Tech Talk for Wednesday November 7th 2007

 

Inter-day Comments for Wednesday November 7th

 

9:15 AM EDT: The focus this morning once again is on the U.S. Dollar. It has virtually collapsed in overnight trading following news from a Chinese official who stated that, “In terms of the structure of our foreign exchange reserves, we should take advantage of the appreciation of strong currencies to offset the depreciation of weak currencies”. The Chinese are believed to own $1.3 trillion in U.S. backed securities (mainly U.S. treasuries). Implication is that the Chinese at best will defer purchases of additional U.S. Dollars assets as part of its foreign currency reserves. At worst, it could become a net seller of U.S. Dollar assets implying long term selling pressure on the U.S. Dollar

 

Impact on markets following the Chinese statement was wide and significant. Commodities priced in U.S. Dollars (e.g. crude oil, gold, silver, aluminum, etc) rose sharply. All major currencies moved higher with the Canadian Dollar and Euro moving to an all time high. Wholesale unleaded gasoline prices broke above $2.45 U.S. per gallon to an all time high.

Chart courtesy of StockCharts.com                                  www.stockcharts.com

 

U.S. equity markets responded by moving sharply lower in overnight trading. Dow Industrial futures are down 127 points and S&P 500 Index futures are off 15 points in pre-opening trade. Both are expected to test their 200 day moving average at the opening.

 

Chart courtesy of StockCharts.com                     www.stockcharts.com

Chart courtesy of StockCharts.com

 

General Motors also contributed to weakness in U.S. equity prices. General Motors reported a third quarter loss of $39 billion, the second largest loss ever recorded by a corporation. The loss included additional write downs from its GMAC unit indirectly related to the sub prime debacle. In addition, the company is being impacted by slowing demand for autos and trucks in the U.S.

 

Technical Action Yesterday

 

Technical action by S&P 500 stocks was mixed yesterday. Six S&P 500 stocks broke resistance and seven stocks broke support.

 

 

S&P 500 stocks breaking resistance

 

Stock                           Symbol            Previous          New

                                                            Trend              Trend

Air Products                 APD                Up                   Up

Cisco                           CSCO             Up                   Up

Deere                           DE                   Up                   Up

Hospira                        HSP                 Neutral             Up

Janus                            JNS                 Up                   Up

Tenet Healthcare          THC                Down               Neutral

 

S&P 500 stocks breaking support

 

Stock                           Symbol            Previous          New

                                                            Trend              Trend

Clear Channel               CCU                Up                   Neutral

Cognizent Tech             CTSH              Down               Down

Kroger                         KR                   Up                   Neutral

Pactiv                           PTV                 Neutral             Down

Pulte Homes                 PHM                Down               Down

Quest Diagnostics         DGX                Up                   Neutral

Robert Half                  RHI                  Down               Down

 

Technical action by TSX stocks also was mixed. Four TSX stocks broke resistance and four stocks broke support.

 

TSX stocks breaking resistance

 

Stock                           Symbol            Previous          New

                                                            Trend              Trend

Nortel                          NT                   Down               Neutral

Pan American Silver     PAA                Down               Neutral

Silver Standard             SSO                 Down               Up

SNC Lavalin                SNC                Up                   Up

 

 

 

 

TSX stocks breaking support

 

Stock                           Symbol            Previous          New

                                                            Trend              Trend

AGF                            AGF.B             Up                   Neutral

Couche Tard                ATD.B             Down               Down

Interoil                          IOL                  Down               Down

Stantec                         STN                 Up                   Neutral

 

 

Inter-day Comments for Tuesday November 6th

(Charts have been updated to yesterday’s close)

 

9:25 AM EDT: The focus this morning is on continuing weakness in the U.S. Dollar. The U.S. Dollar fell to another all time low and the Euro and Canadian Dollar rose to another all time high. Gold has jumped to a 28 year high. Crude oil has jumped to an all time high. U.S. equity indices are up nicely in overnight trading.

 

High tech stocks are leading U.S. equities on the upside before the opening. Several favourable overnight news events have impacted the sector:

  • Oracle was added to Goldman Sachs “Conviction” list
  • Several investment firms raised their target price on Google
  • CS First Boston raised its target on Research in Motion.
  • Nortel finally reported a profit.

Google and Research in Motion are expected to open at all time highs. Oracle is testing resistance at $23.00. A break above resistance implies an intermediate technical target of $25.80.

Chart courtesy of StockCharts.com                        www.stockcharts.com

 

Traders also are waiting for fiscal first quarter earnings for Cisco scheduled to be released tomorrow. Option activity during the past few days suggests that traders are looking for an encouraging report. Consensus is $0.36 versus $0.31 per share last year. On the charts the stock is testing resistance at $33.60. A break above resistance implies an intermediate technical target of $37.60.

 

Chart courtesy of StockCharts.com                              www.stockcharts.com

 

Good news from the technology sector as well as improving technicals suggest that the technology sector is gearing up for another short term spurt. Look for the S&P Technology Index to move to another six year high as early as this morning.

Chart courtesy of StockCharts.com                             www.stockcharts.com

 

Don’t forget the semiconductor sector (eg. The SOX Index)! It is lagging the technology sector and could play catch up.

 

 

Updates: Of stocks in the news, Nortel was the best performer on big volume following release of third quarter results.

Chart courtesy of StockCharts.com                           www.stockcharts.com

 

Semiconductor ETFs  (e.g. Semiconductor HOLDRs) and individual semiconductor stocks (e.g. Intel, Texas Instruments) led the advance in the high tech sector yesterday.  Their short term technicals continue to improve.

 

Chart courtesy of StockCharts.com                            www.stockcharts.com

 

Chart courtesy of StockCharts.com            www.stockcharts.com

 

Interesting Chart

 

FP Trading Desk headline reads, “Technical signs bullish for silver prices”. Following is a link to the report: http://communities.canada.com/nationalpost/blogs/tradingdesk/archive/2007/11/06/technical-signs-bullish-for-silver-prices.aspx

 

Silver has a positive and improving technical profile. Yesterday, silver broke a key intermediate and long term resistance level above $15.00 per ounce. Leon Tuey’s intermediate technical target of $20-$22 U.S. is realistic. In addition to the technicals, silver has just entered into a period of seasonal strength from the end of October to the end of March. The trade has been profitable in 8 of the past 10 periods. Average return per period was 13.4%. The Silver ETF (Symbol: SLV) rose more than 5% yesterday. Silver stocks also are showing strong positive technicals. Pan American Silver added 7%. Silver Wheaton improved 3%.

Chart courtesy of StockCharts.com                         www.stockcharts.com

 

Iain Fraser’s Column

 

We thought, for the column today, we would do some reminiscing. We guessed that the low in October of 2002 would be the low for both the New York and Toronto markets. Consequently, we produced our first report on November 1st of 2002 and the second one on December 5th 2002 (in those days our reports were done on a monthly basis). The stocks that we picked out as top picks (most undervalued) in those first two reports included Telus @ $13.01, Canadian Natural Resources @ $10.68, CIBC @ $42.80 and Suncor @ $23.56. In those early days our emphasis was on the banks and the oils; both have turned out quite well. Our most startling top pick (most undervalued) in 2003 was Inmet @ $6.20; this stock has recently been over $100. At the time we picked it we weren't sure what kind of business they were in; it tur ns out they were, and are, mainly copper producers. Another grand pick was Rogers @ $7.50. In 2003, and in the following years, we were greatly impressed by the mobile phone, and we still are. How 100,000 people could go to the rose bowl and all be on a different phone at the same time, and if somebody phoned in from the outside, the mobile phone system would pick the right person out of the 100,000. It is the same with the internet, just about all the written words ever written on this planet are at our fingertips as we speak. Another, rather lucky pick, was Alcan @ $38.70; we thought at that time the stock would move up to the low $60's; it did, and kept on going up to over $100.

Chart courtesy of StockCharts.com                      www.stockcharts.com

Chart courtesy of StockCharts.com                        www.stockcharts.com

 

As we reflect back on our history, we still have the same opinion, and that is, that when it comes to equities, the ones to choose are those that are undervalued and are favorable on the charts.

 

Thackray’s Monthly Market Letter

 

Brooke Thackray released his monthly letter on seasonal trading on Monday evening. Several strategies are mentioned in the letter including strategies on all ten of the S&P 500 sectors. In addition, the report includes a Trader’s Page highlighting the brief, but profitable trade around the U.S. Thanksgiving holiday. The report is free. Subscribe by sending an email to subscribe@alphamountain.com with SUBSCRIBE in the subject line. Also, please state your first and last name, city and country.  

 

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.