Pre-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.
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:
- Resources used in the presentation.
Differences between seasonal, technical and fundamental analysis
- 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
- Annual recurring events
- Special planned events
- Analyst estimate changes
Access to information
- Valued analysts
- Direct sources: quarterly and annual reports
- Short term momentum indicators (Stochastics, RSI, MACD)
- Sentiment indicators
- Core technical indicators
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
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.
Éric Wheatley, MBA, CIM
Associate Portfolio Manager, J.C. Hood Investment Counsel Inc.
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