Tech Talk for Monday May 19th 2008
Outlook this week
Economic news this
week focuses on Producer Prices.
Economic report Period Release
Date Time Consensus Previous
Leading indicators April May 19 10:00 0.0% 0.1%
Producer prices April May 20 8:30 0.4% 1.1%
Core April May 20 8:30 0.2% 0.2%
Existing home sales April May 22 10:00 4.85 Mil. 4.93 Mil.
Source: www.cnbc.com
First quarter earnings reports continue to wind down. Prominent companies to report this week include Hewlett Packard, Home Depot and Target.
Company Qtr. Consensus Previous
Monday May 19th
Lowes 1 $0.40 $0.48
Tuesday May 20th
Hewlett Packard 2 0.85 0.70
Home Depot 1 0.37 0.48
Medtronic 4 0.73 0.66
Staples 1 0.30 0.29
Target 1 0.71 0.75
Wednesday May 21st
Limited 1 0.08 0.13
Source: www.cnbc.com
Trends
The Up/Down ratio for S&P 500 stocks rose again last week from 1.63 to (282/148=) 1.91. Another 34 stocks broke resistance last week (including eight stocks on Friday). Five S&P 500 stocks broke support. The Mark Up phase continues.
Bullish Percent Index for S&P 500 stocks rose again last week from 58.00% to 62.20%. It remains above its 15 day moving average. Intermediate trend remains up. However, by definition, the Index is well above the 50% level. The Index has upside potential, but is approaching an intermediate high.
Chart courtesy of StockCharts.com www.stockcharts.com
The Up/Down ratio for TSX Composite stocks improved again from 1.62 to (102/59=) 1.73. Fourteen TSX stocks broke resistance (including four stocks on Friday) and nine stocks broke support (including one stock on Friday). TSX stocks remain in the Mark Up phase.
Bullish percent index for TSX Composite stocks improved again from 49.21% to 50.00% and remains above its 15 day moving average. Intermediate trend is up. S&P 500 stocks remain in the Mark Up phase.
Chart courtesy of StockCharts.com www.stockcharts.com
The S&P 500 Index gained 2.67% last week. Intermediate trend remains upward. The Index is finding short term resistance at its 200 day moving average. RSI and Stochastics are short term overbought but continue to trend higher. MACD is showing early signs of peaking. Downside risk is to its 50 day moving average at 1362.
Chart courtesy of StockCharts.com www.stockcharts.com
Percent of S&P 500 stocks trading above their 50 day moving average rose from 67.54% to 79.76% last week. Percent is near an intermediate high and is close to a peak.
Chart courtesy of StockCharts.com www.stockcharts.com
Percent of S&P 500 stocks trading above their 200 day moving average rose from 40.28% to 51.90%. Intermediate trend is up. Percent has additional upside potential, but is approaching an overbought level.
Chart courtesy of StockCharts.com www.stockcharts.com
The Dow Jones Industrial Average gained 1.89% last week. Intermediate trend remain up. The Average has found short term resistance at 13,132 and its 200 day moving average. RSI and MACD are peaking at a short term overbought level. Stochastics are trying to recover from a short term oversold level. Strength relative to the S&P 500 Index is trending lower.
Chart courtesy of StockCharts.com www.stockcharts.com
Bullish Percent Index for Dow Jones
Industrial Average stocks was unchanged at 60% and eased below its 15 day
moving average.
Chart courtesy of StockCharts.com www.stockcharts.com
Bullish Percent Index for NASDAQ Composite Index stocks rose from 38.61% to 41.15% last week and remains above its 15 day moving average. The Index continues to recover from an intermediate oversold level.
Chart courtesy of StockCharts.com www.stockcharts.com
The NASDAQ Composite Index improved 3.41% last week. The Index is finding short term resistance at its 200 day moving average. Short term momentum indicators (RSI, MACD and Stochastics) are overbought, but continue to trend higher. Strength relative to the S&P 500 Index remains positive.
Chart courtesy of StockCharts.com www.stockcharts.com
The Russell 2000 Index gained 2.93% last week. Short term resistance has appeared at its 200 day moving average. Short term momentum indicators (RSI, MACD and Stochastics) are overbought, but continue to trend higher. Strength relative to the S&P 500 Index has turned positive.
Chart courtesy of StockCharts.com www.stockcharts.com
The Dow Jones Transportation Average added 3.37% last week. Intermediate trend remains upward. Gains occurred on lower than average volume. Short term momentum indicators (RSI, MACD and Stochastics) are overbought, but managed to move higher last week. Strength relative to the S&P 500 Index remains positive.
Charts courtesy of StockCharts.com www.stockcharts.com
The TSX Composite Index improved 3.19% last week. It broke resistance at 14,646.82 to reach an all time high. Short term momentum indicators (RSI, MACD and Stochastics) are overbought, but continue to trend higher. MACD is more overbought than at any time since October 2000. Strength relative to the S&P 500 Index remains positive.
Chart courtesy of StockCharts.com www.stockcharts.com
Percent of TSX stocks trading above their 50 day moving average improved from 71.49% to 73.59%. It remains overbought, but has yet to roll over.
Chart courtesy of StockCharts.com www.stockcharts.com
Percent of TSX stocks trading above their 200 day moving average improved from 47.66% to 51.08%. Intermediate trend remains up, but is approaching an overbought level.
Chart courtesy of StockCharts.com www.stockcharts.com
The
Chart courtesy of StockCharts.com www.stockcharts.com
The Nikkei Average added 4.13% last week. The Average remained above resistance at 14,105. Short term momentum indicators (RSI, MACD and Stochastics) are overbought, but continue to trend higher. Strength relative to the S&P 500 Index remains positive. Stronger than expected first quarter GDP contributed to strength.
Chart courtesy of StockCharts.com www.stockcharts.com
The
Chart courtesy of StockCharts.com www.stockcharts.com
European equity indices also advanced last week. The London FT Index added 1.61%, the Frankfurt DX Index tacked on 2.19% and the Paris CAC Index rose 2.37%.
The U.S. Dollar was virtually unchanged last week. It remains in an intermediate uptrend. Resistance exists between 74.48 and 77.85. Short term momentum indicators have recovered to a neutral level.
Charts courtesy of StockCharts.com www.stockcharts.com
The Euro recovered slightly last week. Resistance has formed at 160.20.
The Canadian Dollar remains in a six month range
between 96.69 and 102.99.
Chart courtesy of StockCharts.com www.stockcharts.com
The CRB Index eased slightly last week. Short term momentum indicators (RSI, MACD and Stochastics) are rolling over from overbought levels.
Chart courtesy of StockCharts.com www.stockcharts.com
Gold continues to recover. Short term momentum indicators (RSI, Stochastics, MACD) continue to rebound from short term oversold levels. Support is indicated at $846.40 and its 200 day moving average at $834. Gold appears to be forming a base building pattern for a possible significant upside move during the seasonally strong July/October period.
Chart courtesy of StockCharts.com www.stockcharts.com
Silver has a similar technical pattern. Support is indicated at $16.06. Short term momentum indicators continue to recover from oversold levels.
Chart courtesy of StockCharts.com www.stockcharts.com
Despite touching an all time high on Friday, crude oil was virtually unchanged last week (up$0.08 per barrel). Short term momentum indicators are rolling over
Charts courtesy of StockCharts.com www.stockcharts.com
Natural gas touched a new high and abruptly fell 6.5%. Short term momentum indicators (RSI, MACD and Stochastics) have rolled over from overbought levels.
Copper gained $0.11 per lb. last week. Momentum indictors continue to trend lower.
Chart courtesy of StockCharts.com www.stockcharts.com
Ditto for Aluminum prices! They rose $0.07 per lb.
Chart courtesy of StockCharts.com www.stockcharts.com
The yield on 10 year treasuries briefly moved above a five month trading range between 3.28% and 3.96% last week. However, the move was not sustained and yield closed virtually unchanged. Short term momentum indictors are overbought and rolling over. Long term rate likely will stabilize near current levels.
Chart courtesy of StockCharts.com www.stockcharts.com
Other Factors
Major U.S. equity indices are finding short term resistance near their 200 day moving average. They are unlikely to move above these levels until significant technical signs of a peak in energy prices are apparent. Upside potential thereafter is possible.
Early technical signs of a peak in energy
prices have appeared (particularly for natural gas), but more signs are needed
(particularly for crude oil).
Chart courtesy of StockCharts.com www.stockcharts.com
Technically, North American equity indices
are substantially short term overbought. Indeed, MACD for the TSX Composite
Index is at the highest level since October 2000. In addition, Bullish Percent
Indices for most
Stability in interest rates and currencies
is likely to continue in the short term. The Federal Reserve is expected to
maintain its Fed Fund rate at current levels until at least the next FOMC
meeting in six weeks. Chance of a 0.25% increase in the Fed Fund rate at the
Federal Reserve’s October meeting currently is 60%. Central bank controlled
interest rates in Europe and
Media comments have become increasingly
bullish despite deteriorating economic news (e.g. more new home starts
adding to a record inventory of
Political rhetoric continues to ramp up.
The environmental lobby continues to win major political battles on both sides
of the border that are limiting prospects for energy production growth. Last
week, polar bears were placed on the
Chart courtesy of StockCharts.com www.stockcharts.com
The Bottom Line
The easy money already has been realized in North American equity markets and most sectors. Additional upside potential remains (if and when the energy sector rolls over). However, the upside part of the current intermediate cycle is “long in the tooth”. For most sectors, it’s a question of when to take trading and seasonal profits.
Tech Talk’s Weekly Column in the Financial Post
(Published Saturday and available by paid subscription at www.nationalpost.com )
An update on Investment Opportunities in Natural Gas
This column on January 12th 2008 focused on investment opportunities in natural gas. The column stated that, “Investors can take advantage directly in the natural gas/crude oil ratio by owning the natural gas Exchange Traded Fund (Symbol: UNG). Alternately, they can favour “gassy” stocks and trusts over “oily” stocks and trusts. The strategy looks particularly interesting during the current period of seasonal strength lasting until May”. Since publication of this column, natural gas prices have advanced 43.2%. The Natural Gas Exchange Traded Fund as well as “gassy” stocks and trusts have recorded comparable total returns. Now that May has arrived, what is the preferred strategy?
Seasonal influences
A seasonality analysis of natural gas prices from 1990 to 2005 completed by SeasonalCharts.com shows that natural gas has two periods of seasonal strength during the year: from mid February to the end of April and from the end of July to the end of October. Seasonal strength during the February to April period once again appeared this year, but has now ended.
Fundamental
influences
The column on January
12th noted that inventory levels for crude oil and natural gas were
about to change. Crude oil inventories had reached a three year low.
Natural gas inventories remained well above their five year average. However,
many
Technical influences
Natural gas prices
are showing early technical signs of reaching a seasonal peak. Western
Canadian natural gas prices reached a short term peak three weeks ago and are
showing short term technical signs of rolling over.
The Bottom Line
Congratulations to investors who played the seasonal trade in natural gas Exchange Traded Funds and “gassy” stocks and trusts this year. Once again the seasonal trade has been profitable. Preferred strategy is to take seasonal profits at current or higher prices during the month of May.
Adrienne Toghraie’s
“Trader’s Coach” Column
Humor For Trading:
When Things
Are Going Wrong
By Adrienne Toghraie, Trader’s
Coach
www.TradingOnTarget.com
In 1981, just sixty-nine days into his presidency, a deranged young man shot Ronald Reagan in the chest. Years later, information was released to the public that the situation was far graver than anyone had known at the time. Yet, while Reagan was being wheeled into the operating room, he was making jokes to his distraught wife and aides. Two very important things happened as a result of Reagan’s attempts at humor in the midst of a serious crisis:
· First, he reduced the level of stress all around him, allowing his key people to gain perspective and regain control.
· Second, he increased his own chances of survival by managing his body’s biochemistry and lines of defense.
The panic monster
For traders, the same principle applies. In the midst of a serious crisis in their trading, when the market is going south or when a trade is tanking, a trader’s worst enemy is panic. It is incredibly easy to lose perspective when things are going wrong. At those times, we all begin to retreat to places in our minds that feel safer or more familiar. Unfortunately, many of those places are not at all helpful ones in a crisis and they may actually be very dark places from which it is difficult to escape. For example, you might find yourself feeling a sense of hopelessness or the actual physical pain of fear in your body. You may start to see yourself as a child who has no control of his life. Or you may succumb to anger and a sense of injustice, looking for someone to blame. None of these familiar places will provide you with a sense of perspective or enable you to garner your resources in order to fight back.
Panic, of course, is the most destructive of all places in which to retreat in a crisis. The Panic Monster consumes all of your resourcefulness and absorbs all of your attention. Instead of being able to maintain your focus so that you can solve the problem, studies have shown that panic leads people into the most witless strategies. One of the most common reactions to panic is to act impulsively. Another is to bolt from the situation. A third is to inflict self-harm. As you can see, these are highly self-destructive reactions for a trader and in no way tend to ameliorate the crisis.
Humor as an antidote
One of the fastest antidotes to panic in a crisis is humor. It can be administered immediately and with no cost or needed equipment or assistance. Yet, its effect is as instantaneous as dumping water on a fire. And the wonderful thing about humor in a crisis is that really bad humor can be as effective as really creative humor. In a crisis, people will find themselves laughing at a really bad joke when they would not have reacted to it when things are going well. Sometimes the laughter is simply a release of fear or panic feelings and appreciation for the opportunity to do so. So, you do not need to concern yourself that you are not good at making jokes, that you cannot remember a good story or come up with a good line. It may turn out that simply starting to laugh at the absurdity of the situation is enough to dispel the rising sense of panic.
Increasing your lines of defense
A client tells the story of how he rushed to the hospital when his mother was going into the operating room for a major surgery. When he arrived, he found his mother in terrible pain and in a state of great panic. After attempting to calm her, he began to tell her stories that made her laugh. She was still laughing as she was wheeled into the operating room. Afterward, her surgeon remarked that he was utterly amazed at how well she had come through such a critical operation. Like Reagan, humor had strengthened her body in the face of a great physical battle for survival. A week later, her doctors had to operate once again, this time on a far less serious development. But, her son had not been able to get to the hospital and she never recovered from the second operation.
Traders need to keep a crisis in perspective and to avoid panic. Since humor is such an effective means of quelling a crisis and keeping a trader on track with his trading rules, here are four simple strategies for keeping humor close by as a weapon against panic:
1. Find comic strips, funny stories, and jokes from the newspaper or magazines that make you laugh and help you to put things into perspective. Cut them out and pin them to your computer, hang them on the wall, and keep them near your field of vision. Rotate these jokes and funny stories so that you do not become inured to them. When you begin to feel yourself slipping into a panic, reread them.
2. Keep the phone number close of a friend who consistently makes you laugh. He is the person who sends you email jokes and funny stories and never takes anything too seriously. When you feel yourself falling into a panic, give him a call.
3. Keep a collection of funny movies. When you have had a really bad trading day, go home and watch one of these movies.
4. Practice your own sense of humor. Consciously begin to express it more often, and work to develop it. You might even take a short course on humor if you feel that you are getting too serious.
5. Consciously associate with people who have a good sense of humor and who make you laugh. Engage in activities that inspire people to express their humor such as games that people play lightly for fun.
The point of using humor when things are going badly is to help you to regain your perspective and to arm yourself for intelligent action in a crisis. The secondary result is to help you to enjoy your trading more, which can only lead you to being a better trader.
SEE BELOW
TOP PERFORMANCE SEMINAR
(see www.TradingOnTarget.com
for details)
July
26 & 27 – Chicago
$2,500
(Pro-rated Early Enrollment Discount)
Adrienne Toghraie, Trader’s Coach
Email – Adrienne@TradingOnTarget.com
919-851-8288
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