Pre-opening Comments for Wednesday October 7th
U.S. equity index futures are mixed this morning. S&P 500 futures slipped two point in pre-opening trade. Futures were higher overnight following the release of better than expected quarterly earnings by Yum Brands and Costco and after the U.S. Dollar moved lower. However, gains faded as the opening approached and the U.S. Dollar recovered.
Yum Brands, operator of Pizza Hut, Taco Bell and Kentucky Fried Chicken added 1% after announcing higher than expected third quarter earnings. Consensus was $0.58 versus $0.58 per share last year. Actual was $0.69 per share. The company also offered positive earnings guidance for the fourth quarter.
Costco gained 2% after announcing higher than expected fiscal fourth quarter earnings. Consensus was $0.77 versus $0.90 per share last year. Actual was $0.85 per share. The company also offered positive guidance for the first quarter.
Monsanto added 1% after reporting fiscal fourth quarter adjusted earnings slightly higher than expected. Consensus was a profit of $0.01 versus a loss of $0.03 per share last year. Actual was a profit of $0.02.
Family Dollar Stores added 5% after releasing better than expected fiscal fourth quarter earnings. Consensus was $0.41 versus $0.38 per share last year. Actual was $0.43 per share.
TD Newcrest changed its opinion on several mining stocks this morning. Ivanhoe Mines was downgraded from a Speculative Buy to Hold. Teck Resources was upgraded from a Buy to an Action Buy. Gammon Gold was downgraded from Hold to Reduce. Thompson Creek Metals was upgraded from Reduce to Hold.
Cisco added 1% after William Blair raised its rating from Market Perform to Outperform.
Technical Action Yesterday
Technical action by S&P 500 stocks was quietly bullish yesterday. Three S&P 500 stocks broke resistance (JC Penny, Reynolds American and Safeway) and one stock broke support (St. Jude’s Medical). The Up/Down ratio increased from 7.04 to (382/53=) 7.21.
Technical action by TSX stocks also was quietly bullish. Three TSX stocks broke resistance (Birchcliff Energy, Emera and Gammon Lake Resources) and one stock broke support (Rogers Communications). The Up/Down ratio was unchanged at (116/22=) 5.27.
Gold was a focus yesterday on a break to an all time high above resistance at $1,033.90 (GLD: $100.44). Gold has formed a massive reverse head and shoulders pattern with a long term technical target of $1,300. On the other hand, gold and its ETFs on a short term basis are overbought.
Strength in gold is related to weakness in the U.S. Dollar. The U.S. Dollar has formed a tight three week trading range between 75.83 and 77.47. It found resistance at its 50 day moving average. Stochastics have rolled over. Will short term support hold? Probably!
Grain prices came alive yesterday. That’s good news for investors involved with the seasonal Ag play. A break above resistance by JJG above $37.15 would be convincing. Ag stocks responded strongly to strength in grain prices.
The U.S. Transportation sector finally has recorded a technical buy signal for its period of seasonal strength from September 24th to November 13th
Relative Strength for U.S. Sectors
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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.
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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.