Pre-opening Comments for Friday January 29^th

U.S. equity index futures are higher this morning. S&P 500 Index futures are up 8 points in pre-opening trade. Equity markets responded to the reappointment of Ben Bernanke to Federal Reserve Chairman.

Index futures added to gains following release of real annualized U.S. fourth quarter Gross Domestic Product. Consensus was a gain of 4.7% versus 2.2% in the third quarter. Actual was a gain of 5.7%.

Canada also reported higher than expected GDP growth. Canada’s GDP rose 0.4% in November. Consensus was a gain of 0.3%.

The parade of higher than expected fourth quarter earnings results continues. Companies reporting higher than consensus earnings included Microsoft, Amazon, Honeywell, Mattel and Canadian Oil Sands.

‘Tis the season for oil service stocks to move higher! This morning Capital One upgraded Cameron International and National Oilwell Varco from Neutral to Add. Both stocks traded higher.

Walmart added 3% after Goldman Sachs upgraded the stock from Neutral to Buy.

Methanex added 1% after BMO Capital upgraded the stock from Market Perform to Outperform. Target price was raised from $26 to $28.

Chevron reported lower than expected fourth quarter earnings. Consensus was $1.66 versus $2.44 per share last year. Actual was $1.53. The main reason for the miss was a $613 million loss from its marketing and refining operations. Gasoline prices in the U.S. will need to increase this spring in order to allow major U.S. refiners to at least break even.

World auto sales rose 22% in December on a year-over-year basis. That’s good news for companies that provide components and materials for the auto industry. Platinum used in catalytic converters looks particularly interesting.

Technical Action Yesterday

Technical action by S&P 500 stocks remains bearish. Two S&P 500 stocks broke resistance (Amgen and Boeing) and eight stocks broke support (Cisco, Conoco Phillips, Hewlett Packard, Philip Morris, QLogic, Southern Companies, Union Pacific, Viacom and Zimmer). The Up/Down ratio fell from 3.70 to (323/92=) 3.51.

Technical action by TSX Composite stocks also remains bearish. One TSX stock broke resistance (Thomson Reuters) and eleven stocks broke support (Agrium, Brookfield Asset Management, Canadian Oil Sands Trust, CML Health, Dorel, Eldorado, Enerplus Trust, Hudson Bay Mining, Minefinders, Potash Corp and Vitera). The Up/Down ratio fell from 3.70 to (141/45=) 3.13.

More Information on the Oil Service Sector

Two articles in Report on Business yesterday offer an insight on current developments in the industry.

• Credit Suisse is projecting an 11% increase in spending in 2010, a healthy gain over 2009 levels, but not a full return to 2008.
• CEOs in the industry, that have released fourth quarter results, are offering positive guidance. According to Baker Hughes chief executive officer Chad Deaton, “In some areas of the U.S. we are again starting to hire and as a result of strengthening demand for our products and services and as this demand expands and leads to improved capacity utilization, we will be able to implement price increases”.
• Headline from an article from Calgary reads, “Drillers face labour shortage”. The article noted that “After a year spent laying off huge swaths of their work force, oil patch drillers are now so strapped for qualified workers that they have begun advertising in places such as the East Coast”.
• The Petroleum Services Association of Canada is expecting 9,000 wells to be drilled in 2010, up from 8,450 wells in 2009.

More information on the U.S. Oil Exploration and Production Sector

Several U.S. analysts have upgraded individual U.S. oil exploration and producer stocks. Focuses yesterday were on upgrades on Apache and Anadarko. The upgrades were surprising because companies in the sector face “difficult” fourth quarter earnings and cash flow reports when released during the next couple of weeks.

The S&P Oil Exploration and Production Index is a sub-index of the S&P Energy Index. It does not include major U.S. companies with refining operations such as Exxon Mobil and Chevron.

According to a recent study completed by Brooke Thackray, the U.S. Oil Exploration and Production Index has a period of seasonal strength from January 30^th to May 9th. The trade has been profitable in 17 of the past 20 periods. Average return per period was 13.7%. The Index exceeded returns from the S&P 500 Index by 10.0% per period. Following are the seasonality charts:

Oil E & P 1990-2009

Chart courtesy of Brooke Thackray

Oil E & P Relative to the S&P 500 1990-2009

Chart courtesy of Brooke Thackray

Most liquid ETF in the sector is iShares on the U.S. DJ Exploration and Production Index (Symbol: IEO). Following is a list of its top holdings and their seasonal performance from January 30^th to May 9^th during the past 10 periods:

Company                                       Average Return      Frequency of

Per period             Profit (out of 10)

Occidental Petroleum                        18.7                          10

Apache                                            14.6                            9

Anadarko                                           9.4                            9

Devon Energy                                    12.8                            9

XTO Energy                                      15.4                            9

EOG Resources                                 21.0                           10

Chesapeake Energy                           24.2                             8

Southwestern Energy                        29.4                             9

Noble Energy                                   17.7                             8

Technicals for the ETF currently are not attractive. Units have traded in a five month range with support at $47.54 and resistance at $57.73. Units recently fell below their 50 day moving average, but remains above their 200 day moving average at $47.63. Short term momentum indictors are trending lower. Stochastics already are short term oversold, but has yet to show technical signs of bottoming. On the other hand, intermediate trend is up and strength relative to the S&P 500 Index has been positive since mid December.

Preferred strategy is to wait for technical signs of bottoming near support and its 200 day moving average before entering the seasonal trade.

Chart courtesy of StockCharts.com www.stockcharts.com

Tech Talk’s Financial Post Column this Saturday

The focus is on the U.S. Materials sector.

Ken Norquay’s Column

Swiss cheese: it’s about the holes.

There is a high level meeting in Switzerland between the top bureaucrats and leaders of the biggest economies in the world. These conquering heroes are the same ones whose precedent setting cooperation saved the world’s banking system a year ago. They all lowered interest rates sharply, loaned billions to the banks and stimulated their economies dramatically. And it worked. The system survived.

But two nations will be particularly concerned this year. The Dutch will have noticed a crack in the dike and the British will be dealing with a sticky wicket. Between them they could lose 3.8 billion Euros. These two governments loaned money to the shaky Bank of Iceland. But the bank failed anyway. So, the Icelandic government is now being asked to make good on its loan guarantee. Earlier this month [January 2010] their parliament passed a bill scheduling the repayment of this mega-loan. But the people rebelled. 25% of Icelandic voters signed a petition stating they did not want to repay the loan to Britain and the Netherlands. They felt cheated. In the good times, the banks kept the profits; but when it failed, it’s the population who has to pay back the bank’s debt. Not fair. And, of course, it’s not fair that the citizens of England and Holland lose the 3.8 billion either.

Last year, the G-8 solved the banking crisis. Will the World Economic Forum be able to solve this year’s loss-of-faith crisis? How can they prevent Icelandic cynicism from spreading to England and Holland?

Will loss-of-faith spread to America? 140 US banks failed in 2009. Eight more failed on January 26, 2010! Over one third of American houses have mortgages that are bigger than the value of the house. Americans are ticked off with the president and with the Democrats. Are Americans losing faith too?

These are good times to be Canadian. Our economy never got as weak as most other modern economies. And our recovery seems stronger than most. And our banks are widely recognized as the safest in the world. No loss-of-faith in Canada.

This is my Economic Faith Metre for the Swiss Cheese World Economic Forum:

Iceland -lost faith

Britain and Holland -worried

USA -losing faith

Canada -full faith

Faith is important in modern economies. The whole concept of making loans in full expectation that those loans will be repaid is a matter of faith. No faith, no loans. No loans, no economy. It is very important that the G-8 leaders make great efforts to insure that people keep their faith in the system.

Now let’s talk about your faith: will the Swiss Cheese World Economic Forum affect your faith? How does your faith in the Canadian economy affect your retirement plans? In 2008 the stock markets of the world all crashed simultaneously. Citizens of all countries who kept the faith lost their shirts! In 2009, the world’s stock markets recovered some of the 2008 losses. Those who hung in there and kept the faith made back some of their retirement nest eggs. And what should we expect for 2010?

Our expectations are more a matter of faith than facts. Bankers don’t hang out their dirty laundry. They hide the facts so we’ll keep the faith. Here’s my assessment of the faith that Canadians have in the financial world: most investors have noticed that their investments have not fully recovered from the 2008 stock market crash. Most plan to sell out of the stock market if it ever goes back to the 2008 highs.

This is not faith: it’s hope. They are hoping it will go back up – and if it does go back up, they’ll sell and invest in something safer. The 2008 stock market crash broke investors’ hearts: they no longer love the market. And now they’re hoping to break even.

In my book, Beyond the Bull I discuss how the stock market reflects our human emotions. At stock market tops, investors love the markets. At bottoms, they hate the markets. And on the way down, they keep hoping it will go back up. Traders sometimes sarcastically refer to a bear market as “the slope of hope.” Where does faith fit into all this?

It’s faith in the world’s banking system that is at risk right now. It’s about ordinary people like Icelanders, Europeans and Americans keeping their faith in the banking system. And it’s about your faith too. It’s your investments that are surfing on this wave of human emotions. Will the financial waves recover or will they crash like they did in 2008 and early 2009?

We know what the attendees at the World Economic Forum will do. They will wheel and deal and do whatever they can to help us all keep the faith. But what will we do. Most investors are not economic leaders, they’re economic followers. They love the markets when it peaks, hate it when it bottoms and on the way down, they hope it will go back up. They feel love or hate or hope, but they seldom do anything.

What should investors do?

Let me re-phrase that question: the stock market has rallied over 50% in 10 months and another banking crisis seems to be emerging in Europe. Do you think investors should stop hoping the market will go higher and move into something safer now?

This is a chart of the TSX composite index: a one year look at the Canadian Stock Market. It has been drifting since September. Do you think the economic leaders

attending the World Economic Forum will help this market go higher? Or will they trigger another 2008 sell-off?

It’s your portfolio: it’s your retirement nest egg that is at risk. Your financial future is a function of what you own, not what you think or what you feel.

The Swiss Cheese World Economic Forum is about what you think and feel: it’s about keeping the faith. Your financial future is about what investments you own and what you do with them. You may love or hate of hope whatever you want in the financial world. But the key to investment success is to own securities that are going up and sell them when they start to go down.

Your investments are the Swiss cheese: your feelings and thoughts are the holes.

Ken Norquay, CMT Jan 28, 2010.

Chief Market Strategist,

CastleMoore Inc

905-847-8511

These are the links to Amazon for those interested in my book:

Canada

US
http://www.amazon.com/Beyond-Bull-Taking-Market-Wisdom/dp/0980923182/ref=sr_1_1?ie=UTF8&s=books&qid=1228246055&sr=8-1
UK
http://www.amazon.co.uk/Beyond-Bull-Taking-Market-Wisdom/dp/0980923182/ref=sr_1_1?ie=UTF8&s=books&qid=1228245979&sr=8-1

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:

U.S. Customers: Thackray’s 2010 Investor’s Guide: How to Profit from Seasonal Market Trends (Thackray’s Investor’s Guide)

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 $9.87 January 28 2010

Open	10.070			-
High	10.070		-
Low	9.850		-
Bid x2	9.870		-
Ask x8	9.940		-
Volume	11,990		-
52-wk High 01/18	10.650		-
52-wk Low 01/28	9.850		-

Net Asset Value: $9.88

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