Tech Talk for Friday May 2nd 2008

 

Pre-opening Comments for Friday May 2nd

 

9:10 AM EDT: Surprises by the April U.S. employment report have boosted U.S. Index futures this morning. S&P 500 Index futures are up 11 points. Consensus for the unemployment rate was an increase from 5.1% to 5.2%. Actual was a decline to 5.0%. Consensus for non-farm payrolls was a drop of 80,000 versus a drop of 80,000 in March. Actual was a drop of 20,000.

 

Strength in U.S. equity indices is expected to trigger a breakout by the Russell 2000 Index this morning. The breakout occurs on a move above 731.24.

Chart courtesy of StockCharts.com                          www.stockcharts.com

 

U.S. equity markets also are being helped by surprisingly strong first quarter earnings reports. According to Thomson Reuters, 63% of S&P 500 companies that have reported quarterly earnings to date have exceeded consensus and another 11% matched consensus.

 

International equity indices also are moving above key resistance levels. The Paris CAC Index broke above resistance this morning. The Nikkei Average broke above resistance last night.

Chart courtesy of StockCharts.com                       www.stockcharts.com

Chart courtesy of StockCharts.com                    www.stockcharts.com

 

The stronger than expected employment report has boosted the U.S. Dollar this morning. Bond prices have dropped sharply.

Chart courtesy of StockCharts.com                       www.stockcharts.com

Chart courtesy of StockCharts.com                           www.stockcharts.com

 

Nortel reported better than expected first quarter results this morning. Revenues nicely exceeded consensus estimates. The company reported an operating loss of $0.05 per share (excluding a restructuring charge) versus a loss of $0.15 per share last year. Consensus was a loss of $0.13 per share. The stock is trading higher in pre-opening trade.

On the charts, the stock has an improving technical profile. It recently completed a base building pattern and established an intermediate uptrend. Ironically, NT has changed from the worst performing TSX 60 Index to the best performing TSX 60 Index stock during the past six weeks. NT has gained 52% since the middle of March.

Chart courtesy of StockCharts.com                               www.stockcharts.com

 

Technical Action Yesterday

 

Technical action by S&P 500 stocks remains bullish. Another 17 S&P 500 stocks broke resistance yesterday. Three stocks broke support.

 

S&P 500 stocks breaking resistance

 

Stock                           Symbol            Previous          New

                                                            Trend              Trend

Assurant                       AIZ                  Neutral             Up

Autonation                    AN                  Up                   Up

BB & T                        BBT                 Neutral             Up

Cardinal Health             CAH                Down               Up

Clorox                          CLX                Down               Neutral

Disney                          DIS                  Neutral             Up

Lowes                          LOW               Neutral             Up

Micron                         MU                  Down               Neutral

Millipore                       MIL                 Down               Up

Nvidia                          NVDA             Down               Up

Regions Financial          RF                   Down               Neutral

SLM Holdings              RF                   Down               Neutral

Symantec                     SYMC             Neutral             Up

Travelers                      TRV                 Up                   Up

United Technologies     UTX                Down               Up

Whole Foods               WFMI             Down               Up

Wyndham                     WYN               Down               Up

 

 

S&P 500 stocks breaking support

 

Stock                           Symbol            Previous          New

                                                            Trend              Trend

Avon                            AVP                Up                   Neutral

Cincinnati Financial       CINF               Up                   Neutral

CVS                            CVS                Up                   Neutral

 

Technical action by TSX Composite Index stocks also remains bullish. Another 10 TSX stocks broke resistance yesterday. One stock broke support.

 

 

 

 

 

 

TSX stocks breaking resistance

 

Stock                           Symbol            Previous          New

                                                            Trend              Trend

Forzani                         FGL                 Up                   Up

Great West Life            GWO               Down               Up

Home Capital               HCG                Down               Up

Interoil                          IOL                  Down               Up

Loblaw                         L                      Down               Up

Manitoba Telecom        MBT                Down               Up

Metro                           MRU.A            Down               Up

Royal Bank                  RY                   Down               Up

SunLife                         SLF                 Down               Up

Weston                        WN                 Down               Up

 

TSX stocks breaking support

 

Stock                           Symbol            Previous          New

                                                            Trend              Trend

Tim Horton’s                THI                  Up                   Down

 

Pre-opening Comments for Thursday May 1st

(Charts have been updated to yesterday’s close)

 

9:10 AM EDT: U.S. equity index futures are slightly lower in overnight markets. Positive impact of a stronger U.S. Dollar has been offset by less than expected first quarter earnings reports.

Chart courtesy of StockCharts.com                    www.stockcharts.com

 

Exxon Mobil is weaker in early trading after reporting less than consensus first quarter earnings. Consensus was $2.13 versus $1.62 per share last year. Actual earnings were $2.03. On the charts, XOM is struggling. It recently tested its all time high at $9 4.50, but failed. The stock recorded a MACD sell signal on Tuesday.

Chart courtesy of StockCharts.com                         www.stockcharts.com

 

Weakness in ExxonMobil likely will spill into other energy stocks at the opening. Additional weakness in the prices of crude oil in overnight markets also will contribute to their weakness. Crude oil also recorded a MACD sell signal on Tuesday. ‘Tis the season for crude oil prices and energy stock prices to peak and move lower.

Chart courtesy of StockCharts.com                  www.stockcharts.com

Chart courtesy of StockCharts.com                       www.stockcharts.com

 

Eastman Kodak also is expected to open lower following worse than expected first quarter earnings. Consensus was a loss of $0.04 per share. Actual loss was $0.40 per share.

 

Centex, a U.S. home builder reported a substantially lower than consensus first quarter earnings. Consensus was a loss of $2.43 per share. Actual was a loss of $7.34 per share.

 

In Canada, Tim Horton’s is expected to open lower this morning after releasing less than consensus first quarter earnings and revenues. Consensus was $0.35 versus $0.31 per share. Actual was $0.33 per share.

 

Chart courtesy of StockCharts.com                       www.stockcharts.com

 

Tech Talk’s Comments on the FP Trading Desk site

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

 

10:35 AM EDT: FP Trading Desk headline reads, “Shoppers Drug Mart considered good defensive name”. Following is a link to the report: http://network.nationalpost.com/np/blogs/tradingdesk/archive/2008/05/01/shoppers-drug-mart-considered-good-defensive-name.aspx

 

Shoppers Drug Mart currently has a positive technical profile. The stock recently broke above a base building pattern on a move above $53.25 and established an intermediate uptrend. The stock also recently moved above its 50 and 200 day moving averages. Short term momentum indicators (MACD, Stochastics, RSI) are trending higher from oversold levels.

 

Chart courtesy of StockCharts.com                        www.stockcharts.com

 

FP Trading Desk headline reads, “Citi’s $11 billion dividend won’t be back in a hurry”. Following is a link to the report: http://network.nationalpost.com/np/blogs/tradingdesk/archive/2008/05/01/citi-s-11bn-dividend-won-t-be-back-in-a-hurry.aspx

 

Citigroup currently has a negative technical profile. Intermediate trend is down. The stock trades below its 200 day moving average. Short term momentum indicators (MACD, Stochastics, RSI) are overbought are showing signs of rolling over. On the other hand, the stock recently managed to move above its 50 day moving average, an early technical sign that a bottom may have been reached.

 

Chart courtesy of StockCharts.com                       www.stockcharts.com

 

U.S. airlines are literally flying off the charts. During the past week, the AMEX Airline Index has gained 17.7% thanks to actual and real consolidation in the industry as well as lower crude oil prices.

Chart courtesy of StockCharts.com                           www.stockcharts.com

 

Update: At the close yesterday, the Index was up 24.4% from its low on Wednesday April 23rd.

 

Interesting Charts

 

Rotatation! Rotation! Rotation! That’s was the story yesterday. With the breakout of the U.S. Dollar and establishment of an intermediate trend, traders rotated out of commodity sensitive stocks (energy, gold, base metals, grains) into financial service and high tech stocks. Financial service SPDRs broke above a base building pattern and established an intermediate uptrend.

Chart courtesy of StockCharts.com                      www.stockcharts.com

Canadian financial service stocks quickly followed.

Chart courtesy of StockCharts.com                              www.stockcharts.com

 

Major U.S. equity indices are now approaching their 200 day moving average, a natural place for short term resistance.

 

Chart courtesy of StockCharts.com                       www.stockcharts.com

 

Chart courtesy of StockCharts.com                     www.stockcharts.com

Chart courtesy of StockCharts.com                              www.stockcharts.com

 

Weekly Bullish Percent Index Review of U.S. Sectors

 

Most bullish percent indices continued to trend higher and remained above their 15 day moving average last week. However, seven of the eleven indices already are above the 50% level. Also, two indices (Energy and Basic Materials) already have rolled over from above the 50% level and are trending lower. The easy money already has been made in most sectors. However, most indices continue to have a least some upside potential (except Energy and Basic Materials).

 

 

 

 

 

Sector                         Index               Above/Below                          Comment

                                    Change           15 day Moving Average

Info Technology            Higher              Above             

Transportation              Higher             Above                                     Above 50%

Financial Services         Higher              Above                                     Above 50%

Telecommunications      Higher              Above

Consumer Staples         Higher              Above                                      Above 50%

Basic Materials             Lower              Below                                      Rolled Over

Consumer Discretion    Higher              Above                                      Above 50%

Industrials                     Lower              Below                                      Above 50%

Health Care                  Higher              Above

Energy                          Higher              Above                                      Rolled Over

Utilities                         Lower              Above

                                    Bolded items are changes from last week

 

                                    All Charts courtesy of StockCharts.com

Weekly Technical Comment for Claymore’s Canadian ETFs as of May 1st 2008

 

Another profitable week for holders of Claymore ETFs! Technicals continued to improve for most ETFs with qualifications: Short term momentum indicators for several ETFs suggest that momentum has peaked and three ETFs show declining momentum.

 

ETF                 Symbol  Intermediate Above 50  Above 200  MACD         Seasonal  RS

                                       Trend             Day MA Day MA                          Trait        

Canadian          CRQ       Up                Yes              Yes             Peaking       Up              N2

Cdn. Dividend  CDZ       Neutral          Yes             No              Peaking        Up              1+

U.S.                 CLU       Down            Yes            No              Uptrend        Up              4 +

Oil Sands         CLO       Up                Yes            Yes             Downtrend   Up             3 +

BRIC               CBQ       Up                 Yes            Yes             Uptrend        N/A           13+

International      CIE         Up                Yes             No              Peaking         Up              5+

Preferred          CPD       Down            No              No              Uptrend         N/A          N/A

Japan               CJP         Down            Yes            No              Uptrend         Up              6+

Global Mining   CMW     Up                Yes             Yes             Downtrend   Up            8+

Global Water    CWW     Down             Yes            Yes             Peaking           N/A          5+

Global Ag.        COW      Up                  Yes            NA             Downtrend     Up            4+

Bank & Lifeco  CEW      Up                  Yes            NA             Peaking           Up           N2

Bolded items are changes from last week

RS  Relative Strength

+     Number of months with positive performance relative to its benchmark

-      Number of months with negative performance relative to its benchmark

N    Number of months with neutral performance relative to its benchmark

 

An Update on Claymore’s Oil Sands ETF

 

Tech Talk released a series of bullish comments on Claymore’s Oil Sands ETFs during the past five months. The first comment was released on December 7th when purchases of units were recommended at $23.38. Comments were based primarily on a seasonal trade from the end of November to the end of May. Subsequently, units advanced to as high as $27.30, but recently have weakened to $26.00. Where are units heading from here?

 

Seasonal influences

 

Seasonal influences continue to have a significant impact on the sector this year.

The period of seasonal strength coincides with a series of favourable recurring events including:

  • News in late November and December about exploration and development programs for the winter drilling season as well news about capital spending for the following year.
  • The winter heating season from December to March
  • The winter drilling season from December to March. Rumors of discoveries and additional reserves surface as the drilling season progress
  • Upbeat fourth quarter and annual earnings reports starting in February and continuing to mid March
  • Upbeat annual meetings in April and May
  • The annual Canadian Association of Petroleum Producers (CAPP) conference early in June when CEO of major companies review corporate prospects.

This series of favourable recurring events for Canadian oil stocks are reaching an end. In addition, the period of seasonal strength for crude oil, unleaded gasoline and natural gas is reaching an end.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fundamental influences

 

Higher energy prices have contributed to strength in Canadian energy stock prices during the current period of seasonal strength. Crude oil and natural gas prices have virtually exploded since the end of November. Crude oil in Canadian Dollars spiked from $89 per barrel to over $120 per barrel. Natural gas in Canadian Dollars jumped from $7.31 to over $11.00 per MBtu. Net result: earnings and cash flow by Canadian producers have exceeded expectations. Several Canadian producers including PetroCanada, Talisman and Nexen reported first quarter results last week that were well in excess of consensus estimates. Their share prices rose nicely prior to and on release of results, but came under profit taking pressures shortly thereafter.

 

Technical influences

 

Favourable seasonal influences appear to have peaked earlier than usual this year. Short term momentum indictors (Moving Average Convergence Divergence, Relative Strength Index, Stochastics) for crude oil, natural gas, the TSX Energy Index and the Claymore Oil Sands ETF rolled over this week from short term overbought levels.

 

The Bottom Line

 

It’s time to take seasonal profits on the Claymore Oil Sands ETF, particularly on strength between now and the end of May.

 

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.