Pre-opening Comments for Friday April 13th
U.S. equity index futures are lower this morning. S&P 500 futures were down 7 points in pre-opening trade. Index futures are responding to news that China’s GDP growth is slowing. Consensus for GDP growth in the first quarter was 8.3% versus 8.9% last year. Actual was 8.1%.
Index futures weakened further following release of March Consumer Prices at 8:30 AM EDT. Consensus was an increase of 0.2% versus a gain of 0.4% in February. Actual was an increase of 0.3%. Consensus for March CPI ex food and energy was an increase of 0.2% versus a gain of 0.1% in February. Actual was an increase of 0.2%.
Google added $2.99 to $654.00 after reporting higher than consensus first quarter earnings and after announcing a two for one stock split.
JP Morgan fell $0.45 to $44.39 despite reporting higher than consensus first quarter earnings. The bank also announced a dividend increase and a share buy-back program.
Wells Fargo also came under profit taking pressures despite reporting higher than consensus first quarter earnings and despite raising its dividend. The stock fell $0.62 to $33.40.
Encana is expected to open lower after Credit Suisse downgraded the stock from Outperform to Neutral.
Eldorado Gold added $0.04 to $14.44 after BMO Capital upgraded the stock from Market Perform to Outperform. Target is $20.
Nike added $0.14 to $108.79 after Janney Capital initiated coverage on the stock with a Buy rating. Target is $127.
KeyBanc upgraded the U.S. Home Building sector. Toll Brothers, Pulte Homes and Lennar were upgraded from Neutral to Buy.
JP Morgan Chase & Co. (NYSE:JPM) – $44.39 slipped 1.1% despite reporting higher than consensus first quarter earnings. The Bank also announced an increase in its dividend and a share buy-back program. 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 end of November. Short term momentum indicators are slightly oversold and trying to recover. Seasonal influences are positive. Preferred strategy is to accumulate the stock on weakness closer to its 50 day moving average at $41.26.
JPMorgan Chase & Co. (NYSE:JPM) Seasonal Chart
Nike Inc. (NYSE:NKE) – $108.79 added 0.1% after Janney Capital initiated coverage with a Buy rating and a $127 target. The stock has a positive technical profile. Intermediate trend is up. Resistance is at its all-time high recently set at $112.97. The stock trades above its 200 day moving average and is bouncing from near its 50 day moving average at $107.64. Strength relative to the S&P 500 Index has been positive since the beginning of November. Short term momentum indicators are slightly oversold and trying to recover. Seasonal influences are positive. Preferred strategy is to accumulate the stock at current or lower prices.
NIKE, Inc. (NYSE:NKE) Seasonal Chart
EnCana Corp. (NYSE:ECA;TSE:ECA) – $18.38 is expected to open lower after Credit Suisse downgraded the stock from Outperform to Neutral. The stock has a negative technical profile. Intermediate trend is down. The stock trades below its 20, 50 and 200 day moving averages. Strength relative to the S&P 500 Index has been negative since last June. Short term momentum indicators are oversold, but have yet to show signs of bottoming. Better opportunities exist elsewhere.
You are invited to attend a special presentation session hosted by:
Paul Svana, B.A.Sc. Managing Director, Wealth Management – Union Securities Limited.
Mr. Don Vialoux, CMT
Research Analyst – Horizons Exchange Traded Funds – advising the Horizons Seasonal Rotation ETF (HAC).
Creator of www.timingthemarket.ca web site
Tuesday, April 24th, 2012
Union Securities – Boardroom
151 Yonge Street, 13th floor
Seating is limited. Please RSVP with Paul Svana at 416-775-4655 or 1-866-244-2144
Refreshments will be served.
A major reason for strength in North American equity markets yesterday was economic news from China that implied higher than consensus first quarter GDP growth. Actual figure is expected to be released overnight. Consensus is annual growth at an 8.3% rate. Once again, the Shanghai Composite Index has improving short term momentum and positive strength relative to the S&P 500 Index.
Chinese ETFs and related securities are responding.
Major U.S. equity indices recovered on the Chinese news to near the bottom of previous trading ranges, but remain at or below levels closed last Thursday prior to the March employment report. Strength provides an opportunity to reduce positions prior to release of a flood of first quarter earnings reports next week.
Ditto for the TSX Composite Index!
Response to Google’s first quarter report after the close was interesting. Earnings slightly exceed consensus and revenues matched consensus. Initially, the stock came under selling pressure. However, immediately after the company announced a two for one stock split and a stock dividend, the stock rose sharply to $658. After the company’s conference call, the stock closed virtually unchanged from its close at $651.01.
Gasoline prices rose sharply following news released on Wednesday that inventories dropped last week by another 4.28 million barrels. Typical of gasoline inventories at this time of year! ‘Tis the season for gasoline prices to move higher!
The Canadian Dollar recovered on the news from China. Nice bounce from support near 99.60 and a close above its 20, 50 and 200 day moving average. ‘Tis the season for the Canadian Dollar to move higher!
Eric Wheatley’s Weekly Listed Options Report
Preamble: I’ve finally put the finishing touches on the English version of the John C. Hood Investment Counsel Inc. Introduction to Options Guide. It’s still being revised, but if anyone from this site wishes to get a sneak peek and help me out with constructive criticism, please write to me at the address below and I’ll send you the draft version. It’s barely twenty pages long, so it’s a slight investment of your time and I would be very grateful. So would John. It’s good to have a rich elder statesman be grateful to you y’know.
I thought I had run out of things to cover last time, when my patron, John C. Hood, sent me the list of questions he was to answer in one of his periodic interviews on BNN. Here is a question which caught my eye:
“What do you think about using a reverse collar for QQQ; selling a $59 put and buying $66 call. I’m hoping to participate in any upside, and I’m comfortable being assigned QQQ if it drops back to $59”.
A reverse collar! Not only haven’t I covered this strategy, it’s actually one of the few compound options strategies which can be quite relevant to investors who have to pay retail transaction fees.
As is made clear in the question, a reverse collar is for people who are bullish (or bearish, though the short call/long put trade is less common and is quite a bit riskier if the call gets assigned) on a stock not only in the short term, but also for the long term. I have expounded at length the advantages of selling options, which brings in premium, stabilising returns and skewing the risk-return ratio in your favour. For someone who has a strong opinion about a stock’s price going up in the short term, you can buy a call and benefit from its leverage. Since buying the call entails paying out money – which seems to put off more than a few people – you can offset the cost of the call by selling a put and setting aside the cash needed to buy the shares should you be assigned. In the example above, the QQQs are instruments which we at J.C. Hood Investment Counsel Inc. like to use in our portfolio management activities: ETFs. If I, as a (hypothetical. The registration process is still ongoing) portfolio manager, wished to be exposed to the NASDAQ and was strongly bullish on the index, this type of transaction could be quite interesting.
The caveat here is the same I bring up often: you are putting on two trades. The size of the trades will determine whether the transaction costs are prohibitive or not. I’m still of a mind to recommend either a) buying calls or b) selling puts, based upon your opinion. That said, a reverse collar makes perfect sense for the bullish person who wishes to take on both a short-term speculative exposure AND a long-term position in the underlying.
Éric Wheatley, MBA, CIM
Options Analyst, J.C. Hood Investment Counsel Inc.
Little known fact about John Charles Hood #23
Once again this year, scantily-clad twentysomething female worshippers performed their rituals on John Charles Hood’s front lawn at the vernal equinox, putting on quite a show with their fertility dances. Being a pagan idol has its advantages.
Comments on Gold from Dave Skarica
Following is the link:
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Following is an example of EquityClock.com’s seasonality charts:
U.S. Dollar Index Futures (DX) Seasonal Chart
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 April 12th 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).