Tech Talk for Wednesday May 7th 2008

Tech Talk for Wednesday May 7^th 2008

Pre-opening Comments for Wednesday May 7^th

9:15 AM EDT: U.S. equity index futures are mixed this morning. Dow Jones Industrial Average futures are down 3 points. Earlier, they were down over 30 points, but recovered after a better than consensus first quarter productivity report. Consensus was a gain of 1.5%. Actual was 2.2%.

First quarter earnings continue to surprise on the upside. Disney reported fiscal second quarter earnings of $0.58 versus $0.43 per share last year. Consensus was $0.51 per share. Cisco reported fiscal third quarter operating earnings of $0.38 versus $0.34 per share. Consensus was $0.34 per share. BCE reported first quarter operating earnings of $0.57 versus $0.52 per share last year. Consensus was $0.56 per share. Cisco and Disney are moving higher in overnight trading. Both have an improving technical profile. Both recently broke above base building patterns and established intermediate uptrends.

Chart courtesy of StockCharts.com www.stockcharts.com

The Nikkei Average is showing early signs of recovery. Last night the Average briefly broke above resistance at 14,105.

Chart courtesy of StockCharts.com www.stockcharts.com

U.S. bond yields are higher this morning and are testing a key resistance level for 10 year treasuries at 3.96%.

Chart courtesy of StockCharts.com www.stockcharts.com

U.S. 30 year treasuries broke below a key support level and its 200 day moving average this morning.

Chart courtesy of StockCharts.com www.stockcharts.com

Higher long term bond yields have prompted a strong gain in the U.S. Dollar this morning. The U.S. Dollar remains in an intermediate uptrend. In turn, commodity prices (gold, silver, copper) priced in U.S. Dollars are under pressure again.

Chart courtesy of StockCharts.com www.stockcharts.com

Technical Action Yesterday

Technical action by S&P 500 Index stocks was bullish yesterday. Seven S&P 500 stocks broke resistance. None broke support.

S&P 500 stocks breaking resistance

Stock Symbol Previous New

Trend Trend

Amerisource Bergen ABC Down Up

Cognizant CTSH Down Up

Emerson Electric EMR Up Up

Estee Lauder EL Up Up

NYSE Euronext NYX Down Up

Spectra SE Down Up

Teco Energy TE Down Neutral

Technical action by TSX Composite Index stocks also was quietly bullish. Two TSX stocks broke resistance. None broke support.

TSX stocks breaking resistance

Stock Symbol Previous New

Trend Trend

Anvil AVM Down Up

TransCanada TRP Down Up

An Update on the Energy Sector

Crude oil prices reached all time highs yesterday after Goldman released a report predicting that crude oil could reach $200 U.S. per barrel during the next year. The opinion was based on anticipation of declining inventory levels. The crude oil ETF responded accordingly:

Chart courtesy of StockCharts.com www.stockcharts.com

U.S. Energy stocks are significantly underperforming the price of crude oil. Energy SPDRs and Oil Service HOLDRs peaked three weeks ago and are just now approaching their all time highs. Short term momentum indicators (MACD, RSI) have rolled over. Favourable seasonal influences for the sector are approaching the end (i.e. at the end of May).

Chart courtesy of StockCharts.com www.stockcharts.com

The seasonal trade in the U.S. energy sector from the end of November to the end of May has been highly profitable once again this year. Since release of Tech Talk’s column in the Financial Post on the U.S. Oil Service sector on February 9^th, Oil Service HOLDRs has gained 29.4 %. Strength between now and the end of May provides an opportunity to take seasonal trading profits.

An Update on the Uranium Sector

Since Tech Talk’s favourable comments on the sector in the Financial Post on February 23^rd, the sector has virtually gone nowhere. Cameco, the poster child for the sector has gained only 2% since then. Yesterday, Cameco as well as other producer stocks in the sector had a nice pop. Technically, they are showing early signs of bottoming.

Chart courtesy of StockCharts.com www.stockcharts.com

A possible reason for strength was news that Uranium hexafluoride prices jumped about 10% last week suggesting that a shortage may be developing (Yellow cake produced at uranium mines is processed into Uranium hexafluoride before it is processed into fuel for nuclear reactors). News from Cameco about repairs at its uranium processing plant scheduled to return to production in the fourth quarter this year will be watched closely. News likely will come when Cameco announces first quarter results before the opening on Tuesday May 13^th. Below is the latest price data on yellow cake (U308) and Uranium Hexafluoride prices from www.uxc.com

More information on uranium stocks is available at Merv Burak’s Blog:

http://techuranium.blogspot.com . Merv’s short and immediate term technical indicators turned bullish yesterday.

Ux U3O8 Prices*

April 28, 2008
Spot: US$65.00/lb (Unch.)

About Uranium Prices

Ux Conversion Prices

April 28, 2008
North American (NA)
Spot: US$10.00/kgU (+1.00)

European (EU)
Spot: US$11.50/kgU (+1.50)

If you want to own an energy stock, consider a basket of uranium stocks.

FP Trading Desk Comment on Cameco

The following comment appeared on the FP Trading Desk yesterday: “Street too optimistic on Cameco, Thompson Creek: Blackmont analyst”

http://network.nationalpost.com/np/blogs/tradingdesk/archive/2008/05/06/street-too-optimistic-on-cameco-thompson-creek-blackmont-analyst.aspx

An Important News Event Announced After The Close

Clearwire and Sprint announced a joint venture valued at $12 billion to develop a fast internet wireless service called WiMax. Time Warner Cable, Comcast, Intel and Google have agreed to support financing of the joint venture. Clearwire and Sprint rose sharply following the news. WiMax internet service is the cable companies’ answer to internet service offered by the major telecom companies in the U.S. The service (the so called G4 service) is faster than available DSL telecom service, but requires time to build infrastructure. Nortel is a leading developer and supplier of WiMax equipment. Clearwire, Sprint and NT have an improving technical profile.

Chart courtesy of StockCharts.com www.stockcharts.com

Iain Fraser’s Column

The news is so bad from the U.S., and from New York, that one would think Herbert Hoover was president. Just about every day another financial institution, mainly American, reports that it has to raise another 2-15 billion dollars. This continuing disaster has scared most investors out of the market, and who can blame them? It is indeed unusual and unexpected that the stock market in New York continues to go up, a little bit; and in Toronto the market is now going into new all-time highs. We have been intrigued by the biblical phrase: “the first shall be last and the last shall be first.” Who would have thought that President Kennedy would be shot dead after only 1000 days in office; who would have thought that the Japanese attack on Pearl Harbor would ensure an Allied victory in WW2; who would have thought that the U.S. would give money to the vanquished, Germany and Japan, so they could rebuild their countries; and who would have thought that the Canadian stock market would go to a new high during the current financial fiasco.

We venture to guess that most Canadian investors are underweight (less than 15%) in the materials sector. In our report next week, we have a new top pick in the metals and mines sector.

We are once again pleased to offer all of you a three issue free trial (no obligation); just send us an email and we will do the rest.

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 other than Nortel.

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.