Tech Talk for Friday May 9th 2008

(Brooke Thackray is scheduled to appear on BNN Television at 12:30 PM today.)

 

Pre-opening Comments for May 9th

 

9:15 AM EDT: U.S. equity markets are moving lower before the opening. Dow Jones Industrial Average futures are down over 80 points. Traders are bothered by news from American International Group released last night. AIG reported a loss of $3.09 per share versus a profit of $1.58 last year. Consensus was a profit of $1.10 per share. The company also announced plans to raise $12.5 billion. Its stock is down 7% in pre-opening trade.

AIG currently has a negative technical profile. Intermediate trend is down. The stock trades below its 200 day moving average and broke below its 50 day moving average yesterday. Strength relative to the S&P 500 Index has been negative during the past year. Support at $38.50 is being tested.

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Chart courtesy of StockCharts.com                        www.stockcharts.com

 

Citigroup also is under early pressure this morning following news that the company plans to wind down $400 billion of assets. More information is expected to be released later today at an analyst meeting. Citigroup also has a negative technical profile. Intermediate trend is down. The stock trades below its 200 day moving average. Strength relative to the S&P 500 Index has been negative during the past year. Short term momentum indicators (RSI, MACD and Stochastics) recently rolled over from an overbought level.

Chart courtesy of StockCharts.com                        www.stockcharts.com

 

The U.S. reported a lower than expected trade deficit in March. Consensus was $61.3 billion versus $62.3 billion in February. Actual was $58.2 billion.

 

Economic news from Canada was encouraging. Trade surplus in March was $5.5 billion. Consensus was $4.0 billion. In addition, Canada added another 19,200 jobs in April. The Canadian Dollar is slightly stronger on the news. On the charts, the Canadian Dollar remains in a five month trading range between 96.69 and 102.99.

 

Chart courtesy of StockCharts.com                          www.stockcharts.com

 

The TSX Composite Index is testing its all time high set in July 2007 at 14646.82.

Chart courtesy of StockCharts.com                       www.stockcharts.com

 

Technical Action Yesterday

 

Ooops! Technical action by S&P 500 stocks was slightly bearish yesterday. Two S&P 500 stocks broke resistance and five stocks broke support. Notable on the list of stocks breaking support were beverage stocks.

 

S&P 500 stocks breaking resistance

 

Stock                           Symbol            Previous          New

                                                            Trend              Trend

Alcoa                           AA                   Neutral             Up

Teco Energy                 TE                    Neutral             Up

 

S&P 500 stocks breaking support

 

Stock                           Symbol            Previous          New

                                                            Trend              Trend

Barr Labs                     BRL                 Up                   Down

Coca Cola                    KO                  Up                   Neutral

Coca Cola Enterprises  CCE                Down               Down

Eastman Kodak            EK                   Down               Down

Nike                             NKE                Up                   Down

 

Technical action by TSX Composite stocks was mixed. Four TSX stocks broke resistance and three stocks broke support.

 

TSX Composite stocks breaking resistance

 

Stock                           Symbol            Previous          New

                                                            Trend              Trend

Canadian Pacific           CP                   Up                   Up

Cameco                       CCO                Neutral             Up

Cardiome Pharma         COM               Up                   Up

PetroCanada                PCA                Neutral             Up

 

TSX Composite stocks breaking support

 

Stock                           Symbol            Previous          New

                                                            Trend              Trend

First Calgary Pete.        FCP                 Neutral             Down

Kingsway Financial       KFS                 Neutral             Down

ManuLife                      MFC                Up                   Down

Pre-opening Comments for Thursday May 8th

 

9:10 AM EDT: U.S. equity index futures are slightly higher in pre-opening trade. Dow Jones Industrial Average futures are up 12 points. Equity markets are responding to better than expected April retail sales.

 

April retail sales were boosted by better than average weather conditions across the U.S. as well as consumer anticipation of $600 cheques per adult to be forwarde by the Federal government.  The cheques began to arrive earlier this week. April estimates were exceeded by 13 of 19 retail merchandisers who reported sales this morning. Companies reporting higher than consensus April sales include Wal-Mart, Kohl’s, JC Penney and Costco.

 

Retail merchandiser stocks and ETFs are responding to anticipation of stronger sales during the second quarter. Retail HOLDRS, an ETF consisting of a basket of retail merchandising stocks recently broke above a base building pattern and continues to trend higher.

Chart courtesy of StockCharts.com                          www.stockcharts.com

 

Currencies are virtually unchanged this morning following news that the European Central Bank and the Bank of England are maintaining their overnight lending rate at current levels.

 

Tech Talk comments on the FP Trading Desk site

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

 

12:00 Noon: FP Trading Desk headline reads, “Manulife drops as D’alessandro to step down”. Following is a link to the report: http://network.nationalpost.com/np/blogs/tradingdesk/archive/2008/05/08/manulife-drops-as-d-alessandro-to-step-down.aspx

 

Manulife responded strongly on the charts following news that its CEO is stepping down. The stock broke below its 50 moving average as well as support at $36.80 and established an intermediate downtrend.  Next support is at $34.00.

Chart courtesy of StockCharts.com                            www.stockcharts.com

 

Uranium stocks are leading the TSX Composite Index on the upside this morning. Cameco, the  poster child for the sector broke above its 200 day moving average and resistance at $40 to reach a five month high.

Chart courtesy of StockCharts.com                        www.stockcharts.com

 

Other uranium producer stocks also are sharply higher (e.g. Denison Mines).

 

Chart courtesy of StockCharts.com                       www.stockcharts.com

 

A possible reason for strength is a spike in uranium hexafluoride prices this week.

 

Editor’s Note: Nice call by Merv Burak! His latest comments are available at http://techuranium.blogspot.com .

 

Weekly Technical Comment for Claymore’s Canadian ETFs as of May 8th 2008

 

Another profitable week for holders of Claymore ETFs! Technicals continued to improve for most ETFs

 

ETF                 Symbol  Intermediate Above 50  Above 200  MACD         Seasonal  RS

                                       Trend             Day MA Day MA                          Trait        

Canadian          CRQ       Up                Yes             Yes             Peaking        Neutral       N2

Cdn. Dividend  CDZ       Neutral          Yes             Yes             Peaking        Neutral     2+

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

Oil Sands         CLO       Up                Yes            Yes             Peaking        Up             3 +

BRIC               CBQ       Up                 Yes            Yes             Peaking         N/A         14+

International      CIE         Up                Yes             Yes             Peaking         Neutral     5+

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

Japan               CJP         Neutral        Yes            No              Uptrend         Neutral     7+

Global Mining   CMW     Up                Yes             Yes             Peaking        Neutral     9+

Global Water    CWW     Down             Yes            Yes             Peaking         N/A           6+

Global Ag.        COW      Up                  Yes            NA             Downtrend      Neutral    5+

Bank & Lifeco  CEW      Up                  Yes            NA             Peaking           Up           N2

Natural Gas    GAS       Up                  Yes            NA             Peaking         Neutral    2+

 

 

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

 

Introducing the Claymore Natural Gas ETF to our universe

 

Claymore introduced an Exchange Traded Fund on AECO gas at the beginning of February. Initial trading in units has been encouraging. Volume has averaged about 20,000 per day.

 

Features

Symbol: GAS

Exchange: Toronto Exchange

Index: NGX Canadian Natural Gas Index (Available at www.ngx.com )

The Index is a based on the AECO “C” physical forward contracts which expire at the end of the month preceding the delivery month. The forward prices used to price and create the index are referred to as “Prompt” and “Deferred” contracts. The prompt contact is the closest expiring forward contact and the deferred is the second nearest expiring contract.

Initial price: $20.00 Cdn.

MER: 0.80%

Fundamental influences

 

AECO gas has been a stellar performer during the past three months thanks mainly to a colder than average winter and a greater than average decline in Western Canadian inventories. Inventories at the end of April declined to 236.50 BCF versus 288.68 BCF in April 2007. Inventories in April 2007 were at a record high for the month. Current inventories remain above their five year average, but are definitely trending lower on a year-over-year monthly basis. A major reason for the decline is lower natural gas production in Western Canada despite higher prices. Additional drilling for gas in Western Canada has yet to show signs of recovery relative to the same period last year. A higher royalty structure in Alberta effective January 1st 2009 has contributed to the slow down. Natural gas supplies from western Canada peaked in April 2006 at 17.3 Bcf/d. Average production by the end of 2008 is expected to decline to less than 16.0 Bcf/d. Higher natural gas prices are needed before additional drilling activity is encouraged once again.

 

Seasonal influences

 

Brooke Thackray recently completed a seasonality study on AECO gas for the 1998 to 2007 period. The study shows that AECO gas tends to reach a seasonal peak in May followed by a brief period of weakness until the end of July followed by a strong advance from August until late December. Following is a chart showing seasonal trends.

 

 

 

Seasonality in AECO Gas from 1998 to 2007

 

 

 

 

 

Technical influences

 

Investors who purchased the Claymore Natural Gas ETF at issue at the beginning of February are smiling. Units have gained more than 40%. Intermediate trend is up. Units trade nicely above their 50 day moving average Strength relative to U.S. natural gas prices has been positive during the past two months.. However, resistance at its all time high at $28.63 may be forming. Short term momentum indicators (RSI, MACD and Stochastics) recently rolled over from short term overbought levels.

Chart courtesy of StockCharts.com                     www.stockcharts.com

 

The Bottom Line: Lower inventories and declining production as well as stagnant drilling activity eventually will lead to higher prices. Look for an important entry point into Claymore’s natural gas ETF near the end of July this year. However, declining short term momentum as well negative seasonal influences from May to July suggest that traders should take at least some profits in May at current or higher prices.

 

 

Weekly Bullish Percent Index for U.S. Sectors

 

Most bullish percent indices continued to trend higher and remained above their 15 day moving average last week. However, eight of the eleven indices already are above the 50% level. The easy money already has been made in most sectors. However, most indices continue to have at least some upside potential. Exceptions are Energy and Basic Materials, sectors that are notably overbought and showing early signs of rolling over.

 

Sector                         Index               Above/Below                          Comment

                                    Change           15 day Moving Average

Info Technology            Higher              Above                                      Above 50%

Transportation              Higher              Above                                      Above 50%

Financial Services         Higher              Above                                     Above 50%

Telecommunications      Unchanged      Above

Consumer Staples         Higher              Above                                      Above 50%

Basic Materials             Higher             Below                                      Rolled Over

Consumer Discretion    Lower              Above                                      Above 50%

Industrials                     Higher             Above                                     Above 50%

Health Care                  Higher              Above

Energy                          Higher              Below                                      Rolled Over

Utilities                         Higher             Above

 

                                    Bolded items are changes from last week

 

                                    All Charts courtesy of StockCharts.com

 

Tech Talk’s Weekly Column in tomorrow’s Financial Post

(Available in hard copy or at www.nationalpost.com )

 

The column gives an update on the U.S. oil service sector.

 

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.