Tech Talk for Thursday July 3rd 2008

 

Canadian equities played “catch up” with U.S. equities yesterday and “it ain’t over yet”! Commodity sensitive stocks (other than gold) were the targets. Today, equity markets focuses on two important economic news events: the June employment report and news on the European Central Bank rate. Both likely will be bad news.

 

Pre-opening comments for Thursday July 3rd

 

9:10 AM EDT: U.S. equity index futures are higher following release of economic news released this morning. Dow Jones Industrial Average futures are up 64 points in pre-opening trade. Fears of a bad employment report were relieved. The June U.S. employment report released at 8:30 AM was in line with expectations. Consensus for non-farm payrolls was a 60,000 decline. Actual was a 62,000 decline. Consensus for the unemployment rate was 5.4%. Actual was 5.5%.

 

The U.S. Dollar rallied following release of the employment report. Commodities priced in U.S. Dollars including gold, silver and copper moved lower. Relative Strength Index and Stochastics indicate that Silver currently is short term overbought. Silver has a positive technical profile. Weakness to support at $16.25 and its 200 day moving average is possible without damaging its technical profile.

Chart courtesy of StockCharts.com                          www.stockcharts.com

 

European equity indices moved lower overnight following news that the European Central Bank has raised its overnight lending rate to major banks from 4.0% to 4.25%. Higher interest rates will dampen inflation expectations, but also raise costs for borrowers.

 

Trading activity in North American equity markets will be quiet today. U.S. equity and bond markets will close early prior to the Independence Day holiday.

 

Technical Action Yesterday

 

Technical action by S&P 500 stocks remains bearish. Three S&P 500 stocks broke resistance and another 12 stocks broke support.

 

S&P 500 stocks breaking resistance

 

Stock                           Symbol            Previous          New

                                                            Trend              Trend

Citizens Commun.         CZN                Up                   Up

Smith International        SII                   Up                   Up

Southwestern Energy    SWN               Up                   Up

 

S&P 500 stocks breaking support

 

Stock                           Symbol            Previous          New

                                                            Trend              Trend

Affiliated Computer      ACS                Up                   Down

Allied Waste                 AW                  Up                   Neutral

Comcast                       CMCSA          Neutral             Down

Corning                        GLW               Up                   Neutral

Donnelley                     RRD                Up                   Neutral

Freeport McMoran      FCX                Up                   Down

General Dynamics         GD                   Up                   Neutral

Intercontinental Ex        ICE                  Neutral             Down

JDS Uniphase               JDSU               Neutral             Down

Leggett & Platt             LEG                 Up                   Neutral

Paccar                          PCAR              Neutral             Down

U.S. Steel                     X                     Up                   Neutral

 

Technical action by TSX Composite stocks clearly was bearish. Three TSX stocks broke resistance and ten stocks broke support.

 

TSX stocks breaking resistance

 

Stock                           Symbol            Previous          New

                                                            Trend              Trend

Eldorado                      ELD                 Up                   Up

Silver Wheaton             SLW                Down               Neutral

Western Goldfields       WGI                Down               Up

 

 

TSX stocks breaking support

 

Stock                           Symbol            Previous          New

                                                            Trend              Trend

AbitibiBowater             ABH                Up                   Neutral

Cascade                       CAS                Down               Down

Cdn. National Rail        CNR                Up                   Neutral

Cdn. Pacific Rail           CP                   Up                   Down

Cdn. Western Bank      CWB               Down               Down

Corus Entertainment     CJR.B              Down               Down

Dorel Industries            DII.B               Neutral             Down

First Calgary Pete.        FCP                 Up                   Down

Rona                            RON                Down               Down

Thomson Reuters          TRI                  Neutral             Down

 

Pre-opening Comments for Wednesday July 2nd

(Charts have been updated to yesterday’s close)

9:15 AM EDT: U.S. equity indices are mixed this morning. Dow Jones Industrial Average futures are down 4 points in response to mildly negative economic news. The ADP report measuring employment in the private sector in June indicated a 79,000 job loss.

 

Starbucks is 5% higher in overnight trading following news that the company plans to close up to 600 “underperforming” stores in the U.S. and lay off up to 12,000 employees. Recovery in its stock prices is badly needed. The stock currently has a negative technical profile. Yesterday, it broke support to reach a four year low.

Chart courtesy of StockCharts.com                        www.stockcharts.com

Talisman could open lower this morning. Overnight, it announced a dry hole at an exploratory well in the Norwegian North Sea. In addition, Morgan Stanley downgraded the stock from outperform to neutral. Talisman currently has a deteriorating technical profile. The stock peaked six weeks ago at $25.40, broke a key support level and established a double top pattern. Next support is at $17.75.

Chart courtesy of StockCharts.com                         www.stockcharts.com

 

Bombardier received encouraging news overnight. The company is bidding on a contract worth up to $3 billion to build new street cars for Toronto. Bombardier’s biggest competitor bowed out of the competition on Monday. BBD.B has a positive technical profile. Intermediate trend is up. The stock remains above its 50 and 200 day moving average. Strength relative to the TSX Composite Index has been positive since January. The stock has retreated to near the top of a long term trading range where support is likely.

 

Chart courtesy of StockCharts.com                      www.stockcharts.com

 

Tech Talk comments on the FP Trading Desk site

(Available yesterday at http://www.financialpost.com/trading_desk/index.html )

 

FP Trading Desk headline reads, “Takeover of Shaw Communication looks unlikely” Following is a link to the report:

http://network.nationalpost.com/np/blogs/tradingdesk/archive/2008/07/02/takeover-of-shaw-communication-looks-unlikely.aspx

 

Shaw Communication currently has a neutral technical profile. Intermediate trend is neutral. The stock is trading in the middle of a six month trading range between $17.00 and $22.30. It trades below its 200 day moving average, but above its 50 day moving average. Short term momentum indicators are neutral. On balance volume data shows that the stock is not being accumulated and therefore is an unlikely takeover candidate.

 

Chart courtesy of StockCharts.com                       www.stockcharts.com

 

The reason for strength in uranium stocks during the past two weeks has became apparent this morning. The spot price for uranium improved from $57 to $59 U.S. per lb. last week. Spot prices have consistently moved lower since November from $90 U.S. per lb.. The recovery last week sets the stage for an intermediate uptrend into this summer.

 

 

 

 

Ux U3O8 Prices*

 

June 30, 2008
Spot: US$59.00/lb (+2.00)

Chart courtesy of www.uxc.com

 

Denison Mines, one of Canada’s largest uranium producers briefly broke above resistance at $9.00 this morning.

Chart courtesy of StockCharts.com                      www.stockcharts.com

 

Interesting Chart

 

“Tis the season for negative earnings surprises! Nvidia noted after the close yesterday that quarterly earnings and revenues will significantly miss consensus estimates mainly due to the return of defective chips. Nvidia has a negative technical profile. Intermediate trend is down. The stock trades below its 50 and 200 day moving averages. Strength relative to the S&P 500 Index is negative. The stock is expected to break support at $17.31 at the opening.

 

Chart courtesy of StockCharts.com                         www.stockcharts.com

 

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.