Don Vialoux Canada’s Great Technical Analyst is a speaker at the World Outlook Conference this Weekend at the World Outlook Financial Conference. You can register to attend of view the entire conference on video HERE.
Why the Great and Growing Backlash
From Don Vialoux’s Tech Talk below: (Ed Note: For some technical glitch this post did not appear until now.)
Pre-opening Comments for Wednesday January 20th
U.S. equity markets are lower this morning. S&P 500 futures are down 8 points in pre-opening trade. Traders took profits in the shares of companies that reported fourth quarter earnings overnight.
Futures moved slightly lower after release of December economic news at 8:30 AM EST. December housing starts fell 4.0% to 557,000 units. Starts were dampened by cold and stormy weather conditions. The December Producer Price Index rose 0.2% versus consensus of no change. Core PPI was unchanged versus consensus of a gain of 0.1%.
Canada’s inflation rate surprisingly moved lower in December. Canada’s Consumer Price Index slipped 0.3%. Its annual rate was 1.3%.
Scott Brown won the Senate season in Massachusetts last night. The win assures gridlock in the U.S. Senate on current issues such as healthcare. The U.S. Dollar strengthened on the news.
Strength in the U.S. Dollar triggered weakness in commodities priced in U.S. Dollars. Crude oil, copper, gold and silver are trading lower.
IBM slipped 2% despite reporting higher than expected fourth quarter earnings and despite offering positive guidance for 2010. Consensus for the fourth quarter was $3.47 per share. Actual was $3.59. This morning Canaccord upgraded the stock from Hold to Buy. Target price goes from $130 to $150.
Kraft fell 2% after Warren Buffett noted this morning that he does not support the deal by Kraft to purchase Cadbury.
Reports from major U.S. Banks were mixed. Bank of America and Morgan Stanley reported lower than expected earnings while Wells Fargo reported higher than expected earnings. Bank of America fell 2% after reporting a loss of $0.60 versus consensus of a loss of $0.51 per share. Morgan Stanley fell 2% after reporting $0.14 versus consensus of $0.36 per share. Wells Fargo added 1% after reporting $0.08 versus consensus of a loss of $0.01 per share.
Microsoft is rumored to be negotiating with Apple to replace Google with Bing as the search engine of choice on iPhones.
Barclays upgraded Nexen from Equal Weight to Overweight and downgraded Encana from Overweight to Equal Weight.
Technical Action Yesterday
Technical action by S&P 500 stocks remains positive. Five S&P 500 stocks broke resistance (Baker Hughes, International Flavors & Fragrances, Parker Hannifin, Pepco Holdings and Target Stores) and none broke support. The Up/Down ratio improved from 5.77 to (384/63=) 6.10.
Technical action by TSX Composite stocks was quietly bullish. Two TSX stocks broke resistance (Canadian Tire A and Quebecor B) and none broke support. The Up/Down ratio improved from 6.72 to (169/23=) 7.35.
Baker Hughes, a major U.S. oil service company was on the list of S&P 500 stocks breaking resistance yesterday. It broke above $48.02.
Oil Services HOLDRs, the most liquid ETF in the sector also is performing well. However, short term momentum indicators are overbought and showing early signs of rolling over.
The oil services sector currently is on the radar screen because it has a period of seasonal strength from January 31st to May 9th. The trade has been profitable in 17 of the past 20 periods. Average gain per period was 14.7%.
Strength relative to the S&P 500 also has been exceptional during this period. The Oil Services sector has outperformed the S&P 500 by 11.0% during its period of seasonal strength.
Fundamentals for the sector are not attractive in the short term. Fourth quarter earnings and cash flow are expected to be significantly lower than last year. Medium term prospects are more positive. Higher oil and natural gas prices have recovered significantly since March. Demand for oil services has started to recover.
In conclusion, the sector remains on the radar screen for a possible entry point on weakness during the next few weeks. Please be patient.
Don Vialoux has 37 years of experience in the Investment Industry. He is a past president of the Canadian Society of Technical Analysts (www.csta.org) and a former technical analyst at RBC Investments. Now he is the author of a daily letter on equity markets available free on the internet. The reports can be accessed daily right here at www.dvtechtalk.com.
Impossible! That’s what institutional investors say about “Timing the Market”. Mr. Vialoux will explain that, indeed, it can be done with the appropriate analysis. He also will explain why timing the market will be important during the next decade. Buy and Hold strategies are not working anymore; Investors are looking for alternatives. Mr. Vialoux will demonstrate four techniques that can be used to time intermediate stock market swings lasting 5-15 months. The preferred investment vehicles for investing in intermediate stock market swings are Exchange Traded Funds.
Comments in Tech Talk reports are the opinion of Mr. Vialoux. They are based on technical, fundamental and/or seasonal data that is believed to be accurate. The comments are free. Mr. Vialoux receives no remuneration from any source for these services. Comments should not be considered as advice to buy or to sell a security. Investors, who respond to comments in Tech Talk, are financially responsible for their own transactions.