Pre-opening Comments for Wednesday March 28th
U.S. equity index futures are mixed this morning. S&P 500 futures are up unchanged in pre-opening trade.
Index futures slipped following release of February Durable Goods Orders. Consensus was a gain of 3.0% versus a decline of 3.7% in January. Actual was a gain of 2.2%. Excluding transportation, consensus was a gain of 1.5%. Actual was an increase of 1.6%.
Family Dollar eased $0.93 to $57.31 despite reporting higher than consensus third quarter earnings.
Nestle is expected to open lower after UBS downgraded the stock from Buy to Neutral.
Agnico-Eagle is expected to open higher after Global Hunter initiated coverage on the stock with a Buy rating. Target is $46.
Verizon is expected to open higher after RBC Capital upgraded the stock from Sector Perform to Outperform. Target is $40.
Nestle SA (NSRGY) – $62.47 is expected to open lower after UBS downgraded the stock from Buy to Neutral. The stock has a positive technical profile. Intermediate trend is up. The stock trades above its 50 and 200 day moving averages. Strength relative to the S&P 500 Index has been positive since the beginning of February. However, short term momentum indicators are overbought and showing signs of rolling over. Preferred strategy is to accumulate the stock on weakness closer to its 50 day moving average at $60.08.
Agnico-Eagle Mines Ltd. (NYSE:AEM;TSE:AEM) – US$33.44 is expected to open higher after Global Hunter initiated coverage with a Buy rating. Target is $46 U.S. The stock has a negative technical profile. Intermediate trend is down. The stock trades below its 50 and 200 day moving averages. Strength relative to the S&P 500 Index has been negative since September. Seasonal influences are neutral to negative until July. However, short term momentum indicators are recovering from oversold levels. Preferred strategy is to take advantage of short term strength closer to resistance at $37.97 to reduce positions.
Agnico-Eagle Mines Ltd. (TSE:AEM) Seasonal Chart
Verizon Communication (NYSE:VZ) – $38.66 is expected to open higher after RBC Capital upgraded the stock from Sector Perform to Outperform. The stock has a mixed technical profile. Intermediate trend is up. Support is at $37.07 and resistance is at $39.96. The stock trades above its 50 and 200 day moving averages. Seasonal influences are positive until mid-June. However, strength relative to the S&P 500 Index has been negative since mid-December and short term momentum indicators have rolled over from overbought levels. Preferred strategy is to accumulate the stock on weakness closer to its 50 day moving average at $38.52.
Verizon Communications Inc. (NYSE:VZ) Seasonal Chart
Health Care was the focus yesterday following discussion by members of the U.S. Supreme Court. Investors are guessing that a key section of Obamacare requiring everyone to pay likely will be struck down. Healthcare stocks responded on the upside.
Tech Talk’s Weekly ETF Column
(Published yesterday at www.globeandmail.com )
Headline reads, “Thinking of buying more U.S. stocks? Don’t do it now!” Following is a link to the report:
Following is full text:
Federal Reserve Chairman Ben Bernanke offered encouraging comments on the U.S. economy on Monday. U.S. equity indices responded by tacking on strong advances. The Dow Jones Industrial Average gained 1.23 per cent, the S&P 500 Index improved 1.39 per cent and the NASDAQ Composite Index advanced 1.78 per cent to reach an 11 year high. Traders responded primarily to one word made by Bernanke: accommodative. He noted that the Federal Reserve’s monetary policy will remain “accommodative” until fragile economic growth in the U.S. is sustained. Traders interpreted “accommodative” to mean that a third quantitative easing programme to stimulate the U.S. economy remains a possibility.
Strength in U.S. equity indices comes at an interesting time prior to a series of events during the next few weeks that could cause U.S. equity indices to pause recent uptrends:
· Economic news for the month of March generally will not help equity markets. March economic reports to be reported in April will have a difficult time showing gains on a month-over-month basis over exceptionally strong February data.
· Consensus estimates show that total first quarter earnings by S&P 500 companies are expected to show no increase on a year-over-year. That includes a 52 per cent increase by Apple, the company with the biggest influence on the S&P 500 Index. A major reason for the slowdown on a year-over-year basis is currency translation. The U.S. Dollar Index averaged 80 in the first quarter of 2012 versus 78 in the first quarter of 2011. Approximately half of the earnings from S&P 500 companies comes from outside of the U.S. Earnings from outside of the U.S. must increase 2.6 per cent in 2012 to match earnings last year.
· First quarter earnings reports by S&P 500 companies are likely to be accompanied with mixed to negative guidance for the second quarter. Once again, currency translation will have an impact. Average for the U.S. Dollar Index in the second quarter last year was 75 implying that earnings outside of the U.S. must increase 6.7 per cent in 2012 to match earnings last year if the U.S. Dollar Index remains near 80.
· Short and intermediate technical indicators show that U.S. equity indices currently are overbought. Investors are willing to take profits following gains since lows set on October 4th. The S&P 500 Index is up 31.8 per cent, the Dow Jones Industrial Average gained 27.3 per cent and the NASDAQ Composite Index has advanced 35.8 per cent.
· Seasonal influences during a U.S. Presidential Election Year historically turn negative in the first week in April. Prior to the beginning of April at least one of the major parties has multiple potential candidates. The peak into early April tends to coincide with equity market perception that final candidates for the Presidency have been chosen. This year, Obama is the Democrat Party selection and Romney is the most likely Republican Party selection. Political campaigns quickly change focus from fighting each other to fighting the incumbent (the so called EtchASketch effect infamously mentioned last week by Romney’s campaign organizer). Watch for the change in focus to occur just after Easter. Negative political rhetoric ramps up from both sides. Consumer and investor confidence declines, economic growth statistics stall and equity markets move lower. On average during U.S. Presidential election years since 1930, the Dow Jones Industrial Average has dropped 3.5 per cent from the first week in April to the end of May.
What to do? Ben Bernanke gave investors a bonus on Monday. Take it while you can. Investors with a time horizon of three months or less will want to protect themselves by taking profits before Easter in broadly based U.S. equity index ETFs including S&P 500 SPDRs (SPY $141.61), DJIA SPDRs (DIA $132.09) and PowerShares QQQ Trust (QQQ $68.11). Investors with a longer time horizon can hold through the period of weakness. U.S. equity markets have a history of moving higher from the end of May to the end of the year during a U.S. Presidential Election year.
Don Vialoux is the author of free daily reports on equity markets, sectors,
commodities and Exchange Traded Funds. . Daily reports are
available at http://www.timingthemarket.ca/. He is also a research analyst for
Horizons Investment Management Inc. All of the views expressed herein are his
personal views although they may be reflected in positions or transactions
in the various client portfolios managed by Horizons Investment Management.
FP Trading Desk Headline
FP Trading Desk headline reads, “What slowdown in China”? Following is a link:
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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 and Jon Vialoux are research analysts for Horizons Investment Management Inc. All of the views expressed herein are the personal views of the authors and are not necessarily the views of Horizons Investment Management Inc., although any of the recommendations found herein may be reflected in positions or transactions in the various client portfolios managed by Horizons Investment Management Inc
Horizons Seasonal Rotation ETF HAC March 27th 2012
Thackray’s 2012 Investor’s Guide
Thackray’s 2012 Investor’s Guide recently has been released. It can be ordered online from Amazon.ca or Amazon.com at http://www.amazon.ca/gp/product/0978220064/ref=as_li_qf_sp_asin_il_tl?ie=UTF8&tag=timthemar-20&linkCode=as2&camp=15121&creative=330641&creativeASIN=0978220064
It can also be ordered online from Brooke’s website: www.alphamountain.com (book is in stock).