Editor Note: Highly recommend that you take a monday morning visit to Don Vailoux’s monday report where he analyses an astonishing 40 plus Stocks, Commodities and Indexes.
Pre-opening Comments for Thursday September 24th
U.S. equity index futures are slightly higher this morning. S&P 500 futures are up 3 points in pre-opening trade. Futures are responding to a mild reduction in weekly jobless claims and a weaker U.S. Dollar. Weekly jobless claims fell 21,000 to 530,000.
The focus today is on the G20 meeting today in Pittsburg. A wide variety of economic issues will be discussed today and tomorrow.
Goldman Sachs raised target prices by 10% on a series of U.S. retail merchandisers in anticipation of a recovery in sales during the back to school season.
Citrix added 4% after the stock was added to Goldman Sach’s Conviction list.
Bed Bath & Beyond slipped 3% despite reporting higher than consensus second quarter earnings. Consensus was $0.48 versus $0.46 per share last year. Actual was $0.52 per share. However, the stock was downgraded by Credit Suisse.
Canwest announced plans to sell its Australian TV network for approximately $650 million. Funds are to be used to reduce debt.
Paychex is down 3% after lowering earnings and revenue guidance for fiscal 2010.
Rite Aid is down 10% after the company cut earnings and revenue guidance for fiscal 2010.
Technical Action Yesterday
Technical action by S&P 500 stocks remained bullish yesterday despite a late day sell off. Six S&P 500 stocks broke resistance (Avon, H&R Block, NiSource, Raytheon, Teradata and XTO Energy) and one stock broke support (United Health). The Up/Down ratio rose from 15.03 to (438/29=) 15.10 another all time high.
Technical action by TSX Composite stocks was quiet. Two TSX stocks broke resistance (Royal Bank, Vitera) and one stock broke support (Forzani Group). The Up/Down ratio slipped from 6.00 to (121/21=) 5.76.
What happened after the Fed’s announcement yesterday
Initially, the response was positive: U.S. equity indices advanced, the U.S. Dollar weakened, bond prices slipped slightly and gold and gold stocks strengthened slightly. Shortly after, traders began to realize the significance of the Fed’s announcement to extend its program to purchase U.S. treasury bonds. All markets reversed: the U.S. Dollar recovered and closed near its high, equity markets fell and closed near their low , bond prices recovered and closed near their high and gold and gold stocks fell and closed near the low for the day. The later response comes at an important time. MACD for all of these markets (except bonds) are showing short term technical signs of a reversal: U.S. equity markets are peaking, the U.S. Dollar is bottoming and gold and gold stocks are peaking. Following are the charts with their MACD indicator:
THE CASTLEMOORE INVESTMENT COMMENTARY
Ready, Willing but not yet A Bull.
At CastleMoore, we first decide how much exposure we want to a given market and then how assets are allocated within that parameter. For this we use several tools, including the work done by our colleagues in the investment business, work that is meant for general or limited distribution.
You need not be a genius to succeed in this business. You just have to know where to find them.
Mark Twain once wrote, “to a man with a hammer, everything looks like a nail.” In the art of investing, this can be a fatal flaw. A common mistake made by many investors is to be so firmly committed to a point of view that all new information or commentary gets viewed though glasses color for that opinion. You can always find a chart or research report supports your point view –curve fit- and often objectivity takes a back seat to the desire to have been proven right in the first place. It’s why an investor may hold onto a losing position just long enough to break even or eke out a slight gain.
We should make a point of saying this at least once a year, but we’ll state it here: tax considerations aside, once you’ve bought a stock, forget about what you paid for it. Think only about what it is worth at the present vis-à-vis its current price.
Taxes considered, it makes all the more sense to sell a position and establish a tax loss (assuming you can do something with it), even if you subsequently buy a similar security with the proceeds. This is called a tax swap.
At any rate, we read outside material if for no other reason than to know other perspectives and not to pick up any habits related to obstinacy. And, of course, our colleagues in our business like reading our material as well.
Yesterday markets’ action was interesting on several fronts, all of which ostensibly related to the release of the Fed minutes. Everyone knew that there was zero chance of a hike. What participants were interested in was the language of the minutes. Without parsing it, suffice it to say the Fed said things are a bit better but there are still risks.
Take a look how various markets responded, immediately following the release..like within minutes (2:16ish)…then about 45 minutes later. All the charts are 1 minute charts of yesterday only.
US 10 yr Treasury (closes at 3pm)
Now this type of action reinforces two points. The first is that everything is correlated by the minute now which conjures up uneasy feelings about the structure and health of markets. The broad indices are moving up or staying strong within our relative strength tables which shows there’s less leadership.
The second point is a little more discretionary in nature, and it’s that, markets now are not discounting things as much as only a few weeks ago and are now sometimes selling on news. That’s why the word ostensibly was used above. Things are curiousor and curiousor…….
Of interest too as Western markets push higher is that China (Shanghai) is off 18+% since August. It and the NASDAQ lead the way last December. The Shanghai index did not come anywhere close to retesting as the NASDAQ did. Is this a canary in the coal mine?
Though a correction is due, the work now is figuring out just how it will go.
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If you would be interested in participating in a CastleMoore online webinar or if you would be interested in attending live an upcoming CastleMoore investment seminar, send an email to email@example.com.
CastleMoore Inc. uses a proprietary Risk/Reward Matrix that places clients within one of 12 discretionary portfolios based on risk tolerance, investment objectives, income, net worth and past investing experience. For more information on our discipline and methodology please contact us.
Buy, Hold…and Know When to Sell
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.
Disclosure: Mr. Vialoux does not own securities mentioned in this report.
Disclaimer: Comments and opinions offered in this report at www.timingthemarket.ca 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.