ShareThisPre-opening Comments for Monday August 30th
U.S. equity index futures are slightly lower morning. The S&P 500 Index futures were down 3 points in pre-opening trade. Investors are starting to focus on the possibility of Hurricane Earl reaching the U.S. east coast later this week.
Index futures were unchanged following release of economic news at 8:30 AM EDT. Consensus for July Personal Income was a gain of 0.2% versus no change in June. Actual was a gain of 0.2%. Consensus for July Personal Spending was an increase of 0.3% versus a gain of 0.1% in June. Actual was an increase of 0.4%.
Canada’s second quarter current account deficit released at 8:30 AM was in line with expectations. Consensus was $11 billion. Actual was $11 billion. The Canadian Dollar was unchanged on the news.
Genzyme rose 4% to $70.50 after rejecting Sanofi-Aventis’ all-cash $69 offer. Negotiations between the two companies turned hostile over the weekend.
Potash Corp slipped 1% on news that the Saskatchewan government is examining legislature that could slow or halt BHP Billiton’s takeover of Potash Corp.
Intel slipped 0.5% after Lazard Capital downgraded the stock from Buy to Hold.
Hewlett Packard gained 3% on news of a $10 billion share buy back.
Economic News This Week
Most reports from Canada and the U.S. this week will confirm that economic growth is slowing.
July Personal Income to be released at 8:30 AM EDT on Monday is expected to improve 0.2% versus no change in June. July Personal Spending also to be released at 8:30 AM EDT is expected to improve 0.3% versus a gain of 0.1% in June.
Canadian annual real second quarter GDP to be released at 8:30 AM EDT on Tuesday is expected to fall to 2.5% from 6.1% in the first quarter. June GDP is expected to improve 0.2% versus a gain of 0.1% in May.
August Chicago PMI to be released at 9:45 AM EDT on Tuesday is expected to slip to 57.5 from 62.3 in July.
August Consumer Confidence to be released at 10:00 AM EDT on Tuesday is expected to remain unchanged at 50.0
Minutes to the FOMC meeting on August 10th are to be released on Tuesday at 2:00 PM EDT.
July Construction Spending to be released at 10:00 AM EDT on Wednesday is expected to fall 0.7% versus a gain of 0.1% in June.
August ISM to be released at 10:00 AM EDT on Thursday is expected to slip to 53.0 from 55.5 in July.
Weekly initial jobless claims to be released at 8:30 AM EDT on Thursday are expected to increase to 475,000 from 473,000 last week.
Revised second quarter Productivity to be released on Thursday at 8:30 AM EDT is expected to decline to -1.6% from -0.9% in the first quarter.
July Factory Orders to be released at 10:00 AM EDT on Thursday are expected to improve 0.3% from a decline of 1.2% in June.
August Non-farm Payrolls to be released at 8:30 AM EDT are expected to decline 118,000 versus a decline of 131,000 in July. Private employee additions are expected to decline from 71,000 to 41,000. The Unemployment Rate is expected to increase to 9.6% from 9.5%. Hourly earnings are expected to improve 0.1% versus a gain of 0.2% in July.
August ISM Services at 10:00 AM on Friday expected to slip to 53.2 from 54.3 in July
Earnings News This Week
The focus once again is on Canada’s banks:
Tuesday sees Bank of Nova Scotia.
Wednesday sees Bombardier and Heinz
Thursday sees Canadian Western Bank, Laurentian Bank and Toronto Dominion Bank
Friday sees Campbell Soup.
Equity Trends
The ratio of stocks in an uptrend to a downtrend (i.e. the Up/Down ratio) for S&P 500 stocks slipped last week from 0.69 to (153/250=) 0.61.
Bullish Percent Index for S&P 500 stocks fell last week from 54.00% to 44.20% and the Index remains below its 15 day moving average. Intermediate trend remains down.
The Up/Down ratio for TSX stocks fell last week from 1.55 to (99/69=) 1.46.
Bullish Percent Index for TSX Composite stocks was virtually unchanged last week at 62.63%, but moved just above its 15 day moving average. Intermediate trend remains down.
The S&P 500 Index fell 7.10 points (0.66%) last week. Intermediate trend remains down. Resistance is at 1,129.24. Support is at 1,010.91. Short term momentum indicators are oversold, but continue to trend lower.
Percent of S&P 500 stocks trading above their 50 day moving average improved last week from 38% to 40%. Percent recovered from 26.80% set on Thursday.
Percent of S&P 500 stocks trading above their 200 day moving average slipped last week from 43.00% to 41.20%. Percent remains in an intermediate downtrend.
The Dow Jones Industrial Average fell 52.97 points (0.52%) last week. Intermediate trend remains down. Support is at 9,614.32. Resistance is at 10,719.94. Short term momentum indicators are oversold, but have yet to show significant technical signs of bottoming. Strength relative to the S&P 500 Index remains positive.
Bullish Percent Index for Dow Jones Industrial Average stocks fell last week from 60.00% to 46.67% and remains below its 15 day moving average. Intermediate trend remains down.
Bullish Percent Index for NASDAQ Composite stocks fell last week from 46.70% to 42.71% and remains below its 15 day moving average. Intermediate trend remains down.
The NASDAQ Composite Index fell 26.13 points (1.20%) last week. Intermediate trend remains down. Support is at 2,061.14. Resistance is at 2,309.43. Short term momentum indicators are oversold, but continue to trend down. Strength relative to the S&P 500 Index remains negative.
The Russell 2000 Index added 5.98 points (0.98%) last week. Intermediate trend remains down. Support is at 587.67. Resistance is at 672.16. Short term momentum indicators are oversold, but continue to trend down. Strength relative to the S&P 500 remains negative.
The Dow Jones Transportation Average slipped 24.38 points (0.58%) last week. Intermediate trend remains down. Resistance is at 4,624.78. Support is at 3,872.64. Short term momentum indicators are oversold, but continue to trend down. Strength relative to the S&P 500 remains neutral.
The TSX Composite Index added 157.65 points (0.98%) last week. Intermediate trend remains down. Support is at 11,065.53. Resistance is at 12,077.01. The Index once again moved above its 50 and 200 day moving average. Short term momentum indicators recovered to a neutral level. Strength relative to the S&P 500 Index has turned positive.
Percent of TSX stocks trading above their 50 day moving average increased last week from 50.51% to 58.08%. Percent is slightly overbought.
Percent of TSX stocks trading above their 200 day moving average improved from 46.45% to 47.98% last week. Percent remains in an intermediate downtrend.
The Australia All Ordinaries Composite Index fell 58.00 points (1.30%) last week. Intermediate trend remains down. Support is at 4,213.00. Resistance is at 4,618.80. Short term momentum indicators are oversold, but continue to trend lower. Strength relative to the S&P 500 Index remains neutral.
The Nikkei Average fell 188.33 points (2.05%) last week. Intermediate trend remains down. The Average fell below another support level (9,076.41) last week. Short term momentum indicators are oversold, but continue to trend lower. Strength relative to the S&P 500 Index remains negative.
The Shanghai Composite Index fell 31.56 points (1.19%) last week. Intermediate trend remains neutral. Support is at 2,319.73. Resistance is at 3,181.66. Short term momentum indicators are overbought and began to roll over last week. Strength relative to the S&P 500 Index has turned positive.
The London FT Index added 6.28 points (0.31%), the Frankfurt DAX Index fell 53.99 points (0.90%) and the Paris CAC Index gave up 18.69 points (0.53%).
The Athens Index dropped 42.73 points (2.69%) last week. Intermediate trend is up, but the Index already has dropped 15% from its high early in August (A clear warning sign that the Greek financial situation is not over). Short term momentum indicators are oversold, but continue to trend lower. Strength relative to the S&P 500 had turned from positive to neutral.
Currencies
The U.S. Dollar Index slipped 0.14 last week. It found resistance near its 50 day moving average. Support is at 80.08. Resistance exists in a band above 85.03. Short term momentum indicators are overbought, but have yet to show signs of peaking.
The Euro added 0.24 last week. Resistance is at 133.34. Support is in a band starting near 124. Short term momentum indicators are oversold, but have yet to show technical signs of bottoming.
The Canadian Dollar slipped 0.33 cent U.S. last week. Support exists in a band below 92.83. Resistance is at 98.70. Short term momentum indicators are oversold, but have yet to show signs of bottoming.
Commodities
The CRB Index was virtually unchanged last week after a sharp downside move early in the week and an equally sharp gain late in the week. Momentum is neutral.
Crude oil gained $0.40 U.S. per barrel last week. Short term momentum indicators are oversold, but continue to trend down.
Gasoline added $0.03 per gallon last week and recovered to the bottom of a previous trading range. Momentum indicators are oversold, but continue to trend lower.
Natural Gas broke key support at $3.82 on Friday and re-established an intermediate downtrend. It fell $0.43 (10.4%) last week Short term momentum indicators are oversold, but continue to trend lower.
Gold added another $10.20 U.S. per ounce last week. Gold is testing its all time at $1,265.00. Short term momentum indicators are overbought, but have yet to show signs of peaking. A break above resistance implies technical upside to $1,384. ‘Tis the season for gold and gold equities to move higher!
iShares on the TSX Gold Index broke above resistance at $24.43 on Friday and are testing their all time high at $24.61. Strength relative to gold remains positive, an encouraging sign for gold and gold equities.
Silver gained $1.07 last week. It is testing resistance at $19.81. Short term momentum indicators are neutral.
Platinum continues to underperform gold and silver. It remains in a tight three month trading range. Momentum indicators are neutral.
Copper added 11.4 cents last week on rumored Chinese buying. Resistance is at $3.4105. Short term momentum indicators are neutral.
The grains ETN was virtually unchanged last week. Intermediate trend remains up. Short term momentum indicators are neutral.
Interest Rates
The yield on 10 year Treasuries increased 0.04% last week. All of the gain came on Friday following Bernanke’s speech. Short term momentum indicators are oversold and showing early signs of bottoming.
Conversely, the long term Treasury ETF was unchanged last week. Short term momentum indicators are overbought and showing early signs of peaking.
Other Factors
The Baltic Dry Index slipped 1.6% last week
The VIX Index slipped 1.04% last week, but appears to have reached an intermediate bottom.
Short term momentum indicators are oversold, but showed possibilities of a short term recovery on Friday. Their oversold level appears at a time in the month (last three days of the trading month and first two trading days of the next month) when equity markets usually move higher.
On the other hand, medium term technical indicators continue to trend lower and economic news (particularly in anticipation of the employment report on Friday) will show a continuing slow down in economic growth.
According to Thackray’s 2010 Investor’s Guide, the month of September is the weakest month of the year. U.S. equity markets historically have advanced until just after Labour Day followed by persistent declines. Additional comments and data on this phenomenon will appear in tomorrow’s Tech Talk.
U.S. equity markets have a consistent history during midterm election years of moving lower in the month of September.
The Bottom Line
A brief recovery by equity markets early this week from an oversold level would not be a surprise. However, the gains (if they occur) are not sustainable. Equity markets need a period of base building before they can launch a significant intermediate upside move. Please be patient. Meanwhile, hang on to seasonal trades in gold, agriculture and biotech.
Breaking News over the weekend
The takeover offer of Genzyme by Sanofi Aventis went hostile over the weekend. Sanofi offer $69 U.S. per share. The stock closed at $67.62 on Friday. Look for Genzyme to move well above $69 at the opening today. Analysts are expecting the deal to close in a range between $75 and $80. The deal has a positive impact on the Biotech sector.
Mr. Vialoux on BNN Television on Friday
Following are links to the show:
http://watch.bnn.ca/market-call-tonight/august-2010/market-call-tonight-august-27-2010/#clip341708
http://watch.bnn.ca/market-call-tonight/august-2010/market-call-tonight-august-27-2010/#clip341709
http://watch.bnn.ca/market-call-tonight/august-2010/market-call-tonight-august-27-2010/#clip341712
FP Trading Desk headlines
FP Trading Desk headline reads, “More Quantitative Easing threatens greenback”. Following is a link to the report:
http://business.financialpost.com/2010/08/27/more-qe-threatens-greenback/
FP Trading Desk headline reads, “Canadian Dollar big winner with more Quantitative Easing”. Following is a link to the report:
FP Trading Desk headline reads, “UBS unveils portfolio of 12 best TSX Dividend Growers”. Following is a link to the report:
http://business.financialpost.com/2010/08/27/ubs-unveils-portfolio-of-12-best-tsx-dividend-growers/
FP Trading Desk headline reads, “New Gold upgraded as Mexican/Chilean Operations could see resolution”. Following is a link to the report:
Editor’s note: New Gold is the largest holding in the Market Vector Junior Gold ETF (GLDJ).
Tom Roger’s “Elliott Wave” Blog
http://www.tomrogers.net/signpost.htm
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
HAC Seasonal Rotation ETF HAC $11.07 August 27th 2010
· Open 11.10
· Close 11.07 (Down $0.01)
· High 11.10
· Low 11.06
· Bid 11.06 x0
· Ask 11.07 x0
· Volume 28,504
· 52-week High 11.37 06/03
· 52-week Low 9.44 02/05
· Beta 2.30
· Net Asset Value per Share: $11.05 (All time high)
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Discussions from the Tech Talk Forum:
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August 30th, 2010 at 4:15 am
Hi Don,
As a follow-up question to the one I made on this site on May 21st, there is a head & shoulder top that I see in the S&P500 with the top of the head in April and the right and left shoulder in January and August, respectively. If I connect the neckline from the February and July low, and project it down, I get a bottom target of 825 on the S&P500. Would this be a realistic target in your opinion? And if so, what sort of time-frame do you believe it would take to achieve the bottom?
Thanks.
August 30th, 2010 at 7:03 am
Any ideas why the base metal stocks, especially HBM, are so strong recently? I thought the seasonal strength of base metal stocks do not start until Nov?
August 30th, 2010 at 8:22 am
Hi Don, is there a reason you don’t trade the actual commodities futures contract on some of your seasonality plays? Curious,
August 30th, 2010 at 8:22 am
Hi Don, great show on BNN as usual.
Unfortunately you got cut short at the end of the program while talking about natural gas. Judging from the seasonality charts on equityclock it looks like nat gas is just entering its period of seasonal strength right about now. With the move up today it looks like we have buy signals with the RSI, stochs and the MACD????
If I recall correctly your preferred method for investing in nat gas is GAS, the etf from claymore?
Another question, does your etf HAC, invest in nat gas? Curious so I do not go overweight.
Thanks
August 30th, 2010 at 8:29 am
hi don:
in your monday summary, you reference SSEC rather than HSI or or HSCEI? can you comment as to why? also, do you have a preferred ETF for china (FXI perhaps)?
regards,
jordy
August 30th, 2010 at 10:56 am
Hi Don, I would be interested in any comments you have on INTC in terms of support, resistance, seasonality.
Thanks,
Dave
August 30th, 2010 at 12:47 pm
ken:
http://www.google.com/finance/company_news?q=TSE:HBM
August 30th, 2010 at 2:15 pm
Anyone have opinions on $NATGAS? Today closed at $3.84? Holding support? Last year it hit a low of $2.69 on the 3rd of September, then a big rally until Oct 21st. Equity clock says “Analysis has revealed that with a buy date of September 2 and a sell date of October 20, investors have benefited from a total return of 50.54% over the last 7 years. This scenario has shown positive results in 5 of those periods.”
Are we ready to bounce?
August 30th, 2010 at 3:24 pm
DaveA, I bought some today. Hoping Don confirms a buy signal then I will buy some more.
August 30th, 2010 at 3:29 pm
DaveA: I’ve been pouring over a ton of charts and it’s tough when price is continually hitting new lows. I’ve done comparison charts and ratio charts of Oct NG, Nov NG and Jan NG with little to suggest much change. Same contango with little front month demand and not showing strength. And the Gas stocks aren’t showing much enthusiasm in anticipation of anything positive. Some are very oversold. And a chart of HNU can’t really be trusted with the odd bias the calculation has on the ETF chart. The GAS ETF on the TSE has been showing positive divergences for a while now on the new lows especially the 60min chart for the last 2 weeks. Looking at a price chart in order to make a new 10 day high and take out some price resistance GAS would need to clear 2.93. That would suggest some change in price momentum. Next resistance then is close by at July 18th low of 3.08 which would also be over a 50% Fib retrace of the August sell off which is another positive. More significant resistance is at 3.35-3.40 which was the May lows that price broke down from in July ending a 2-3 month base building pattern. That 3.40 price is also the 14 month downtrendline as well so a break above it would suggest an end to this downtrend. And the fundamentals are bearish but that can soon change with a fresh news story too. That’s all I can see here……….
August 30th, 2010 at 3:57 pm
Nat Gas: As far as Nat Gas stocks go NYSE:CHK is outperforming Nat Gas and has been since Dec 2008 in a nice steady uptrend. It has been dramatically outperforming TSX:GAS and TSX:HNU as well with much higher highs and higher lows for a couple of years now consistently in bull market fashion. And since mid July has been outperforming ECA as well. Last Wednesday NYSE:CHK tagged the double bottom of the May lows at 19.65 with positive divergences on the oscillators as well. Today’s close was near the lows of the day at 20.83 +8 cents. It had been as high as 21.30 but sold off displaying little desire to rally further. Price would need to hold above 19.65 to suggest this test of a double bottom with positive divergences was suggesting a low was in. Obviously a stop loss would be needed at a comfortable level below 19.65 in case of a failure. But CHK has been an outperformer regardless of the poor NG market.
August 30th, 2010 at 4:20 pm
Hi Don,
Great site. I have been following it for over a year now. I was wondering if you can comment on xrb. For a reasonably sleepy bond fund, it has been moving up steadily and significantly for the past month.
Thanks Pete
August 30th, 2010 at 4:33 pm
Without getting too complicated I see HND has done for now and if you are watchfull HNU is set to sail. Thats my take for what its worth.
August 30th, 2010 at 4:34 pm
I think a lot of you are forgetting about the fundamentals for natural gas. Unless a hurricane happens and effects supply (which Don mentions on BNN), the fundamentals for Natgas are bearishish for a few reasons. Off the top of my head is 1. Shale gas and 2. LNG (offshore countries shipping gas for storage in North America). Natural gas futures are primarily for the North American market, but the LNG stories are slowly turning NatGas into a more global commodity like crude oil. Fundamentals > technicals in this case.
August 30th, 2010 at 5:19 pm
Re: Nat Gas Fundamentals
We have less stock of NG now then we did at this time last year and with all things else being equal (hurricane severity,perceived view of the strength of market, etc) I think we will see a move up in September just like last year but probably not as strong. Last year there was concern that they would reach max capacity, this year that concern is not here.
August 30th, 2010 at 7:35 pm
Hi Huy. Just confirming that a break by the S&P 500 below 1010 will complete a head and shoulders pattern with a significant downside technical target. Chances of completion of the pattern are considered low at present, but it remains on the radar screen.
August 30th, 2010 at 7:44 pm
Hi Ken. Some technical analysts are calling for an earlier than expected upside move in base metal pricss this year due to declining base metal inventories (particularly copper and nickel). A close by copper above $3.41 will trigger additional technical interest. Rumors say the Chinese are buying base metals. Today, Inmet broke resistance. On the other hand, seasonal influences usually are negative in September. The sector is on the radar screen, but needs more evidence is needed that a significant trend is developing in the sector.
August 30th, 2010 at 7:48 pm
Hi Shawn. HAC’s chosen mandate is to own ETFs. Other investment vehicles currently are not considered.
August 30th, 2010 at 7:54 pm
Hi Brendan. HAC recently received regulatory approval to invest in commodity based ETFs and ETNs. Natural gas is on the radar screen. Be careful with technical signals triggered today. Contracts quoted by the media rolled over today. A significant contago exists between contract months. More technical evidence is needed to trigger a trade in the sector.
August 30th, 2010 at 9:04 pm
Hi Everyone. Careful on the NatGas ETF’s because, as I discovered, the Claymore GAS ETF is not tied to US NG futures. According to Claymore, it is tied to the Alberta NGX Canadian Natural Gas Index (http://www.ngx.com/index.html) which is not at all the same animal as the US index that follows US inventory levels and US weather patterns. The NGX goes its own way and that is why GAS-ETF seems so out of sync with US NG prices. It moves according to Canadian Gas supplies and pricing, which may not give you what you are expecting. Caveat emptor.
August 30th, 2010 at 10:52 pm
Nat Gas can we very good for short periods, Inmet IMN.TO compares well with CHK, on watch for hurricanes now to jump on HNU.TO, see lots of info in this link:
http://www.firstenercastfinancial.com/e_news.php
Fiona Next Hurricane For Energy Complex To Watch
Aug 30, 2010
[Dow Jones] Forecasters next watching storm to follow Hurricane Earle. Likely to develop into Hurricane Fiona in coming days, could threaten US Gulf of Mexico region by weekend, says Jim Rouiller, senior energy meteorologist for Planalytics. “I fully expect a storm system on Earl’s heels over central portions of the Atlantic basin to become hurricane Fiona over the next few days and will go on to pose a very distinct threat to Florida and the Gulf,” he says. Nymex October gas futures recently trade +13.2c, or 3.6%, at $3.837/MMBtu.
The U.S. will have its warmest winter in five years, which will reduce demand for natural gas, according to forecaster MDA Federal Inc.
Temperatures in New York will be 2.5 degrees higher than the 30-year normal this winter, while Chicago will see temperatures 2 degrees higher.
“It’s a bearish forecast for sure,” Hartman said. Demand for natural gas will “be drastically reduced compared to normal.”