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Pre-opening Comments for Wednesday July 28th
U.S. equity index futures are lower this morning. S&P 500 futures slipped 3 points in pre-opening trade. Index futures responded to economic news confirming a slow down in economic growth in the U.S.
Index futures dipped further after June Durable Goods Orders came in less than consensus. Consensus was a gain of 1.0%. Actual was a decline of 1.0%. Excluding transportation, consensus was a gain of 0.5%. Actual was a decline of 0.5%.
Responses to earnings reports released overnight were mixed. Conoco Philips added 2% after reporting higher than consensus second quarter earnings and after announcing sale of its Lukoil operations. Boeing slipped 1% despite reporting higher than consensus earnings. CVS dropped 3% despite reporting higher than consensus results, but offering cautious guidance. Canadian Pacific added 0.5% after reporting higher than expected results. Sprint Nextel gained 5% despite reporting a higher than expected second quarter loss, but also announced a higher than expected increase in subscriptions.
Kraft added 1% after Davenport upgraded the stock from Neutral to Buy.
CGI Group slipped another 1% after RBC Capital downgraded the stock from Outperform to Sector Perform. Target is $17.
Cameco slipped 0.5% after the stock was downgraded from Outperform to Neutral.
Research in Motion gained 1% on media reports that the company is about to launch its next Blackberry product.
WWW.EquityClock.com stock of the day
Technical Analysis: Gilead Sciences (GILD)
http://www.equityclock.com/2010/07/27/gilead-sciences-inc-nasdaqgild-technical-analysis/
Technical Action Yesterday
Technical action by S&P 500 stocks was bullish yesterday. Ten S&P 500 stocks broke resistance (Ameren, Chubb, DTE Energy, Kellogg, Leucadia National, Public Service, Sara Lee, Sempra Energy and JM Smucker) and one stock broke support (Thermo Fisher). The Up/Down ratio improved from 0.67 to (175/249=) 0.70
Technical action by TSX Composite stocks was mixed. Three TSX stocks broke resistance (Cameco, Laurentian Bank, Superior Plus) and three stocks broke support (CGI Group, Barrick Gold and Eldorado Gold). The Up/Down ratio slipped from 1.14 to (90/80=) 1.13.
Interesting Charts
Broadly based North American equity indices tested, but backed off resistance levels set on June 21st. (E.g. 1,131.23 for the S&P 500 Index)
The technical picture for individual stocks reporting second quarter results was mixed. Companies such as Dupont and Lexmark, that reported blow out results and raised guidance, saw strong technical action.
On the other hand, many companies that had less than blow out results saw their share prices quickly come under profit taking pressure on news despite exceeding consensus estimates.
A few companies on both sides of the border slightly missed consensus estimates and were hammered.
Uranium stocks were notably stronger yesterday on news that the spot price of uranium oxide rose $2 U.S. per lb. last week to $43.50. Nice breakout!
Following is a link to a blog that offers more information:
http://money.ninemsn.com.au/article.aspx?id=7935718
Merv Burak also offered a brief comment on the topic yesterday:
http://techuranium.blogspot.com/
Gold was a big disappointment yesterday. Gold broke support at $1,166.50 and immediately triggered significant weakness in gold equities and related ETFs. Gold now is approaching its long term support level at its 200 day moving average currently at $1,145.15 U.S. per ounce.
Key gold stocks also broke support, most notably Barrick Gold on a break below $42.80 Cdn.
Technical weakness yesterday cannot be ignored. Strategy changes from buy on weakness for a seasonal trade to buy when short term technical parameters show significant signs of bottoming. Seasonal investors can continue to hold current positions.
Keith Richards’ Blog
Keith discusses the possibility of a head and shoulders bottom by the Dow Jones Industrial Average. Following is a link to his blog:
http://www.smartbounce.ca/Smartbounce/Blog/Entries/2010/7/24_Head_%26_Shoulders_Bottom.html
WWW.EquityClock.com comments released yesterday
Moves following the news: Earnings reports for July 28th
http://www.equityclock.com/2010/07/27/moves-following-the-news-earnings-reports-for-july-28/
Market sentiment: Options activity for July 27th
http://www.equityclock.com/2010/07/27/market-sentiment-options-activity-for-july-27-2010/
Special Free Services available through www.equityclock.com for a limited time only
Equityclock.com is offering free access to a data base showing seasonal studies on individual stocks and sectors. The data base holds seasonality studies on over 1000 big and moderate cap securities and indices. Free services are available for this summer only. Enjoy while available!
To login, simply go to http://www.equityclock.com/charts/ and enter the
following details:
Username: equityclock.com
Password: equityclock.com
Also, please take advantage of Google ads and other ads available in the data base.
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 $10.88 July 27th 2010
· Open 10.90
· Close 10.88 (Unchanged)
· High 10.91
· Low 10.86
· Bid 10.88 x2
· Ask 11.00 x7
· Volume 10,746
· 52-week High 11.37 06/03
· 52-week Low 9.44 02/05
· Beta 2.25
· Net Asset Value per unit: $10.85 (Unchanged)
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July 28th, 2010 at 4:14 am
Thanks for the link to Merv Buraks blog.
I would like anyone’s (especially Don’s) thoughts on holding long bonds as TLT. It seems like a no brainer trade right now for two reasons:
1) If there is deflation there will be an excellent capital gain. Long stripped bonds are even better.
2) Bernanke’s recent comments were that that we are entering a period of “unusual uncertainty” is code for “we will use quantitative easing (QE) whatever the ultimate cost”. QE has been used a lot on the short end of the curve and the best bang for the buck would be to get the 10 year plus rates down as much as possible and this would make long bonds have a capital gain.
It seems like a clear trade to me. Any comments?
July 28th, 2010 at 5:03 am
Don, Building on Amelia’s question, how are the big moves in gold and in TLT affecting your view of the direction of the us dollar and the euro? The moves in those currencies have been huge over the last few months.
July 28th, 2010 at 6:42 am
Here I was thinking that gold, GDX has bottomed for the season and so I bought GDX at $49. I’m not a happy person today!
If I am sitting on USD and/or CDN cash do you more experienced folks out there recommend adding on this weakness or wait till the end of this week to add perhaps ?
July 28th, 2010 at 6:58 am
Hi Richard, regarding Gold. It really depends on how you do your support and resistance numbers and what time frame you are using. If you are using fibonacci I have around $1160-1155 as a low. oh well. time will tell.
July 28th, 2010 at 7:13 am
Hi Shawn
I only use RSI, MacD, Full Stoch, 50 DMA, 200 DMA, along with Bollinger and Keltner Channels on a daily chart. Dont pay attention to Fibonacci. Thanks much!
-R
July 28th, 2010 at 7:23 am
Gold has always broken angled trendlines and even price support and resistance levels often. Just get a chart and draw the lines across them to see. The volatility of Gold causes this and one will often see Gold break down briefly stopping out longs and then turn around and soar. Or visa versa. Not that it is a guarantee but it certainly doesn’t surprise me anymore and Gold seems to love to whiplash traders. Especially futures traders that are using extreme leverage and can’t handle the pain. They are forced to unload and cause even more volatility. XGD is still holding support at 21 and a basket of Gold stocks smooths out the extremes and gives a more accurate picture of reality.
July 28th, 2010 at 8:03 am
Hi Don:
Any opinion on why natural gas is moving up, what is the resistance level. Also any thoughts on the downside for oil given the inventory level came in high today.
Thanks.
July 28th, 2010 at 8:43 am
Natural Gas is starting well on Season, up 4% and over 8% for the Bull HNU.TO
Every Thursday is a weekly Gas storage report, see what happens tomorrow morning.
Very volatil, I was on the Bear HND.TO with the trend for a short time but got hit with 13% loss in 1 hour whith a new report. I am long now. Be fast but don’t hurry!
July 28th, 2010 at 9:59 am
Amelia
Watch last week’s Market Call with Hank Cunningham on BNN… he’s a top bond guy. He is still bullish on Bonds… deflation rather than inflation for the near future. I agree 100% with his view… and am positioned accordingly.
July 28th, 2010 at 10:54 am
May be worth looking at this article yesterday for you gold traders:
http://www.optionmonster.com/news/article.jsp?page=commentary/in_the_news/gold_drops_but_draws_bullish_activity_47464.html&src=msu
July 28th, 2010 at 11:29 am
re Amelia, I think corporate bonds are a good place to be invested. Slow growth environment and continuation of spread narrowing can’t hurt you. Governments aren’t offering enough. Deans Knight Income Corp(DNC-T)good way to pick up income with exposure to corp bond sector, principals are invested alongside you, discount to NAV, buyout at NAV at the latest April 2014.
On Gold, 1050 is a P&F target, and I have always viewed a pullback to below $980 as necessary before a push to much higher levels. Fan approach sees gold in the $800s if we get a meaningful correction. This is supposed to be a seasonally strong time for gold, it is anything but. We should pay attention.
July 28th, 2010 at 12:18 pm
Marc, Do you have any concerns about DNC’s below-investment-grade portfolio or its low trading volume?
July 28th, 2010 at 12:33 pm
Not at all. It is a high yield corp. bond portfolio. Experienced team. It trades enough unless you want to put over $100k to work at a time. Occasionally enough on the offer for $25/50k at a time.
July 28th, 2010 at 4:57 pm
For trading US junk corp. bonds, 2 CAN ETFs hedged to CAD: XHY & CHB… XHY has better volume of the two, both have very good yields…better yields than DNC…however DNC is actively managed. XHY has a large basket of corp bonds, around 300, so relatively safe.
These things are relatively high beta for “bond” ETFs, these do not perform as govt. bonds…. best to buy when markets doing poorly as they will reflect this bias from mother stock performance… buying op. is coming soon.
As a general rule, these should be a small part of one’s bond portfolio.
July 28th, 2010 at 5:38 pm
Thanks, Marc and Canuck2004. I appreciate your input!