ShareThisPre-opening Comments for Friday March 15th
U.S. equity index futures are mixed this morning. S&P 500 futures are unchanged in pre-opening trade.
Index futures were virtually unchanged following release of economic data at 8:30 AM EDT. Consensus for February Consumer Prices was an increase of 0.5% versus no change in January. Actual was an increase of 0.7%. Excluding food and energy, consensus for CPI was a gain of 0.2% versus an increase of 0.2% in January. Actual was a gain of 0.2%. Consensus for the March Empire State Index was a decline to 6.5 from 10.0 in February. Actual was a decline to 9.2
Today is “Quadruple Witching Day” on U.S. markets marking the last trade day for March equity and index futures and options. Volume is expected to be higher than average.
The U.S. Dollar is weaker this morning. Commodity prices have responded by moving higher. Crude oil gained $0.64 per barrel. Gold added $2.60 per ounce. Silver improved $0.10 per ounce. Gasoline gained 2.6 cents per gallon. Copper improved one cent per lb.
Bank of America gained $0.44 to $12.55 and American Express improved $0.50 to $65.88 after they announced share buyback programs following release of the Federal Reserve’s financial stress tests.
Best Buy added $0.17 to $21.67 after RBC Capital raised its rating from Sector Perform to Outperform. Target was raised from $16 to $27.
TransOcean fell $0.57 to $53.19 after Jefferies downgraded the stock from Buy to Hold.
Freeport McMoran Copper and Gold gained $0.68 to $33.84 after Goldman Sachs upgraded the stock from Neutral to Buy. Target was raised from $38 to $42.
Interesting Charts
The S&P 500 Index closed just below its closing all-time high at 1,565.15. Its all-time inter-day high is 1,576.09.
Other developed nation equity markets also participated. iShares on the EAFE Index broke to a two year high.
Leading sectors were Materials and Energy. Both broke above resistance to close at new highs. ‘Tis the season!
The energy sector was buoyed by a breakout in natural gas prices.
“Gassy” stocks were notably stronger on both sides of the border.
Strength in natural gas and crude oil prices helped the Canadian Dollar. Nice breakout above a short term reverse head and shoulders pattern! The Canuck Buck also moved above its 20 day moving average.
U.S. long term bond yields continue to rise following a disappointing 30 year Treasury auction yesterday. Rick Santelli at CNBC gave the auction a “D” rating when coverage was less than usual.
Updates on Sector Seasonal Trades
Seasonal trades optimally have a technical score of 3 based on (1) uptrend, (2) trading above its 20 day moving average and (3) outperforming the market (S&P 500 for U.S. holdings, TSX for Canadian holdings). Scores moving lower than 3 are warnings signs. A score of 0-0.5 is a sell signal. The following seasonal trades have a technical score of 1.0 or higher and are in their period of seasonal strength. Their retention is recommended.
Technical score for Industrial SPDRs remained at 2.5. Seasonal influences are positive until early May.
Technical score for Consumer Discretionary SPDRs remains at 3.0. Seasonal influences are positive until mid-April.
Technical score for Retail SPDRs changed from 2.5 to 3.0 when strength relative to the S&P 500 Index changed from neutral to positive. Seasonal influences are positive until mid-April.
Technical score for Palladium changed from 2.0 to 2.5 when an intermediate uptrend resumed on a break above $777.60. Seasonal influences are positive until the end of April.
Technical score for the Oil & Gas Exploration & Development ETF increased from 2.5 to 3.0 when strength relative to the S&P 500 Index changed from neutral to positive. Seasonal influences are positive until mid-April.
Technical score for Energy SPDRs increased from 2.0 to 2.5 when trend changed from neutral to up on a break above $79.50. Seasonal influences are positive until the end of April.
Technical score for Gasoline remains unchanged at 1.0. Seasonal influences are positive until the end of April.
Technical score for Material SPDRs is 3.0. Seasonal influences are positive until early May.
Technical score for the TSX Financial ETF changed from 3.0 to 0.5 when trend changed from up to neutral on a break below support at $24.92, units broke below their 20 day moving average and strength relative to the TSX Composite Index. This is a failed seasonal trade. Better opportunities exist elsewhere.
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. Notice that most of the seasonality charts have been updated recently.
To login, simply go to http://www.equityclock.com/charts/
Following is an example:
Heating Oil Futures (HO) Seasonal Chart
An Educational Seminar on Seasonal, Technical and Fundamental Analysis
Mr. Vialoux is a non-paid guest speaker at an educational seminar in Oakville on Saturday March 23rd. Following is a link to the seminar:
Following is a summary of topics to be discussed at the seminar:
Introduction
- Background
- Resources used in the presentation.
Differences between seasonal, technical and fundamental analysis
Seasonality Analysis
- Definition
- Time requirements
- Length of seasonal trades
- Measuring seasonality (real and relative)
- Factors influencing seasonality: recurring annual events
- Investment suitability
- Sources: Equity Clock, Thackray’s Investment Guide, Tech Talk
Fundamental Analysis
- Annual recurring events
- Special planned events
- Analyst estimate changes
- Limitations
Valuations
Education
Access to information
- Valued analysts
- Direct sources: quarterly and annual reports
Technical Analysis
- Short term momentum indicators (Stochastics, RSI, MACD)
- Sentiment indicators
- Core technical indicators
Trend
Strength relative to market
20 day moving average
Digging deeper into seasonality when applying technical analysis
- Seasonality in equity markets (with history)
- Seasonality in commodity markets
- Seasonality in bond and currency markets
- Seasonality in sectors
- Seasonality in individual equities
Seasonality Myths
Eric Wheatley’s Column
Good Friday morning dear people,
[Note: Once again, this commentary has nothing to do with options. It’s just an opinion piece on my long-term view of the markets. Technical traders may find it to be soporific].
Among my interminable readings – which sometimes make me feel like Danaus’ daughters or Sisyphus – I’ve recently found a simple yet illustrative little article in the New York Times which poses a reasonable question: are stocks expensive and should you buy them? It also goes into why human intuition leads us to makes horrendous investment/trading decisions.
I remember writing back in 2002 that I wasn’t expecting another secular bull market for at least ten to fifteen years (and yes, of course, I received mocking emails for my troubles from eternal optimists. Much as with the various beliefs in the afterlife, we all believe we are right in our long-term opinions for the markets, but there will be no way to gloat afterwards if we are. Darnit). This is because assets such as stocks/houses/vintage cars/artwork/etc. have no natural shorts. Everyone who invests in these markets has a natural and inherent interest in seeing their value rise. No investor benefits from a crash in asset markets – the artificial and relatively insignificant phenomenon of short-selling shares notwithstanding.
I’ve previously mentioned that this is odd in the financial markets. Other securities/commodities such as bonds, gold, oil, currencies etc. have natural shorts (e.g. if you are a Canadian consumer, you benefit from a strong CAD. If you are an American consumer, you benefit from a strong USD) and the equilibrium point in the market is easily found through the awe-inspiring eternal tussle between natural buyers and natural sellers. The stock market, with everyone being a natural long, has a tendency to rise up fast and then stagnate in alternating 10-20 year phases.
So, are we on the cusp of a glorious bull market which will bring with it untold riches?? Well, first off, if we are, a hint to investors (not traders): DON’T SELL ON THE DIPS! If we aren’t and this is just another crest on a long-term wave of stagnation, well, don’t sell on the dips either, though these may be deeper than you fear.
I believe in indexing strategies because indices have a wonderful tendency to benefit from survivorship bias (i.e. crappy companies get filtered out of the indices before killing a portfolio’s value) and to generate good long-term growth at stunningly low costs. I also like to use options to smooth out returns. Nowadays options are horrendously underpriced, so the eternal options guy (me) holds a bunch of his clients’ assets uncovered by calls which would otherwise usually be. I don’t much care if this is the beginning of financial bliss or a lemming’s final steps. Stocks will always rise and fall; those who panic at either end – buying high and selling low – are the ones who will lose. I’m not convinced that this trend WON’T continue, but I’m sitting on a whole lot of cash after the RRSP contribution period and I’m in no hurry to overweight equities. I’ll get my opportunity to buy. I don’t think it’s now and with options premiums so low, methinks there is no need to act.
Cheers!
Éric Wheatley, MBA, CIM
Associate Portfolio Manager, J.C. Hood Investment Counsel Inc.
eric@jchood.com
514.604.2829; 1.855.348.2829
*****************
Little known fact about John Charles Hood #64
John Charles Hood believes that useless actions only wear out the inexperienced and make them vulnerable to a precise blow with a rapier. This Yoda-esque economy of effort comes in handy at industry functions whilst sipping a single glass of fine scotch and watching the Coors Light-addled lightweights stumble past.
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 14th 2013
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March 15th, 2013 at 10:10 am
I havent seen Canuck here in awhile but I know he was bullish on BAC. With the 5 billion common share buyback, anyone buying more here? I think the next major resistence is $15.
March 15th, 2013 at 1:13 pm
Neil, Re CPD (yesterday)
As of this writing, CPD.TO returned 4.94% (StockCharts). This is calculated on the opening price of March 16, 2012 to the current price (March 15, 2013). But these prices do not include the additional 4.21% distribution as stated in the ScotiaiTrade website. (Most sites do not include distributions and dividends – I don’t know why, it would be useful information.) So, according to my calculations, the Total Return is 9.15%.
Two things we should be aware of here. One, StockCharts adjusts the price following a distribution or dividend to avoid showing a gap erroneously, so the actual price return is likely a little less. And two, to get the Total Return, the calculation is somewhat more complicated than a simple addition. You would have to add in the distribution at the time it was applied then work in the Future Value each time. I, for one, am happy with the simple calculation I’ve made.
Now to CPD.TO. Here is a weekly chart comparing CPD with $TSX, XCB (Canadian Corp bonds) and XBB (Canadian Universal Bonds) and the correlation to each. Using long term average correlations, CPD most closely correlates to XCB, Canadian Corporates, then Universal Gov’t bonds. Seems to me that when interests rates start to rise, bonds are in fro a rough time. And CPD may follow them.
However, CPD.TO looks very attractive to me as a core holding.
http://stockcharts.com/h-sc/ui?s=CPD.TO&p=W&yr=6&mn=0&dy=0&id=p12228680458
March 15th, 2013 at 3:23 pm
Hi guys been busy the last two days,
March 15th, 2013 at 3:46 pm
Mike, Lisa
just want to say thx to lisa for helping out using my fav techinical patterns of the MAvgs.
Mike
Once price reaches a MA and changes direction this usually means what it means you ewither make money if it bounces on it or get into a world of hurt.
ZUT broke below the 50MA that was a sell signal it broke the 200MA man why take in more pain???
here’s a great example this is recent I bought PWT.to and PRE in the last month
I bought PWT.to in feb when it broke above the 18MA it got to its 50MA didn’t cross over in a fashionable way it and pulled so I sold it slightly below the 18MA this time around I got in played it the same way bought it at the 18MA broke above the 50MA and has been running but I sold it because of a condlestick pattern that didn’t convince me on an intraday chart so I’m up but am missing out on this latest run.
I bought pre.to about 2weeks ago once it moved back above the 18MA but wednesday I sold it at 25$ because once again my my intraday time frame was giving me sell signals. ok it was the basd news that didn’t help even on a daily chart it closed below the 18MA so that was a risk I didn’t want to take and yesterday what happened it gapped lower. the poor trader who bought it from me must be kicking himself.
These are risks we take and we must live with, I took two risks on the same day one paid off for the buyer and one was a dog for the buyer. so if can we congratulate me for my decisions not really because it wass just coincidence, that one was a bear and one a bull.
My advice to you is take a MA and follow it as a signal to buy or sell.
March 15th, 2013 at 3:52 pm
Brian,
If memory serves me right canuck is on vacation for a month in AZ or did I mix him up with someone else. Not sure well any how if he ain’t on vacation hes remodeling his house.
about BAC I think this is a buy with a stop loss just beneath the 50MA.
March 15th, 2013 at 3:54 pm
FreddeB,
cpd.to,
I agree with you, 9.1% return dividend and all is nice
as long as it stays above the 50MA its a keeper.
March 15th, 2013 at 4:24 pm
Hi Tony
Could you please tell me what MA should look at to make a buy or sell decision on ZUT. I dont know whether to just hold for the yield now or take a loss and move on. Thanks kindly.
March 15th, 2013 at 4:54 pm
Hey Mike
for the 18 or the 50MA are those that I prefer, but for ZUT,
here is a weekly chart that shows next support if it fails we should head down another 1$ down
http://stockcharts.com/h-sc/ui?s=ZUT.TO&p=W&b=3&g=0&id=p13387366511&a=296128070
my stop would be set at 6% below where I bought it so in this case 14.8.
March 15th, 2013 at 5:10 pm
Mike
One of the problems you can run into when buying just the yield is that your pick could end up like erf, bnp, pgf, ATP etc, all companies that had great yields only to see them cut and ones capital eroded. The difference with zut is that the long term trend is up.
http://stockcharts.com/h-sc/ui?s=ZUT.TO&p=W&b=5&g=0&id=p31914286008
I can see this one dropping to around 14.75 – 15 range before it turns around, the key may be whether it can make it back to the 20 ma and hold above that, if it can’t you might want to reconsider. This is not a high beta etf , but it does have some holdings that have not done well recently, i guess it all depends on how much patience you have.
March 15th, 2013 at 5:18 pm
mick/nv Tony
Thanks for the comments. I think will just have to be patient and collect the dividends. In regards to their holdings being hit hard I would have thought the managers would do more due diligence in regards to companies like ATP and JE.
March 15th, 2013 at 6:55 pm
#2, Freddebuoy
Nice piece of anaylsis and charting on CPD.to, etc vs TSX. Very interesting and much appreciated.
FF
March 16th, 2013 at 2:30 am
Freddebuoy and Neil/AB
Re CPD, #2
I started to look at various charts for CPD. FreeStockCharts, Google Finance, TMX site, and the iShares sites all use the unadjusted numbers for the chart. Stock Charts is the only one using the adjusted numbers. However, if you go to Yahoo Finance, and call up a quote for CPD, then on the right click ‘Historical Prices, then select for ‘monthly’ and ‘get prices’, you get a list of the monthly prices and dividends. And here they give the adjusted price that Stock Charts uses, and the OHLC prices that all the other charts used including iShares.
The two different charts are very different looking and I think it would affect TA giving a different result.
Comments here very much appreciated.
Pat.
March 16th, 2013 at 11:59 am
#12
Here are the 2 different charts for cpd.to, the first with no historical data adjusted, notice the gaps and large price swings
http://stockcharts.com/h-sc/ui?s=_CPD.TO&p=D&b=5&g=0&id=p68601945001&a=296196286
the second chart has the historical data adjusted, no price swings or gaps
http://stockcharts.com/h-sc/ui?s=CPD.TO&p=D&b=5&g=0&id=p23643337505
This might explain the differences and which is better to use for TA
http://blogs.stockcharts.com/chartwatchers/2012/07/on-data-accuracy-at-stockchartscom.html?st=data+accuracy
March 16th, 2013 at 1:45 pm
I’m feeling my neck this morning and thank you, Mick and Pat for your help. I’ve learned a lot. And a note to Neil – sorry if I lead you astray.
Seems performance, calculated from data provided by StockCharts, because they do adjust prices for splits, dividends and distributions, CAN be treated as Total Return.
March 16th, 2013 at 4:18 pm
#13 re CPD
Mick/nv
How did you get the unadjusted chart on Stock Charts?
It makes sense to me that the charts would be adjusted for splits. That was an obvious problem when you did the charts yourself by hand.
With any income type entity, it’s a little more confusing but here’s my take. It’s good to know now that there can be two different charts. With the unadjusted one you can track the original value of the units. Without the influence of the payouts, you can see how your capital is doing. With the adjusted cost chart, you can see how your total return works out.
However, if you are comparing say, CPD, to an index, then, how is the index calculated? (ie in this case, a preferred fund to a preferred index like the charts you posted before)
In the case of the chart of a company, though, I don’t really get it why they are including the dividends in the prices on the charts.
It’s very good to be aware of this basic info, and thanks to all you guys for bringing this out for discussion.
Pat.
March 16th, 2013 at 10:05 pm
Pat
To get the unadjusted chart add the underscore to the symbol ( _ ) . I use charts for my buy/sell signals and to look at the long term trend. As mentioned by the stockchart blog, unadjusted charts can give you false buy/sell signals, i believe you can see that in the first chart i posted, too many gaps and price swings. At the end of the day, i want to know if i am richer today than yesterday but i let my brokerage account tell me that.
For index calculation, i believe it is the sum of the individual component values with some defined factor applied against it. Maybe someone who has more knowledge of that can comment.
March 17th, 2013 at 6:46 pm
S&P Futures, down -14.70 at 1538.65 due to Cyprus…