Well how about that. Another trader respects Bill Carrigan posts.
Funny isn't it. Both Bill & Don get published in the media, but I don't see Swampy there or anybody else from these threads.
My guess is that both Bill & Don are on to something, something that the broader comminity of SI will miss completely, 'cause they are completely caught up in their own BS.
Tech Talk for Wednesday June 6th 2007
Inter-day Comments for Wednesday June 6th
9:15 AM EDT: U.S. equity indices are lower in overnight trading due to concerns about rising interest rates in Europe. The European Central Bank raised its overnight rate (equivalent to the Fed Fund rate in the U.S.) from 3.75% to 4.00%. European markets weakened prior to the news and weakness spilled into U.S. equity markets. Comments by Morgan Stanley recommending sale of European stocks contributed to weakness in European equity markets.
TDAmeritrade is a focus this morning. After the close yesterday, two hedge funds announced acquisition of over 8% of TD Ameritrade and began pressuring Toronto Dominion with its 40% interest in TDAmeritrade to sell to another discount broker. TD Ameritrade is up 4% in overnight trading. According to commentators on Fast Money on CNBC last night, TDAmeritrade now is “in play”. Following is a link to Ameritrade’s chart: stockcharts.com
Prudential announced this morning that it has discontinued providing equity research services. Two years ago, Prudential closed down its technical research services led by Ralph Accompora. Lacking the guidance of technical research, Prudential’s fundamental analysts had a difficult time offering timely advice. The rest is history. So much for the value of fundamental research without the support and assistance of technical research!
11:15 AM EDT: FP Trading Desk headline reads, “Union Pacific, CN Rail and Burlington among rails UBS lowers EPS forecast”. Following is a link to the report: communities.canada.com
Technical profiles for U.S. railway stocks are deteriorating. The rail stocks dominate the Dow Jones Transportation Average, an index that showed early signs of technical deterioration near the end of April. As noted in a column in the Financial Post on May 7th the Dow Jones Transportation Average has a period of seasonal strength from the end of September to the end of April. Average gain per period during the past 10 periods was 14.3%. Conversely, the Average has declined an average of 5.6% per period from the end of April to the end of September. History is repeating itself. The Average already is down 2.3% from its April high on April 25th. Short term momentum data also shows weakness. RSI and MACD have rolled over from a short term overbought level and have established downtrends. Following is a link to a chart on the Dow Jones Transportation Average:
stockcharts.com
Technical Action Yesterday
Surprisingly, technical action by S&P 500 stocks was quietly bullish yesterday. Five S&P 500 stocks broke resistance and one stock broke support.
S&P 500 stocks breaking resistance
Stock Symbol Previous New
Trend Trend
Brown Forman BF.B Neutral Up
Dover DOV Up Up
Dow Chemicals DOW Down Neutral
Kimberly Clark KMB Up Up
Pulte Homes PHM Up Up
S&P 500 stocks breaking support
Stock Symbol Previous New News
Trend Trend
Bed Bath & Beyond BBBY Up Down Lower guidance
Technical action by TSX stocks was neutral yesterday. Four TSX stocks broke resistance and three stocks broke support.
TSX stocks breaking resistance
Stock Symbol Previous New
Trend Trend
First Quantum FM Up Up
Sino Forest TRE Down Neutral
TSX Group X Down Up
UTS Energy UTS Up Up
TSX stocks breaking support
Stock Symbol Previous New
Trend Trend
Fortis FTS Up Neutral
Open Text OTC Up Down
Quebecor QBR.B Up Neutral
Inter-day Comments for June 5th
9:25 AM: The focus this morning is on comments made by Fed Chairman Ben Bernanke. Generally, his comments were mildly hawkish for equity and bond markets. He noted that impact of the sub-prime lending situation in the U.S. is not over, U.S. economic growth will be at less than historic levels during the next couple of quarters and concerns about inflationary pressures remain. U.S. equity indices have moved lower in pre-opening trade.
Update: U.S. long term bond yields spiked again. Traders are starting to talk about no reduction in the Fed Fund rate this year.
Chart courtesy of StockCharts.com www.stockcharts.com
Concerns about rising interest rate quickly flowed into interest sensitive U.S. equities (e.g. financial services, REITs, Utilities).
Chart courtesy of StockCharts.com www.stockcharts.com
Despite higher U.S. interest rates, the U.S. Dollar weakened. MACD has rolled over.
Chart courtesy of StockCharts.com www.stockcharts.com
BCE is in the spotlight again this morning. Teachers, the largest holder of BCE shares confirmed this morning that it recently invested over $300 million in BCE (ie. approximately 1% of BCE’s shares).
Chart courtesy of StockCharts.com www.stockcharts.com
2:15 PM: FP Trading Desk headline reads, “Nortel likely loses out on Avaya according to report” Following is a link to the report: communities.canada.com
Nortel: It’s time to put the stock on the watch list
During a presentation on Monday evening at the Toronto Exchange, Bill Carrigan noted that he is taking a more positive stance on Nortel. A closer look at the technicals and fundamentals for Nortel suggest that Bill could be “on to something”.
Fundamental for Nortel finally are turning positive. Most of the company’s legal problems are behind them, its focus has been narrowed to include only products where the company can be a leader, recent product launches are starting to contribute to revenues and earnings and, most important, earnings finally are turning positive. Second quarter earnings are expected to be profitable and earnings gains are expected to accelerate thereafter. Consensus for second quarter earnings is $0.09 U.S. versus a loss of $0.20 U.S. per share last year. Consensus for third quarter earnings is $0.25 versus a loss of $0.20 per share last year. Annual earnings are expected to improve from a loss of $0.76 U.S. per share last year to a profit of $0.66 per share in 2007 and a profit of $1.61 per share in 2008.
Technicals are trying to bottom. The stock has traded in a three month range between $25.01 Cdn. and $28.70 Cdn.. It is trading just above its 50 and 200 day moving averages. A break above $28.70 will complete a potential head and shoulders pattern. Technical target on a breakout above $28.70 is $33.00 Cdn. On the other hand, other technical indicators show little evidence that a breakout will occur in the short term. MACD and Relative Strength Index data are neutral. Strength relative to the TSX Composite Index is neutral. On balance volume data also is neutral. The chart in U.S. Dollars has a more positive technical profile. An intermediate uptrend already has been established. The stock recently moved above its 50 and 200 day moving averages. Short term momentum data is slightly more positive on the U.S. chart.
Chart courtesy of StockCharts.com www.stockcharts.com
Chart courtesy of StockChart.com www.stockcharts.com
Seasonal influences for the stock are favourable between September and January.
The Bottom Line:
Intriguing stock with interesting upside potential, but timing appears to be slightly early! Technical action will be watched closely for possible upside trading action as second quarter results approach. Watch for analyst comments between now and the end of July.
Interesting Report from the FP Trading Desk
Rising loonie could make Q2 earnings season an 'ugly one' in Canada: Northern Securities
The relatively calm reaction the soaring loonie has garnered from corporate Canada could mean companies have taken the appropriate steps to deal with the impact of a currency that is surging towards parity with the U.S. greenback. On the other hand, it could represent the calm before the storm.
This is view of Northern Securities analyst Elvis Picardo, who forecasts corporate earnings will take a significant hit from the strong Canadian dollar in the second quarter, when much of the loonie’s rally has occurred. The negative impact is expected to hurt the manufacturing and commodities sectors most.
“While the Canadian dollar currently appears overbought in the short term, this factor does not appear to be a deterrent to the C$-bulls,” Mr. Picardo said in a research note.
He also noted a foreign exchange hedging survey from the Bank of Canada in April 2006 where roughly half of the clients of Canada’s major banks said the rising loonie was impacting them negatively.
Rising commodity prices were cited as one way to hedge against appreciation of the Canadian dollar, while many respondents expected the loonie would peak in 2006, thus providing a reason for firms to reduce their hedging ratios.
But commodity price gains have stabilize recently and the Canadian dollar continues to break new records, which is why Mr. Picardo thinks second quarter earnings season in Canada “could well be an ugly one.”
Tech Talk comment: Canadian companies selling their products in U.S. Dollars or exporting their products to the U.S. will be impacted most. Revenues are in U.S. Dollars and expenses are in Canadian Dollars. Not a pleasant experience when the Canadian Dollar rises 12% in one quarter! Look for analyst to reduce earnings estimates significantly prior to release of second quarter earnings reports.
Gold and Gold Stock Update
The sector continues to bottom. Most stocks and ETFs in the sector likely reached an important low last week. The bottoming phase is followed by a base building phase followed by the “break-out” phase (likely to occur in the July/September period).
Now is a good time to collect technical and fundamental evidence that supports ownership of the sector for a seasonal trade. The following comment in this week’s Business Week is an example:
“Gold, long considered by Asians to be lucky and the only store of value, is getting a boost from the Chinese calendar. Mainland China snapped up 31% more gold in the opening quarter of this year than last, buying almost 90 metric tons. Officials at the World Gold Council trade group credit the Year of the Golden Pig that began in February: It comes along every 60 years. The Council says current demand is the strongest since the early 1990s when inflation fears and currency devaluation caused a gold boom in China.
"Most popular among those who find it auspicious to buy gold now: jewelry and 'lucky balls', a small ornament worn around the neck or wrist. In India, the world's largest gold market, first-quarter demand is up 50%. Indians bought 211 metric tons of gold, now at $653 an ounces. The surging economy gets the credit there."
ETF Update
State Street has launched five U.S. fixed income ETFs. Following are highlights:
ETF Symbol MER(%)
SPDR Lehman 1-3 month T-Bill BIL 0.13
SPDR Lehman Intermediate Term Treasury ITE 0.18
SPDR Lehman Long Term Treasury TLO 0.13
SPDR Barclays Capital Tips IPE 0.13
SPDR Lehman Aggregate Bond LAG 0.13
An updated list of North American ETFs (including their symbols, MERs and listed options eligibility) is available at dvtechtalk.com .
Tech Talk’s Weekly Financial Post Column
The column appeared yesterday instead of Monday. The original article is available by paid subscription at www.nationalpost.com Following is the column:
Investing in the Russell 2000 Index
U.S. equity indices, that measure the performance of small cap stocks, reached an all time high late last week. Where do they go from here?
The preferred benchmark for measuring the performance of U.S. small cap stocks is the Russell 2000 Index. The Index tracks the performance of the bottom 2,000 stocks out of the top 3,000 market cap stocks listed on U.S. exchanges. Average market cap for Russell 2000 companies is $1.3 billion.
Seasonal Influences
The Russell 2000 Index has a period of seasonal strength from the end of September to the end of January. The trade has been profitable in eight of the past 10 periods. Average gain per period was 9.4% plus dividends. In contrast, the trade from the end of January to the end of September during the past 10 period recorded a profit in four of the past 10 periods. Average loss per period was 0.7% (less dividends). Following is the data:
Russell 2000 Index
Year End of Sept. Year End of Jan. Percent Percent
Sept./Jan. Jan./Sept.
1997 369.1 22.9
1997 453.8 1998 430.1 (5.2) (15.5)
1998 363.6 1999 427.2 17.5 0.0
1999 427.3 2000 496.2 16.1 5.1
2000 521.4 2001 508.3 (2.5) (20.3)
2001 404.9 2002 483.1 19.3 (25.0)
2002 362.3 2003 372.2 2.7 31.0
2003 487.7 2004 580.8 19.1 (1.2)
2004 572.9 2005 624.0 8.9 7.0
2005 667.8 2006 733.2 9.8 (1.0)
2006 725.6 2007 800.3 10.3
Number of September/January gains out of 10: 8 Average gain per period: 9.4%
Number of January/September gains out of 10:4 Average loss per period: 0.7%
The following chart shows optimal seasonal entry and exit points for the Index during the past seven years as well as its strength of relative to the S&P 500 Index:
Fundamental Influences
Earnings prospects into 2008 for Russell 2000 companies are less attractive than prospect for S&P 500 Index companies. Earnings gains by most of the companies in the Russell 2000 Index are driven by U.S. economic prospects. In contrast, recent earnings gains by most of the companies in the S&P 500 Index have come from currency translation and operations growth outside of the U.S. Stronger growth by companies with international operations during the next 12-18 months when U.S. economic growth is slowing implies less potential for the Russell 2000 Index.
Technical Influences
The Russell 2000 Index currently has a mixed technical profile. Intermediate trend is up.The Index remains above it 50 and 200 day moving average. Support exists at 760. Strength relative to the S&P 500 Index began to deteriorate at the end of February. The Index’ seven year record of out-performance relative to the S&P 500 Index was broken in March. In addition, Moving Average Convergence Divergence (MACD) and Relative Strength Index (RSI) recently rolled over from short term overbought levels and are trending down.
The Bottom Line: Fundamental, technical and seasonal reasons to own U.S. small cap
stocks and Russell 2000 Index related Exchange Traded Funds at current prices are less than compelling. Re-entering the sector later this year is a possibility.
Iain Fraser’s Column
We consider ourselves fortunate to be a stock market analyst, mainly in Canadian stocks. The main reason is that the three sectors, financial, energy, mines make up almost 80% of the TSE Composite Index. Because of the takeovers there are only two big stocks in the mining sector and one of them, Alcan, may disappear; leaving only one, TeckCominco. In the financial sector there are the big banks and the big insurance stocks; both have been going up for years and are still going up. But the third sector, energy presents a challenging situation. As you can see on the charts for the XEG and CNQ both are close to all time highs. There are two ways to go; for the bears this is the time to sell and maybe they are right. For the bulls, we put ourselves in this camp, the energy stocks are about to break out and move up 30% or more. If you are in this camp there are four big stocks to consider, the leading stock in the regular producers is CNQ; the leading stocks in the oil sands producers is Suncor. We will be following the energy stocks very closely in our coming reports. The mai n independent oil producing stocks are all good value in terms of cash flow and expected cash flow. Suncor, is different than the other three, because it operates in the oil sands.
In our current Report we show a table of our top picks since inception. There are 29 all together. The list includes our very early top picks (most undervalued). And of course it includes our most recent top picks. |
