Pre-opening Comments for Thursday September 2^nd

U.S. equity index futures are mixed this morning. S&P 500 futures are up 1 point in pre-opening trade. Futures did not change significantly following release of economic news at 8:30 AM EDT. Consensus for weekly jobless claims was 475,000. Actual was 472,000. Consensus for revised second quarter productivity was -1.6% versus -0.9% in the first quarter. Actual was -1.8%.

Currency markets were virtually unchanged after the European Central Bank maintained its overnight lending rate at 1.0%.

Toronto Dominion Bank reported slightly less than consensus third quarter earnings.

RBC Capital raised its rating on Rio Tinto from Sector Perform to Outperform.

Media reports suggest that a private Brazilian company is expected to make a $24 per share offer to buy Burger King later today.

Technical Action Yesterday

Technical action by S&P 500 stocks was bullish yesterday. Eight S&P 500 stocks broke resistance (Consolidated Edison, Costco, Edison International, HCP Inc., Intergys, Qualcomm, Rowan Companies, Sherwin Williams) and none broke support. The Up/Down ratio improved from 0.61 to (157/248=) 0.63. The number of stocks breaking resistance was surprisingly low given strength in broadly based U.S. equity indices.

Technical action by TSX Composite Index stocks also was bullish. Ten TSX Composite stocks broke resistance (Aecon, Brookfield Asset Management, Canadian Pacific, Consolidated Thomson, Emera, Equinox Minerals, Fortis, Ivanhoe Mines, Lundin Mining and Teck Resources) and none broke support. The Up/Down ratio rose from 1.56 to (110/67=) 1.64.

Interesting Charts

Momentum indicators for broadly based U.S. equity indices are recovering from oversold levels. Short term upside potential for indices is to their 200 day moving averages where resistance is likely.

Strength in equity markets yesterday was predictable. Markets were ready to recover from oversold levels. The first trading day of the month historically has been a day of strength. In addition, Thackray’s 2010 Investor’s Guide shows that equity markets have a history during the past 20 years of moving higher until just after the Labour Day weekend. Thereafter, equity markets have a history of moving significantly lower during the remainder of September.

Notably stronger were “Chinese related” equities (e.g. base metal and coal stocks) following news that China’s Purchasing Manager’s Index surprisingly rose last month.

INVESTMENT COMMENTARY

Our next newsletter is at the presses now and will be available next week. If you are not currently a member of CastleMoore’s Investor Centre or receiving our bi-monthly writing on major macro trends and portfolio strategy please sign up. This addition features articles from Don Vialoux and Ed Arbuckle, in addition to the regular cast of writers.

http://www.castlemoore.com/investorcentre/signup.php

Well as the summer comes to an end – well actually at CastleMoore we are taking summer right to the data point September 22nd at 15:44 GMT, but that’s just us – here’s our take on some large themes, namely, Canadian banking, gold, government bonds and the Yen.

Royal Bank

Royal Bank is the mother’s milk of Canadian investing – it’s been a stalwart of the investing public for many, many years to the point that all investors own it somehow. Right now it appears to be completing a broadening formation as represented by the larger swings between highs and lows. The formation is indicative of an emotional market. We will know for sure if it breaks the low trend line, points 2 and 4. Normally in this formation there is an initial plunge below (to be point 6), strong reflexive bounce above the line (to be point 7) then the final washout at some level below the initial plunge (to be point 8). Another point to note is that the banks lead the initial down move, and historically that we lead on the way down does not lead on the way up and out.

Gold Bullion

We exited out bullion position recently. Our model is a pure sentiment based one – bullish/bearish analysis – not a pattern or “other indicators” based. We believe that gold is in a long term secular bull market, but will cool off soon, and present an excellent buying opportunity somewhere near 1000/oz. Right now bullish sentiment is extremely high.

US Long Bonds

Government bonds have been the hated of the hated – they don’t really drop enough crumbs around the investment industry to ever really be loved. As you can see the performance has been very decent this year, and it and an equal amount long Canada’s is our largest client position by far. We are expecting more weakness and will be looking at our risk management levels to protect the profits. The tricky part of a good, but volatile bull market is re-entry. Fundamentally speaking, the largest impact to long bonds is inflation expectations not supply concerns. We know the short end doesn’t do much as since the BoC raised short term rates (twice in fact) in Canada, Canadian bonds have been on a tear, and recently we saw the lower than expected GDP print to add fuel to the notion that we’ve seen the best the stimulus could deliver in Q4/09, for since then each print has been weaker and weaker.

Japanese Yen

If there is a close second for the most hated of the hated it would have to be the Yen. We’ve heard from many people that for many good reasons the Yen must go down, the chief of which is that the BoJ is not happy about it and will intervene. True some of the measurements show an over-bought condition, but we have been waiting patiently for our cue and it came a few weeks back. Risk management levels are easy to locate from this breakout.

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Buy, Hold…and Know When to Sell

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This commentary is not to be considered as offering investment advice on any particular security or market. Please consult a professional or if you invest on your own do your homework and get a good plan, before risking any of your hard earned money. The information provided in CastleMoore Investment Commentary or News, a publication for clients and friends of CastleMoore Inc., is intended to provide a broad look at investing wisdom, and in particular, investment methodologies or techniques. We avoid recommending specific securities due to the inherent risk any one security poses to ones’ overall investment success. Our advice to our clients is based on their risk tolerance, investment objectives, previous market experience, net worth and current income. Please contact CastleMoore Inc. if you require further clarification on this disclaimer.

FP Trading Desk highlights

FP Trading Desk headline reads, “Canadian banks adding significant risk to operations: Moody’s”. Following is a link to the report:

http://business.financialpost.com/2010/09/01/canadian-banks-adding-significant-risk-to-operations-moodys/

Special Free Services available through www.equityclock.com for a limited time only

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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 September 2^nd 2010

· Open 11.11

· Close 11.07 (Down $0.02)

· High 11.11

· Low 11.06

· Bid 11.05 x20

· Ask 11.07 x200

· Volume 34,020

· 52-week High 11.37 06/03

· 52-week Low 9.44 02/05

· Beta 2.30

· Net Asset Value per unit:$11.04 (Down $0.02)

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