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Tech Talk is a free stock market letter service available at http://TimingTheMarkets.com and http://EquityClock.com written by notable analysts Don and Jon Vialoux. Interested in the methodologies and strategies presented by Tech Talk? The Horizons AlphaPro Seasonal Rotation ETF (trading on the... More
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  • Strange but True: Yesterday’s Volume Highest in Six Months

    Technical Action Yesterday

    Technical action by S&P 500 stocks was bullish again yesterday. Another 34 S&P 500 stocks broke resistance (too numerous to include here) and none broke support. Most of the breakouts occurred in early trading. The Up/Down ratio increased from 5.09 to (379/70=) 5.41.

    Technical action by TSX Composite stocks was mixed yesterday. Four TSX stocks broke resistance (Aeroplan, Cameco, Suncor and Talisman) and three stocks broke support (Calloway REIT, Saputo and Transat). The Up/Down ratio dipped from 4.56 to (143/35=) 4.09.

    Strange, but true

    Volume on the NYSE jumped to a six month high yesterday. Volume in S&P 500 stocks fell yesterday to the second lowest level during the past six months (including the day before the Thanksgiving Day holiday). What’s going on?

    Approximately half of the volume on the NYSE yesterday happened in one stock, Citigroup. Much of the volume came from sale of the U.S. government’s remaining shares of Citigroup. Volume in Citigroup escalated near the close when additional shares of Citigroup in the public realm required indexers to buy the stock at the close (e.g. funds that track the Dow Jones Industrial Average). The buying in Citigroup also required the indexers to rebalance positions by selling other stocks that are part of the Dow Industrials. Net result was weakness by the Dow Jones Industrial Average in the last hour of trading yesterday.

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    Interesting Charts

    Another reason for weakness in U.S. equity indices and commodities was late strength in the U.S. Dollar Index. Despite late strength, short term momentum indicators for the U.S. Dollar Index continue to trend lower from overbought levels. A MACD sell signal was recorded yesterday.

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    Economically sensitive sector ETFs broke key resistance levels yesterday.

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    The Federal Reserve currently is losing the battle with the bond bears. Purchases of U.S. Treasuries by the Fed through QE II were expected to lower yields and raise prices. However, action by Obama and Congress yesterday at least temporarily delayed that possibility. Yesterday, long term U.S. Treasury prices and related ETFs broke support on higher than average volume to reach a six month low. Weakness in bond prices (i.e. higher yields) was a contributing factor to strength in the U.S. Dollar yesterday. Will the Fed’s consistent purchases of Treasuries eventually have a positive impact on long term Treasury prices? If it does, equity markets will move significantly higher. Stay tuned!

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    Tags: XHB, SLX, TLT, C, SPY
    Dec 08 4:58 AM | Link | Comment!
  • Stock Market Outlook for December 8, 2010
    Upcoming Events for Today:
    1. Crude Inventories will be released at 10:30am
      The Markets
    Market Close % Change Expected ST Low Expected ST High
    Dow Jones Industrial Average (^DJI) 11,359.16 -0.03% 11,046.91 11,386.30
    Dow Jones Transportation Average (^DJT) 5,059.98 0.18% 4,752.54 5,007.92
    Dow Jones Utility Average (^DJU) 395.69 -0.42% 393.75 406.87
    S&P 500 (^GSPC) 1,223.75 0.05% 1,181.37 1,221.94
    S&P/TSE Composite (^GSPTSE) 13,250.67 -0.19% 12,614.32 13,116.77
    NASDAQ Composite (^IXIC) 2,598.49 0.14% 2,490.86 2,583.75
    Austrian Traded Index (^ATX) 2,795.45 1.15% 2,654.21 2,750.07
    French CAC 40 (^FCHI) 3,810.50 1.63% 3,686.91 3,903.47
    German DAX (^GDAXI) 7,001.91 0.68% 6,626.55 6,911.73
    UK FTSE 100 (^FTSE) 5,808.50 0.66% 5,612.42 5,842.89
    Swiss Market Index (^SSMI) 6,462.50 0.78% 6,409.05 6,588.41
    Brazilian IBOVESPA (^BVSP) 69,338.00 -0.31% 68,449.03 72,140.26
    Mexico’s IPC (^MXX) 37,880.13 0.38% 35,434.99 37,388.45
    Amsterdam Exchange Index (^AEX) 346.21 1.13% 333.57 346.30
    New Zealand NZX 50 INDEX GROSS (^NZ50) 3,281.86 -0.34% 3,265.78 3,327.81
    China HANG SENG INDEX (^HSI) 23,428.15 0.82% 23,052.23 24,642.45
    Korea KOSPI Composite Index (^KS11) 1,962.52 0.45% 1,900.75 1,953.42
    Tokyo NIKKEI 225 (^N225) 10,141.10 -0.26% 9,294.39 10,136.26

     

    Enthusiasm surrounding the proposed framework for the extension of the Bush-era tax cuts was quickly abated as investors were spooked by further probes into insider trading.   President Obama’s announcement on Monday night gave lift to investor optimism as expectations surrounding the extension of tax cuts were finally being met.   Equity markets instantly opened higher by almost one percent as a result.   But by the end of the day, gains were lost as US authorities announced a widening of insider trading investigations, forcing a selloff in equities and taking indices to the lows of the session.  

    Action on the day was both bullish and bearish.   Key indices had opened at new 2-year highs, piercing overhead resistance on the S&P 500 Index and Dow Jones Industrial Index marked by previous highs achieved just one month ago.   The bullish breakout pushed markets into the range of analysts targets for the year and profits were quickly captured as a result.   A target of 1,225 to 1,250 on the S&P 500 Index remains in view over the course of the next 4 weeks.   With the flood of optimism entering the market on the back of the tax-cut extension framework, there is no reason to believe that the same optimism cannot be regained upon the final approval of the proposal over the coming days.   This implies that the action on Tuesday was a sneak-preview of things to come as year-end targets are once again reclaimed and another point of market overhang is alleviated.

    With targets in mind, two paths are presented when considering the facts.   Seasonal tendencies suggest that markets are customarily flat in the first half of December followed by strong gains in the second half.   This suggests that markets may marginally pullback over the next week, finding support at around 1,200 on the S&P 500 before rebounding to higher highs in the final weeks of the year.   The effect is the result of tax loss selling at the beginning of the month, and bargain hunting that follows.   The vote on tax-cut extensions, however, confuses the matter with the passing of this legislation expected in the coming days.   Results for this year may confirm that gains for the month have been realized in the first two weeks followed by flat, range-bound trading into year end.   Longer-term targets into May of next year suggest a strong market through the period of seasonal strength due to cyclical influences resulting from the US Presidential Cycle.   Adding exposure to equity markets on any weakness over the course of the next six weeks appears warranted.

    With weakness in equity markets, dollar strength came through.   The US Dollar index has found support at its 20-day moving average, showing reluctance to follow seasonal tendencies that suggest a weaker dollar throughout the present month.   The upward trend has not been broken as of yet, however, a move below the 20-day moving average would suggest weakness with further downward pressures to come.

    Market sentiment on the day was bullish with the put-call ratio reading 0.76.   With the VIX below 18 and investor sentiment remaining overly bullish, investor complacency is glaringly obvious, leaving equity markets vulnerable to “shocks”, as was witnessed on Tuesday.   Adequate portfolio protection by way of puts remains warranted.

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      Sectors that Moved the Market
    Sector % Price Change % Volume Change
    Energy Sector (XLE) -0.38% 91.26%
    Basic Materials Sector (XLB) 0.13% 112.62%
    Financial Sector (XLF) 0.13% 103.43%
    Health Care Sector (XLV) 0.06% 36.25%
    Consumer Discretionary Sector (XLY) 0.05% -28.51%
    Industrials Sector (XLI) 0.26% 17.56%
    Technology Sector (XLK) 0.12% 53.94%
    Utilities Sector (XLU) -0.67% 140.18%
    Consumer Staples Sector (XLP) 0.56% 77.04%

     

    With Kraft planning to file a preliminary Injunction against Starbucks as it pertains to a failed distribution deal, Consumer staples maintained positive returns by market close.   Kraft finished higher by over 1%.   Seasonal tendencies for the sector are positive into year-end.   Weakness in natural gas contributed to the weakness in utilities, which underperformed broad market indices on the day.   Seasonal tendencies for the sector customarily become strong in the last half of December for gains reaching 3% over a 2 to 3 week period.

      S&P 500 Index

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    Chart Courtesy of StockCharts.com

    Support 2 Support 1 Pivot Point Resistance 1 Resistance 2
    1215.55 1219.65 1227.35 1231.45 1239.15

     

    Total Returns

    Yesterday: 0.05%  –  Trailing 5 days: 3.66%  –  Trailing 30 days: –0.17%

    Averages for current day based on past 20 years of data

    • Current Day: 0.30% with 50.00% of sessions gaining
    • Next 7 days: –0.45% with 49.00% of sessions gaining (Max return: 0.99% by December 10 on Average)
    • Next 30 days: 1.44% with 54.55% of sessions gaining (Max return: 3.00% by December 26 on Average)
      TSE Composite

    image

    Chart Courtesy of StockCharts.com

    Support 2 Support 1 Pivot Point Resistance 1 Resistance 2
    13159.13 13204.90 13286.25 13332.02 13413.37

     

    Total Returns

    Yesterday: –0.19%  –  Trailing 5 days: 2.30%  –  Trailing 30 days: 2.52%

    Averages for current day based on past 10 years of data

    • Current Day: 1.29% with 71.43% of sessions gaining
    • Next 7 days: 0.32% with 48.50% of sessions gaining (Max return: 1.55% by December 11 on Average)
    • Next 30 days: 2.87% with 54.23% of sessions gaining (Max return: 4.65% by December 30 on Average)

    Dec 08 4:39 AM | Link | Comment!
  • Cup and Handle for Sonic Solutions (NASDAQ:SNIC)
    Setting Up

    Stocks that have recently indicated possible entry points according to technical indicators and currently trade within or are approaching their period of seasonal strength.

    Sonic Solutions (NASDAQ:SNIC)

    Sonic Solutions (NASDAQ:<a href='http://seekingalpha.com/symbol/snic' title='Sonic Solutions'>SNIC</a>) Stock Chart

    A classic technical pattern is forming on the chart of Sonic Solutions (NASDAQ:SNIC).   A cup and handle chart is a bullish continuation pattern that sees investors cashing out of an equity at previous highs following a significant downtrend (the cup), only to be met by further buying pressures following a slight pullback of the stock (the handle).   Sonic Solutions (NASDAQ:SNIC) has been outperforming the market for the past few days and a breakout above $12.50 would confirm the bullish continuation pattern.   Seasonal tendencies for this technology company are strongly positive through to January for average gains over the last 16 years of 34%.   Fundamentals for this equity leave much to be desired, putting this equity into the high risk category, however, analysts targets are very optimistic at around $14, or around 16% higher than current levels.

    Sonic Solutions (NASDAQ:<a href='http://seekingalpha.com/symbol/snic' title='Sonic Solutions'>SNIC</a>) Seasonal Chart



    Disclosure: No Positions
    Tags: SNIC, seasonality
    Oct 28 4:36 AM | Link | Comment!
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