Tech Talk for Wednesday April 30th 2008

 

Pre-opening Comments for Wednesday April 30th

 

9:10 AM EDT: U.S. equity index futures are higher this morning. S&P 500 Index futures are up four points following news that U.S. annualized real GDP in the first quarter rose 0.6%, slightly better than consensus at 0.5%. With stronger than expected first quarter GDP and economic and monetary stimulus in the second quarter, traders are now saying that chances of a recession in the U.S. are “small”.

 

The U.S. Dollar has rallied following release of the GDP report.

 

U.S. equity markets also are being helped by better than expected first quarter earnings released this morning. General Motors reported a loss of $0.62 versus a loss of $0.01 per share last year. Consensus was a loss of $1.60 per share. The stock is up 5% in pre-opening trade. Procter and Gamble reported fiscal third quarter earnings at $0.82 versus $0.74 per share. Consensus was $0.81 per share. Time Warner is trading higher following news that the company plans to spin off its cable division. Kellogg and Dean Foods also are trading higher following release of higher than consensus first quarter earnings. First Solar is sharply higher after reporting blow out first quarter earnings. Earnings were $0.57 versus $0.07 per share last year. Consensus was $0.47 per share. All stocks have improving technical profiles. First Solar is expected to open near its all time high.

Chart courtesy of StockCharts.com                     www.stockcharts.com

 

In Canada, Talisman is trading higher after reporting higher than consensus first quarter cash flow and earnings. First quarter earnings were $0.49 versus $0.23 per share. Consensus was $0.33 per share.

 

Cisco Systems is expected to open higher following favourable comments by Morgan Stanley. Cisco has an improving technical profile. The stock is attempting to break above a base building pattern. Morgan Stanley’s comments could be the trigger to complete the pattern.

Chart courtesy of StockCharts.com                          www.stockcharts.com

 

Not all the news was positive. February Real GDP in Canada fell 0.2%. Consensus was a gain of 0.2%. The Canadian Dollar has weakened slightly on the news. 

 

 

Technical Action Yesterday

 

Technical action by S&P 500 Index stocks was surprisingly bullish yesterday given the decline by the Index itself. Twenty S&P 500 stocks broke resistance and three stocks broke support.

 

S&P 500 stocks breaking resistance

 

Stock                           Symbol            Previous          New

                                                            Trend              Trend

Affiliated Computer      ACS                Up                   Up

Anheuser Busch            BUD                Neutral             Up

Avon                            AVP                Up                   Up

BMC Software             BMC               Neutral             Up

CBS                             CBS                 Down               Neutral

CVS                            CVS                Up                   Up

ConocoPhillips             COP                Down               Up

Corning                        GLW               Up                   Up

Family Dollar                FDO                Up                   Up

Host Hotels                  HST                 Up                   Up

Humana                        HUM               Down               Up

Kroger                         KR                   Neutral             Up

Network Appliances     NTAP              Down               Neutral

Office Depot                ODP                Down               Up

Qwest                          Q                     Down               Neutral

Safeway                       SWY               Down               Neutral

Southwest Airlines        LUV                Down               Up

Watson Pharma            WPI                 Neutral             Up

XL Capital                   XL                   Down               Up

 

S&P 500 stocks breaking support

 

Stock                           Symbol            Previous          New

                                                            Trend              Trend

Radio Shack                 RSH                 Up                   Down

Sunoco                         SUN                Down               Down

United Health               UNH                Down               Down

 

Technical action by TSX Composite stocks was quiet. Two TSX stocks broke resistance and three stocks broke support.

 

TSX stocks breaking resistance

 

Stock                           Symbol            Previous          New

                                                            Trend              Trend

Linamar                        LNR                Down               Up

Northbridge Finance     NB                   Down               Up

 

TSX stocks breaking support

 

Stock                           Symbol            Previous          New

                                                            Trend              Trend

Gildan                          GIL                  Neutral             Down

Northgate                     NGX                Up                   Neutral

Silvercorp                     SVM                Up                   Down

 

Pre-opening Comments for Tuesday April 29th

(Charts have been updated to yesterday’s close)

8:55 AM EDT: U.S. equity index futures are trading lower this morning. S&P 500 futures eased 1.5 points. Traders are waiting for news about the Fed Fund rate from the U.S. Federal Reserve tomorrow afternoon.

 

Crude oil is sharply lower this morning following news that oil production from the North Sea disrupted by a strike will resume shortly. Also, a U.S. government agency announced this morning that demand for refined products is declining. Crude oil is off over $2.00 U.S. per barrel.

 

Short term momentum indicators (MACD, RSI, Stochastics) show that crude oil is peaking. A MACD sell signal likely will be recorded today. Look for energy stocks to open lower and transportation stocks to open higher.

Update: The AMEX Airline Index rose 5.5% yesterday

Chart courtesy of StockCharts.com                      www.stockcharts.com

Chart courtesy of StockCharts.com                     www.stockcharts.com

 

WestJet is trading higher on better than expected first quarter earnings released this morning. WJA has an improving technical profile. It recorded a MACD buy signal yesterday.

Chart courtesy of StockCharts.com                           www,stockcharts.com

 

Archer Daniels Midland reported higher than consensus first quarter earnings. The stock is trading higher in pre-opening trade. The stock has a positive technical profile.

 

Rogers Communications reported higher than expected first quarter results. It also announced plans to launch the iPhone in Canada later this year. RCI.B has an improving technical profile. The stock is likely to break above its 200 day moving average at $43.41 today.

Chart courtesy of StockCharts.com                              www.stockcharts.com

 

Overnight strength in the U.S. Dollar is negatively impacting commodity prices. The U.S. Dollar is testing key resistance at 73.19. Crude oil, gasoline, heating oil, gold, silver and copper are trading lower. Look for the Canadian equity market to open lower this morning.

 

Chart courtesy of StockCharts.com                        www.stockcharts.com

 

Seasonality in May

 

May tends to be a mildly positive month for U.S. and Canadian equity markets. The S&P 500 Index has advanced in five of the past 10 periods and declined in five of the past ten periods. May was the eighth best performing month of the year. Performance by the TSX Composite Index is better. The TSX Composite Index also has advanced in five of the past 10 periods and declined in five of the past 10 periods. Average return per period was 1.22%. May was the third best performing month of the year.

 

According to Thackray’s 2007 Investor’s Calendar, best performing U.S. sectors in May since 1990 have been Consumer Staples, Financial Services and Consumer Discretionary (in that order). Poorest performing sectors were utilities and telecom. Best performing sub-sectors were Retailing, Gold and Banks. Worst performing sub-sector was Semi-conductors.

 

Interesting Fact

 

The NYSE reported on April 15th that short interest positions have reached an all time high at 15.6 billion shares.

 

Interesting Charts

 

Just confirming that key energy indices and their ETFs recorded MACD sell signals yesterday!

 

Chart courtesy of StockCharts.com                            www.stockcharts.com

Chart courtesy of StockCharts.com                      www.stockcharts.com

Chart courtesy of StockCharts.com                        www.stockcharts.com

 

In addition, Bullish Percent Index for the U.S. energy sector rolled over from an intermediate overbought level and broke below its 15 day moving average.

Chart courtesy of StockCharts.com                      www.stockcharts.com

 

 

Southwest Airlines led the list of U.S. stocks that moved higher with the decline in crude oil prices.

Chart courtesy of StockCharts.com                          www.stockcharts.com

 

Gold and base metals prices and their related equities remain under pressure.

 

Chart courtesy of StockCharts.com                       www.stockcharts.com

 

Iain Fraser’s Column

 

In the past six weeks the Toronto market has almost exploded on the upside. In the span of six weeks the TSX60 index is up 11.5 per cent; fortunately, the energy index, which is the one we have liked the most, is up 20.5 per cent in just six weeks.

The problem is that most investors have been overwhelmed with negativism because of the credit squeeze. There is little doubt that we have been in big trouble over the past eight months. As we see it, there were many offenders in this fiasco, but the biggest offenders were the rating agencies. Who could blame the banks and the brokers for putting their clients into securities that were rated AAA – which is the rating of US treasury notes. And even sadder comment is that there appears to be little blame on these rating agencies. Surely, this system has to change. The negative reporting has been so bad that most investors are waiting for another shoe to drop; and there probably are many more shoes to drop. The question is – has this fiasco now been discounted? The strong advance in the stock market both here and in New York suggests that the credit crunch mess has now been discounted.

Chart courtesy of StockCharts.com                       www.stockcharts.com

Chart courtesy of StockCharts.com                      www.stockcharts.com

Editor’s Note: Iain’s services are available at www.fraser-ratings.com . Iain can be contacted at fraserratings@yahoo.ca .

Disclosure: Mr. Vialoux does not own securities mentioned in this report.

Disclaimer: Comments and opinions offered in this report 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.