Pre-opening Comments for Tuesday April 17th
U.S. equity index futures are higher this morning. S&P 500 futures are up 8 points in pre-opening trade.
Index futures were virtually unchanged following release of March housing starts. Consensus was 705,000 versus an adjusted 694,000 in February. Actual was a 5.8% decline to 654,000.
The Bank of Canada maintained its benchmark lending rate at 1.0% as expected. The Bank of Canada also noted removing stimulus may be appropriate. The Bank of Canada also raised its GDP estimate for 2012 from 2.0% to 2.4%. The Canadian Dollar moved higher following release of the Bank of Canada’s statement.
Several S&P 500 companies reported higher than consensus first quarter earnings this morning including Coca Cola, Goldman Sachs, Johnson & Johnson, US Bancorp and Comerica. Coca Cola added $0.81 to $73.25, Goldman Sachs improved $0.67 to $118.40, Johnson & Johnson added $0.45 to $64.43, US Bancorp improved $0.19 to $31.35 and Comerica gained $1.84 to $32.20.
Cameco and Uranium One are expected to open higher after JP Morgan gave them a New Overweight rating.
Chubb slipped $0.50 to $70.50 after Evercore downgraded the stock from Overweight to Equal Weight.
Celestica is expected to open lower after Deutsche Bank downgraded the stock from Buy to Hold.
Coca Cola Co. (NYSE:KO) – $73.25 added 1.1% after reporting slightly higher than consensus first quarter earnings. The stock has a positive technical profile. Intermediate trend is up. The stock is testing its all-time high at $74.39. The stock trades above its 20, 50 and 200 day moving averages. Strength relative to the S&P 500 Index has been positive since the beginning of February. Short term momentum indicators are neutral. Seasonal influences are positive until the end of May. Preferred strategy is to accumulate the stock at current or lower prices.
The Coca-Cola Company (NYSE:KO) Seasonal Chart
Johnson & Johnson (NYSE:JNJ) – $64.43 added 0.7% after releasing slightly better than expected first quarter earnings. The stock has a positive, but deteriorating technical profile. Intermediate trend is up. The stock recently touched an all-time high at $66.30. Seasonal influences are positive until the end of May. The stock is trying to hold support at its 200 day moving average at $63.74. However, the stock recently fell below its 20 and 50 day moving averages, strength relative to the S&P 500 has been negative since the beginning of October and short term momentum indicators are trending down. Preferred strategy is to take profits on strength to its all-time high.
Johnson & Johnson (NYSE:JNJ) Seasonal Chart
Celestica, Inc. (NYSE:CLS;TSE:CLS) – $9.03 Cdn. is expected to open lower after Deutsche Bank downgraded the stock from Buy to Hold. The stock has a mixed technical profile. Intermediate trend is up. The stock trades above its 200 day moving average. Seasonal influences are positive. However, the stock recently fell below its 20 and 50 day moving averages, short term momentum indicators are trending lower and strength relative to the S&P 500 Index and TSX Composite Index turned negative at the beginning of March. Preferred strategy is to accumulate the stock on weakness closer to its 200 day moving average at $8.39.
Celestica Inc. (TSE:CLS) Seasonal Chart
Apple was a focus once again yesterday. Since reaching an all-time last week, the stock has fallen 10.0%. Strength relative to the S&P 500 Index has turned negative.
Weakness in Apple was a major reason for weakness in the NASDAQ Composite Index. Apple is the stock with the highest weighting in the Index. Weakness triggered a break by the Index below its 50 day moving average. Strength by the Index relative to the S&P 500 Index also has turned negative.
Agriculture commodities (particularly grains) remain under technical pressure. Corn and Wheat prices broke support to reach multi-month lows.
The Financial Philosopher
Ken Norquay, CMT
Partner, CastleMoore Inc.
April 16, 2012
I can understand why conspiracy theorists think the way they think. And the way they think is: there are people in high places manipulating the world’s population for their own benefit.
A recent example of their thinking was the World Trade Centre 9/11 tragedy. Rather than accept the notion that Al Qaeda, the Muslim terrorist organization, committed that crime, the conspiracy theorists chose to believe the crime was committed by George W. Bush and his right-wing conservative backers who used it as an excuse to declare war on Iraq and Afghanistan. Their motivation was the profits that the arms dealers would make: apparently arms manufacturers are part of this right-wing New World Order group.
A previous, but equally colourful conspiracy theory involved the Japanese raid on Pearl Harbor. The conspiracy theorists of that era believed that it was American right-wing conservatives who wanted the USA to join the Second World War in Asia. Somehow they set it up so the Japanese navy would be able to sneak in close enough to strike Hawaii without being detected.
In the past, it seemed that conspiracy theorists were mostly left-wing affairs that challenged the status quo. But that could be changing.
I hear that the right-wing American conservatives are the ones who have a conspiracy theory this time. They think that President Obama and his left-wing backers have rigged the stock market so that it will have a spectacular run up before the presidential election in November. They are also said to have rigged the economy so there will be many new jobs created in the next six to eight months. All this to help the President get re-elected.
Perhaps my tongue-in-cheek sarcasm is out of place, but the straight-up stock market we’ve seen lately really is an unnatural phenomenon. From low to high, the S&P 500 index has risen over 5% per month from early October to early April. It’s rising like a rocket! And just on time for President Obama to get re-elected! It must be a conspiracy!
Unfortunately, it flies in the face of two ‘correlation theories’ about the stock market. I call them correlation theories because they don’t seem to have a solid base in economic logic. The first is seasonality and the second is the decennial pattern.
My friend Don Vialoux is the Canadian champion of seasonality: the tendency of the stock market to perform better from November to April than from May to October. Don wrote a thesis on this topic when he was earning his Chartered Market Technician (CMT) designation. And here we are in April, the end of the season of strength.
The decennial pattern emerges from the observation that the first few years of the average decade tend to be weak, and the middle and last few years tend to be stronger. And here we are in 2012, a year ending in “2.” If the decennial pattern holds true for this year, the markets should decline into June or September, as they have so often in past decades.
Presidential election theories, seasonality, decennial patterns — what’s the underlying message?
The message is that the market moves up and down a lot. And there are patterns in those price fluctuations. Not one of these patterns repeats itself in exactly the same way every time, but the patterns do exist and can be observed by studying stock-price history.
The real question is: can you use them to make money in your own portfolio?
In my book, Beyond the Bull, I suggest that ordinary investors should have investment techniques. Investment techniques are plans that you put in place long before you ever invest a nickel. When and what will you buy? Under what circumstances will you sell? It’s a little like a conspiracy theory. Only, you are the conspirator. Instead of manipulating the market, you manipulate your portfolio in response to the market. Rather than focusing on people in power, we focus on ourselves. We focus on our own power and influence. Rather than being helpless victims of some grand conspiracy, our energy is channelled toward our own best interests.
To order your copy of Beyond the Bull and the Five Levels of Investor Consciousness CD, or to sign up for Ken’s free monthly webinar, visit www.gobeyondthebull.com (Bullmanship Code = SS32).
This article and others by Ken are available at http://kennorquay.blogspot.com.
Contact Ken directly at firstname.lastname@example.org.
Keith Richards’ Blog
This week’s blog will look at a number of factors that may test the mettle of the stock markets, including a myriad of earnings reports, ongoing concerns in Europe, and some important technical support levels. Visit www.smartbounce.ca to read the report.
Special Free Services available through www.equityclock.com
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.
To login, simply go to http://www.equityclock.com/charts/
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Following is an example of EquityClock.com’s seasonality charts:
Whirlpool Corporation (NYSE:WHR) Seasonal Chart
FP Trading Desk Headline
FP Trading Desk headline reads, “S&P 500 weakness a blessing in disguise: JP Morgan”. Following is a link to the report:
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 16th 2012