Thursday, February 26, 2009

GT Blog Feb 26, 2009

For GT Blog February 26, 2009

More on the beaten up Financials

As of mid week the Canadian Financials are down about 55% from their June 2007 peaks – and the US Financials are down a stunning 85% from their June 2007 peaks

We can explain away the severe US financials under-perform by arguing the Canadian banks are in better shape – but – there could be another reason for the US debacle – undeclared shorting via the ProShares UltraShort Financials ETF otherwise known as the SKF

Over the past several weeks the average daily dollar volume on the SKF is about $7.1 billion which equals the summed dollar volume of the SPDR Financial index top 4 stocks by weight. Money flowing in and out of the larger ETF’s can move the underling asset be it stocks or gold – as observed when the SPDR Gold Trust ETF (GLD) is subjected to bullish and bearish stampedes

Note the failure of the SKF to make new highs through February – a bad omen for the US Financial bears

The Double Short Financials SKF in action – What?

Saturday, February 21, 2009

For GT Blog February 21, 2009

When it comes to the stock market we all want the highest returns with the least amount of risk.

I have found that my best returns occur when I take large positions in a rising stock sector and hold for about 6 to 9 months. When this position is sold the proceeds are “rotated” into a new and different emerging stock sector.

This strategy depends on getting two or three trades right per year – you trade less and spend more time smelling the flowers – stuff like going to sports bars, drinking beer, weekends in Collingwood, the theatre and annoying your neighbours with snow blowers, leaf blowers and those power wash machines.

The next big trade will be to get the timing right on the switch from those hot gold stocks into those cold bank stocks - if I get this right I will be a legend in my own mind

A Switch to Bank Stocks from Gold Stocks – not yet – stay tuned

Wednesday, February 11, 2009

For GT Blog February 12, 2009

The TSX Global Gold Index is now into week 13 of an intermediate cycle advance which typically can span 12 to 16 weeks

Now at a gain of over 50 per cent and well advanced in terms of weeks - we have satisfied the cyclic issues of cyclic magnitude and cyclic duration

In other words the November 2008 - February 2009 run-up in the gold stocks could be over-done - but there could be a reason for the intermediate cycle advance in the precious metal stocks to extend for several more weeks

Aside from an over-bought US dollar - the gold stocks were the victim of a bearish stampede following the March 2008 peak in bullion prices - the average gold stock lost about 50 per cent in the liquidation from March 2008 to October 2008 - It is the rebound from depressed levels that could extend the current rally in the gold stocks

TSX Gold Stocks and Gold in CDN dollars

Friday, February 6, 2009

For GT Blog February 6, 2009

A clip from a Star business item I authored that may appear in the Saturday paper

Frightened money has also been bidding up the U.S. T-bonds driving prices up and yields down to historical levels. The U.S. 10-year Treasury note has become the security most frequently quoted when discussing the performance of the U.S. government-bond market and is as such can be regarded as a bellwether to convey the market's take on longer-term macroeconomic expectations.

Our chart this week is that of the weekly closes of the YIELD on the U.S. 10-year Treasury note. Keep in mind that the bond yield and the bond price operate inversely and so when the yield hit a historical low back in December the bond price was at a historical high.

I have placed a horizontal support line at the 3.5% yield level on the chart to represent the “feel good” level of support that goes back to support at the prior lows of 2002-2003. You will recall that during the bear market lows of 2002 and 2003 there was also great investor fear and terrible economic fundamentals. We had two New York towers vaporized, war in Iraq and the Enron & accounting fiascos.

Note the November breakdown on the yield as nervous investors stampeded into the T-bonds driving the yield down under the “acute fear” level of 2.5%.

The good news now for equity investors is the rebound in the yield back up to the 3% level which to me suggests a reduction of investor fear and the willingness to increase their risk appetite.

I think we get a green light on equities when that 10-year yield finally pops above 3.5%

Tuesday, February 3, 2009

For GT Blog February 2, 2009

The share price of Bombardier Inc. has fallen about 25% over the last 3 trading sessions in response to a few analyst downgrades.

The big concern here is the possibility of a slow down in the Bomber’s aerospace division as competitors like Cessna Aircraft Co, Gulfstream Aerospace Corp. and Hawker Beechcraft Corp warn of plans to cut production due to the economic slowdown.

We a Getting Technical see opportunity here with the shares trading a $3.45 down from a peak of almost $9 a year ago. That is because analysts tend to cut their ratings and price targets closer to the end of a long price decline and then tend to raise their ratings and price targets at the end of a long price advance.

More importantly – according to CIBC World Markets – at this price you get the aerospace division for free!
Now look at the bullish volume during Monday and early Tuesday