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Tech Talk for Tuesday November 22nd 2016

 

Observations

Commodity prices came alive yesterday. Significant gains were recorded by natural gas (3.76%), crude oil (4.06%), gasoline (4.32%), base metals (1.14%) and grains (1.66%). Commodity sensitive stocks responded accordingly. Strength in commodity sensitive stocks triggered a move by the TSX Composite Index to a 15 month high and the S&P 500 Index to an all-time high.

 

StockTwits Released Yesterday @EquityClock

30 day correlation of the MSCI World ex U.S. Index and S&P 500 at lowest level since 2008

Technical action by S&P 500 stocks to 10:00: Bullish. Breakouts: $BHI, $HAL, $MPC, $MRO, $OKE, $WDC, $ADS

Editor’s Note: After 10:00 AM EST, four more stocks broke intermediate resistance: DGX, WU, LVLT and LYB.

Energy and Oil Services stocks dominate list of breakouts: $BHI, $HAL, $MPC, $MRO

S&P/TSX Energy Index moved above 214.12 to an 18 month high extending intermediate uptrend. $XEG.CA

‘Tis the season for S&P/TSX Energy Index to move higher!

Oil & Gas SPDRs $XOP moved above $39.53 extending a reverse Head & Shoulders pattern.

Power Shares Water Resources ETF $PHO moved above $24.76 to an 18 month high extending an intermediate uptrend.

S&P 500 Index moved above 2193.56 to an all-time high extending an intermediate uptrend $SPX

“Gassy” Canadian equities are starting to break out. E.g. Prairie Sky Royalty $PSK.CA ‘Tis the season!

Other “Gassy” Cdn. equities near breakouts: $PPY.CA, $VET.CA $FRU.CA $CNQ.CA

Another “Gassy” Cdn. stock breaks out. Painted Pony $PPY.CA moved above $9.86 extending uptrend.

TSX Composite Index moved above 14,963.60 to a 15 month high extending an intermediate uptrend.

 

Trader’s Corner

Daily Seasonal/Technical Equity Trends for November 21st 2016

Green: Increase from previous day

Red: Decrease from previous day

 

Daily Seasonal/Technical Commodities Trends for November 21st 2016

Green: Increase from previous day

Red: Decrease from previous day

 

Daily Seasonal/Technical Sector Trends for November 21st 2016

Green: Increase from previous day

Red: Decrease from previous day

 

Media Reports Released Before the Opening Yesterday

Investing During the U.S. Thanksgiving Holiday

The U.S. Thanksgiving holiday offers unique investment opportunities for Canadian and U.S. investors. The holiday this year occurs this Thursday November 24th

Two of the strongest days of the year for U.S. equity markets are the day before and the day after U.S. Thanksgiving Day. For Thanksgiving week since 1950, the S&P 500 index has moved higher 68.18 per cent of the time, averaging a gain of 0.71 per cent.  Bulk of the gains came during the two days that bookended the holiday Thursday.  Advances on the Wednesday and Friday were recorded 77.3 per cent and 72.7 per cent of the time, respectively, averaging gains each day around 0.35 per cent.  Happy Thanksgiving indeed!

Performance of the S&P/TSX Composite Index during the U.S. Thanksgiving rally period also has been positive. The TSX Composite Index since its re-launch in March 2000 has advanced in ten of the past fifteen times during the Wednesday to Friday period.

Strength during the period is influenced by a difference in sentiment between institutional and individual investors. Most institutional investors and market makers have a diminished impact on equity markets because they close their books at midday on Wednesday, the day before Thanksgiving. They take an extended long weekend including a holiday on Friday, the day after Thanksgiving. Individual investors have a greater impact on equity markets. They are in a buoyant pre-Christmas mood. Thanksgiving Day in the U.S. is the start of the Christmas shopping season. The day after Thanksgiving Day is known as “Black Friday” and traditionally has been the busiest shopping day of the Christmas season. It became known as “Black Friday” because historically that is the date when retailers finally turn a profit for the year. Their profit and loss statement literally turns from red to black.

What about this year? Once again, Black Friday and the Thanksgiving weekend will be an important day for retail sales in the United States and Canada. The U.S. National Retail Federation’s October survey predicted that sales during the Black Friday period, excluding auto, gasoline and restaurant sales, will increase 4% over last year to an average of $139.61 per person. Nearly six in 10 Americans, an estimated 137.6 million people are planning or considering shopping during the Thanksgiving weekend. For the entire Christmas season, sales are expected to increase 3.6 per cent over last year to $935.58 per person. Ecommerce sales are predicted to continue to grow at a faster rate than “bricks and mortar” store sales representing 36 per cent of holiday sales, up from 34 per cent last year. Canadian retailers also have caught the wave. Many Canadian retailers already are advertising “Black Friday specials” for the U.S. Thanksgiving holiday. A 0.74 cent Canadian Dollar relative to the U.S. Dollar will prompt Canadian consumers to purchase goods in Canada this U.S. Thanksgiving instead of taking a quick shopping trip to the United States.

Investors can take advantage of the U.S. Thanksgiving holiday phenomenon. The easiest opportunity is to avoid selling U.S. and Canadian equities and equity Exchange Traded Funds the day before and the day after the U.S. Thanksgiving holiday when prices have a high probability of moving higher.

And now a curiosity! Seasonal studies show that the best day to take seasonal profits in the retail merchandising sector is on Black Friday. Traders take profits on news. Preferred strategy is to hold retail merchandiser stocks and related ETFs for now, but be prepared to take profits on Black Friday.

Black Friday also is a special day for Canadian investors. That is the day when Canadian equity indices and ETFs historically enter into a period of outperformance relative to U.S. equity markets. The period of outperformance is from the first week in December to the first week in March.

Don and Jon Vialoux are authors of free daily reports on equity markets, sectors,
commodities, and Exchange Traded Funds. . Daily reports are available at
http://TimingTheMarket.ca/ and http://EquityClock.com. The enclosed report is for information only. It 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.

 

Here comes winter: Investing during a “La Nina” event

Natural gas prices and “gassy” stocks prices on both sides of the border came alive last week. Natural gas gained 8.40 per cent to $2.84 per MBtu. The S&P/TSX Energy Index added 5.0 per cent led by stocks that generate most of their cash flow and earnings from natural gas. The first snow storm of the season throughout the northern U.S states and southern Canada sparked the gains.

The snow storm last week could be the first of a series of colder and wetter weather events this winter, a condition that favours natural gas and “gassy” stock prices. Long term weather forecasts for this winter, recently released by the U.S. government, call for impact of a La Nina. Winter temperatures during a La Nina are colder than average and snow fall is greater than average in the northern half of North America. Demand for natural gas for heating purposes is expected to increase significantly in some of North America’s highest population areas. See official government weather sites at http://www.noaa.gov/news/hello-la-nina and http://www.noaa.gov/media-release/us-winter-outlook-predicts-warmer-drier-south-and-cooler-wetter-north

Technical action by “gassy” stocks and related ETFs has been encouraging recently. Most already are in intermediate uptrends and recently began to outperform the S&P 500 Index and the TSX Composite Index.

Seasonal influences also are positive at this time of year. Normally, the S&P/TSX Energy Index reaches a seasonal bottom in the third week in November, moves higher into early January, trades sideways to the end of January and records its biggest gains into early May. This year due to the La Nina weather effect, seasonal patterns are appearing earlier than usual.

Better earnings and cash flow reports from “gassy” companies, when they release fourth quarter results, also will help stock prices. Year-over-year results will show strong gains compared to last year in the fourth quarter when natural gas prices averaged less than $2.00 per MBtu.

Investors have a variety of ways to invest in the “gassy” equity sector. Examples of Canadian “gassy” stocks include Encana (ECA $15.78), Painted Pony (PPY $9.21), Canadian Natural Resources (CNQ $43.09), Vermillion (VET $53.66), Enerplus (ERF $10.07) and Bonavista (BNP $4.33). Among Canadian ETFs, BMO Junior Gas ETF (ZJN $18.02) fits the profile. Top ETF pick in the U.S. is First Trust Revere Natural Gas ETF (FCG US$25.02)

 

Don and Jon Vialoux are authors of free daily reports on equity markets, sectors,
commodities, and Exchange Traded Funds. . Daily reports are available at
http://TimingTheMarket.ca/ and http://EquityClock.com. The enclosed report is for information only. It 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.

S&P 500 Momentum Barometer

The Barometer gained another 4.20 to 63.40 yesterday. It remains slightly overbought and trending up.

 

TSX Momentum Barometer

The Barometer jumped 7.69 to 55.19. It became slightly overbought from neutral and continues to trend up.

 

Disclaimer: Seasonality and technical ratings offered in this report by www.timingthemarket.ca and www.equityclock.com 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