 largest U.S. cities slipped 0.2%. Five of the 20 cities recorded a gain. On a year over year basis home prices were down only 5.3%.
The U.S. Dollar is slightly stronger this morning. Commodities priced in U.S. Dollars including gold, silver, copper and crude oil are trading lower.
Most fourth quarter earnings reports released overnight exceeded consensus estimates. Companies reporting better than expected earnings included Apple, Amgen, Dupont, Corning, Texas Instruments, Zions Bancorporation, Nucor and Johnson & Johnson.
Celestica added 1% after Credit Suisse raised its rating from Neutral to Outperform. Target was raised from $9.50 to $11.50 U.S.
The two day Federal Open Market Committee meeting to determine U.S. administered interest rates starts today. Results of the meeting are expected to be released tomorrow at 2:15 PM EST. No change in the Fed Fund rate is anticipated.
Technical Action Yesterday
Despite U.S. equity market gains yesterday, no S&P 500 stocks broke above resistance and nine stocks broke support (Allergan, Amphenol, Archer Daniels Midland, First Horizon, FPL Group, Murphy Oil, Radio Shack, Teradyne and Vulcan Minerals). The revised Up/Down ratio fell from 4.40 to (337/82=) 4.11.
Technical action by TSX Composite stocks was quiet. No TSX stocks broke resistance and one stock broke support (Detour Gold). The revised Up/Down ratio slipped from 4.33 to (155/36=) 4.31.
Weekly Relative Strength Review of Sector SPDRs
(Since the seasonal U.S. equity index entry point on November 5th)
Interesting changes during the past week! Eight of the nine sector SPDRs broke below their 50 day moving average. Only Health Care held above that level.
Technology continues to outperform relative to its November 5th level, but is rapidly losing momentum.
Consumer Discretionary and Industrials have positive relative performance and appear to be re-accelerating. ‘Tis the season for these sectors to outperform!
Health Care remains the best performing sector and continued their outperformance last week.
Financial Services remain the worst performing sector and continued their underperform last week.
Consumer Staples remain an underperforming sector, but stabilized last week.
Utilities continue to show mild positive performance.
Energy is underperforming and extended its underperformance last week. It’s too early for the seasonal trade in the sector.
Materials continue to outperform and showed early signs of accelerating last week. Its period of seasonal strength is approaching (January 29th to May 6th). Stay tuned for additional updates.
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
Highlight from the FP Trading Desk
Headline reads, “TSX earnings recession coming to an end”. Following is a link to the report: http://network.nationalpost.com/np/blogs/tradingdesk/archive/2010/01/25/tsx-earnings-recession-coming-to-an-end.aspx
ETF News
ETFs Profit on More than Short and Long Positions
January 13, 2010 at 1:41 pm by ETF.com
There are many ways to skin the exchange-traded fund cat beyond simply short and long positions. In fact, one popular exchange-traded fund generated extra returns to investors by lending their shares last year.
Even with an annual fee, State Street beat its benchmark by .26% last year on its popular Financial Select Sector SPDR Fund (XLF: Quote, Profile, Advanced Chart, News), all while holding positions that mirrored its underlying index. During the height of the short selling spree, the fund generated a total of $21 million in stock-lending fees, mostly from Citigroup stock, in which investors were willing to pay as much as 120% annually to short, the Wall Street Journal reports.
The fund passed on a total of $17.8 million to investors and collected just $13.8 million in annual expenses, essentially paying investors to hold onto their ETF positions. While the results are atypical, the process of stock-lending and the potential profits should weigh on investors’ minds in volatile market climates.
Assets in Canadian ETFs surpass $30 billion
ETFs raise $8.5 billion in net new assets in 2009
January 22, 2010–Investors in Canada continued to embrace exchange-traded funds in 2009, pushing total ETF assets under management above $30 billion, iShares reported on Friday.
The latest data from BlackRock, Inc., which owns the iShares ETF business, shows that Canadian ETFs raised $8.5 billion in net new assets in 2009, up from $7.1 billion in 2008.
This rapid growth contributed to a worldwide trend that saw global ETF assets hit an unprecedented US$1 trillion at the end of December 2009.
CSTA News
Great news for current and potential members of the Canadian Society of Technical Analysts! The Market Technicians Association (MTA), the largest technical analysis association in the U.S. has given CSTA members access to MTA programs. These programs include access to webinars and podcasts offered by some of the world’s top technical analysts. Currently scheduled podcasts include interviews with Jake Bernstein and Dennis Gartman. On average, a podcast or webinar is available once a week. Following is part of a press release issued yesterday:
MTA and CSTA Collaboration Agreement
As a member of the MTA that currently resides in Canada, we wanted to take a few moments to make sure that you are aware of a collaboration agreement that the MTA has with the Canadian Society of Technical Analysts (CSTA), and how this agreement provides you with additional member benefits.
All members of the MTA located in Canada are granted membership into the CSTA at no additional cost. The CSTA (www.csta.org) provides a variety of benefits that help to support our members at a local level, such as chapters, an annual seminar, the Frost Award, Newsletter, e-Chat, and more.
In addition, MTA has reached an agreement with the Canadian Securities Institute and CSTA designed to encourage investors to learn more about technical analysis. Several years ago, CSTA helped design a course on technical analysis for the Canadian Securities Institute at the Chartered Technical Analysis (CMT) level one level. The MTA now accepts the Canadian Securities Institute course as equivalent to a CMT level 1 credit that can be used by students who intend to continue their studies beyond level 1. A CMT designation potentially can be earned by completing advanced courses at level 2 and level 3. Following is a press release issued yesterday:
Partnership with the Canadian Securities Institute for a
CMT Level 1 Exemption
CSI Global Education Inc.’s Technical Analysis Course graduates are now eligible to receive advanced standing towards the Market Technicians Association (MTA) Chartered Market Technician (CMT) designation. To receive this advanced standing, you must become a Member or Affiliate of the MTA within three months of completing CSI’s Technical Analysis Course (TAC). Advanced standing is also available for factual residents of Canada only.* The CSI course does not qualify for the NASD series 86 exemption.
Improve your ability to determine investment price trends with the Canadian Securities Institute’s Technical Analysis Course. You’ll analyze historical market information and measure probable price movements and potential gains. You’ll learn charting methods, how to make projections and how to apply quantitative analysis and other techniques to improve the quality of your investment decisions.
Canadian Securities Institute (CSI) Global Education Inc., is Canada’s most respected and recognized leader in financial education. CSI has launched and enhanced the careers of hundreds of thousands of financial professionals in Canada and throughout the world. CSI offers a wide variety of programs and services that are required or recommended for individuals beginning or enhancing careers throughout the financial services industry.
*Types of factual residents:
- Working temporarily outside Canada;
- Teaching or attending school in another country;
- Commuting (going back and forth daily or weekly) from Canada to your place of work in the United States; or
- Vacationing outside Canada.
Click here to see how CSI students enter the MTA’s CMT Program.
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 directly at Amazon.ca and Amazon.com. Following are links to these book stores:
Seasonal trades in the book that currently are active include Information Technology, Consumer Discretionary, Small Cap, Platinum 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 $10.08 January 25 2010
|
Open |
10.140 |
|
- |
|
|
High |
10.140 |
- |
||
|
Low |
10.020 |
- |
||
|
Bid x5 |
|
- |
||
|
Ask x50 |
|
- |
||
|
Volume |
11,695 |
- |
||
|
52-wk High 01/18 |
10.650 |
- |
||
|
52-wk Low 12/09 |
10.000 |
- |
![clip_image013[1]](http://www.timingthemarket.ca/techtalk/wp-content/uploads/2010/01/clip_image01311.gif "clip_image013[1]"){kind=small}
Net Asset Value:$10.01
January 26th, 2010 at 6:21 am
Hi Don,
While we wait for XLB-N (U.S. materials ETF), what are we watching for? Brooke mentioned in his last newsletter that there could be weakness to $33 before the buying date. And it looks like it will start out today still under $32. How much lower can it go this week?
Thanks very much.
January 26th, 2010 at 6:26 am
Don,
And while I think of it, what do we do with silver now? Add to our positions, I guess!
January 26th, 2010 at 8:51 am
XLB on a weekly basis looks like it could see $27/28. Recent highs not confirmed. China likely adding some pressure.
January 26th, 2010 at 9:13 am
Hi Don,
Can you please clarify this for me? In the Education section you say that both gold and silver are seasonally strong from the end of October to the end of February. However you keep noting that gold is in a weak period and silver is entering its strong period. What gives?
Thanks and have a good day
January 26th, 2010 at 9:57 am
Hi Jeff. The seasonal trade in XLB from January 29th to May 6th is approaching. Technicals are not there yet, although mild encouragement came through last week when the sector outperformed in a difficult equity market environment. The Index is heavily weighted in the chemical industry (approximately 60%). Fourth quarter results on a year over year basis in the chemical industry generally will be substantially lower. Prospects for a recovery in 2010 are above average. Dupont noted this morning that sales volumes and prices are rising. Please be patient.
Silver has recorded two technical entry points since the start of its period of seasonal strength at the beginning of November. The most recent entry point occurred in the last week in December. Technicals once again are oversold. A third technical entry point is likely, but it’s not there yet.
January 26th, 2010 at 10:48 am
Encouraging words from National Bank Financial:
U.S. Watch
Despite rebounding gaining 0.5% on January
25, the S&P 500 is still down 4.6% from its
January 19 cyclical high of 1150. At this
juncture, it is important to keep in mind that
equity pullbacks are part of every economic
recovery. As the table below shows, the
amplitude of the average pullback twelve
months after the end of a recession is13%, or
8.8% if we exclude 2001. The reason we do not
view the 2001 episode (-33.8%) as a probable
scenario this time around is back then, the S&P
500 was trading at 21 times forward earnings.
This is well above the current valuations of
around 14 times. As such, we would not expect
to see a larger-than-average recovery pullback
in the coming months. The improving economic
backdrop remains supportive of equities.
Stéfane Marion
January 26th, 2010 at 11:21 am
Hello,
Is there a USD hedged equivalent for XME and also for XLB ?
Thanks,
Joe
January 26th, 2010 at 11:26 am
Don, thank you for your comments re silver to Jeff. I have been trying to get a handle on the volatility of the precious metals. There have been two “corrections” since November for $GOLD, $PLAT and $SILVER.
$GOLD was down 12.35% on the first correction and 6.86% on the second.
$PLAT was down 8.55% and 7.62% respectively.
$SILVER was down 14% and 10.8%.
As a comparison the S&P 500 was also down twice (not including day to day fluctuations) the first time was 2.97% and the second was 5.1%.
January 26th, 2010 at 11:41 am
Hi Don,
You mentioned in yesterday’s comments that the better way to play gasoline is through the futures market. How about through UGA, is it a mutual fund and not recommended ?
Thanks,
Joe
January 26th, 2010 at 12:15 pm
Hello Don,
Could you please give me your opinion/TA, seasonality, downside risk and upside potential for Coca Cola (KO)? Does it fall under consumer discretionary sector?
Regards,
Richard
January 26th, 2010 at 12:28 pm
Hello,
Don, are you able to comment on Inmet (imn.to) with regard to the large drop in value since its high and also shed some light on technicals and seasonality please ?
Alan
January 26th, 2010 at 8:52 pm
Hello Don
Are there leveraged and non-leveraged ETFs available in $CDN to play the Canadian Energy Sector ?
Thanks,
Richard
January 27th, 2010 at 5:34 pm
Hi Joe. XME and XLB are U.S. traded ETFs that trade in U.S. Dollars. HAC is in a position to hedge these ETFs if and when they enter the fund.
January 27th, 2010 at 5:37 pm
Hi Joe. UGA is an ETN that tracks gasoline. Interesting possibility. Technicals continue to look grim. It’s too early to consider for a seasonal trade. A word of caution! Trading can be thin.
January 27th, 2010 at 5:42 pm
Hi Richard. KO is in the consumer staple sector. Short term technical profile currently is negative (short term head and shoulders pattern). Intermediate technical profile is positive (intermediate uptrend, near support at $52.34, short term momentum indicators significantly oversold).
January 27th, 2010 at 5:50 pm
Hi Alan. Inmet has been under significant technical pressure with higher than average volume during the past week due to downgrades by several analysts. Short term momentum indicators are significantly over sold. Next key level is its 200 day moving average at $53.04 where support is possible. Thereafter, support is at $43.66. Favourable seasonal influences coming into February will help to reduce risk. The stock has yet to show technical signs of bottoming.
January 27th, 2010 at 5:55 pm
Hi Richard. Lots of Canadian energy ETFs (including leveraged ETFs). All of the ETFs providers in Canada offer product. Most actively traded energy ETF is iShares on the TSX Energy Index (XEG). Most interesting new product is the BMO Equally Weighted Energy ETF (ZEO).