Wednesday, September 30, 2009

For GT Blog October 1, 2009

Dilemma - a noun pronounced [di-lem-uh] meaning a situation requiring a choice between two equally undesirable alternatives. The great stock market advance that began in early March 2009 has set up an investment dilemma for both the bulls and the bears.

Bearish investors assumed the great advance to be a sucker bear market rally and sat in cash alternatives waiting for a major correction - possibly back down to re-test the March 2009 lows. Dilemma, do they capitulate and buy in now and risk a correction or do they sit in cash and wait for a correction that may never materialize?

Bullish investors who enjoyed the advance assume it is a youthful bull market and fear not to remain invested. They also fear that a correction could wipe away much of their March to date returns. Dilemma, do they sell now and try to re-enter at lower prices that may never materialize or do they hold and remain fully invested and risk a correction?

We need to decide, is this a bull market or - is this a bear market? Solve that and we resolve the dilemma. If a bull market the bears should buy in now and the bulls should remain fully invested. If we still have a bear market the bears will stay in cash and await the correction and the bulls will sell and lock in those bear rally profits.

Perhaps some historical data on bull and bear markets will help when we examine the duration of the bull and bear cycle over the past 100 years.

The average duration of a bear market in months is 14-months with the longest modern bear of 1973-74 running almost 24 months. If you're a bear we are now into 24-months from the peak of October 2007. Clearly the math does not support a current bear environment.

The average duration of a bull market in months is 24-months with the longest modern bull of 1990-1998 spanning 94 months. If you're a bull we are now only 6-months from the bottom of March 2009 and so the math does not support the end of the current bull.

The other issue to support the bull market scenario is the growing number of new 52-week highs in many of the important stock sectors. Yesterday stocks listed on the Nasdaq, the NYSE and the TSX posted over 200 new highs and only 14 new 52-week lows. As we move into October most of the broader indices are approaching new 52-weeks highs. The Nasdaq is currently within 2% of the October 2008 peak and above the November 2008 peak. The all important Russell 2000 is still 15% below the October 2008 peak but above the November 2008 peak.

Our chart below looks at the TSX Composite and the Nasdaq October 2008 price targets - if these 52-week targets are overcome, the bears will capitulate and trigger a bullish stampede into equities.

Closing In - 52-week Price Targets on the TSX Comp and the Nasdaq

Monday, September 28, 2009

For GT Blog September 29, 2009

Hello fellow bloggers and stock market participants.

As you know RIM last Thursday announced continued earnings growth but warned on the potential for future pressure on margins - At the open on Friday the stock torpedoed but the broader stock indices shrugged off the bad news and continued higher.

The shares of competitor Apple Inc. are now higher than last Thursday's close

Lets us have some fun with a skill test to see if you can spot the early warnings of a RIM torpedo by spotting the early signs of negative price divergence as set up in an Apple over RIM weekly chart

Apple is stronger than RIM as measured from A to B, C to D or D to E

RIM is weaker than Apple as measured from A to B, C to D or D to E

Which stock would you buy - right now?

To learn the correct answer attend our Technical Analysis Level 1 or 2 seminar - to register go to:

Two Smartphone Bellwethers

Tuesday, September 22, 2009

For GT Blog September 22, 2009

Let’s listen in on an advisor – client conversation

Advisor: Wow this market is really strong!
Client: How strong is it?
Advisor: It is so strong none of the O’Leary funds have made a new 52-week low since last July.

I have been a bull since the lows of November 2008 when some important stocks such as IBM, Intel & Home Depot bottomed and later followed by the March lows of just about all of the major stock indices on the planet. We are now entering the seventh month of rising stock prices and not a day goes by when I am asked for technical evidence confirming the current bull.

Most bullish technicians will point to important leadership such as the Financial, Technology and Industrial sectors posting new 10-month highs followed closely by the Materials only 5% away from a new 52-week high. This along with the failure of the bears to take the market to new lows since March.

Last Monday I chaired a conference call with the Union Securities wealth management team who for the most part have enjoyed the 2009 bull market. We were once again reviewing the evidence to support our bullish stance when out of the blue one of the advisors asked a question about the wealth management companies

I had a moment of clarity – yes the wealth managers lead and I had overlooked these important bellwethers. The table below is a list of publicly traded Canadian wealth managers sorted by time from their last 52-week low. Half of the list bottomed in 2008 after peaking in mid 2006 and 2007 – I rest my case and kudos to the Union guy.

Wednesday, September 16, 2009

For GT Blog September 17, 2009

Where is BNN’s Kevin O'Leary? I need to know because he was one of the best contrarian indicators on the street. I recall a March 4, 2009 BNN Squeeze Play O’Leary rant on General Electric Company (NYSE-GE - $6.69) to be a “worthless zombie stock”.

This of course was the setup for a classic buying opportunity. To-day 26-weeks later at $17 - GE is up 154% (that is 480% annualized).

We now need to know if Kevin O'Leary thinks the big March to September advance is a bull market or just a bear market sucker rally.

This is a need-to-know because our investment returns are not governed by seeking out “value” or discovering “the overlooked” or getting “inside information” or finding “cash rich” companies. The reality is bull markets boost the prices of all stocks – the good stuff and the crap – no matter, up they go and we are all expert stock pickers.

The bear market on the other hand takes everything down the toilet. The key is to recognize the bull and get long. Bears are for traders.

I think we have a bull market because of important leadership and the failure of the bears to take the market to new lows since March. Note our chart displaying the important Financial, Technology and Industrial sectors actually posting new 10-month highs. The TSX Materials is only 5% away from a new 52-week high.

Looks like a bull to me but without the O’Leary contrarian indicator I am missing that important confirmation – so be careful out there.

Tuesday, September 8, 2009

For GT Blog September 08, 2009

We got some big news last week according to The Globe, after scooping up the dominant domestic specialty lingerie chain, La Senza, in early 2007, the parent of Victoria's Secret is finally bringing its high-profile brand to Canada. Next month, it will open its first four Victoria's Secret Pink outlets here, starting in Ontario, catering to the lingerie demands of teens and twenty-something’s.

If they do an IPO in Canada don’t even think of investing – the math is terrible. We have a business that only sells only to young females or about 20% of the population. Cut that in half because according to Health Canada the proportion of obese children has nearly tripled in the last 25 years so now their target market is about 10% of the population. I think more people watched Kevin O'Leary’s last show on BNN

Gold on the other hand is loved by all and Dennis Gartman says if gold goes up it will go higher and if gold goes down it will go lower -

Our long term monthly chart illustrates the structure of the current secular uptrend of bullion. A secular up trend is a long term advance (12+ years) that is interrupted by shorter bull and bear cycles – usually about 5 in total – we are now beginning cycle 4 and so this could be the last big advance for the complex – keep in mind the last cycle (5) does not necessarily make a new high – and remember with gold we are here for a good time – not a long time

Tuesday, September 1, 2009

For GT Blog September 01, 2009

Over-trading can trigger anti-social behaviour - I drink alone - I am crabby - I frighten small children - I don't fit the norm - I don't cut my toe nails - I don't "fit in" - I like younger women - I don't read Rob Carrick - I drink too much coffee - l hate mutual fund ads - I think Kevin O'Leary is a used car salesmen.

I grow tired of gold bugs who thrive on bad news - the banks are risky - hedge funds are blowing up - the auto business is crap - you can't trust financial statements - real estate sucks - the consumer is dead - global warming - Chinese plastic everywhere - to much crappy Ontario wine at the LCBO - and now a Mission Impossible 3 movie - all too much too cope with - The gold bugs were wrong last year but this year could be their year - so time for a cold beer and to take a second look at those gold stocks - besides Dennis Gartman says if gold goes up it will go higher and if gold goes down it will go lower

Our gold stock Vs. Gold bullion chart illustrates the gold stocks under-performance Vs. bullion leading into the mid 2008 financial crisis - the gold stocks were eventually caught up in the asset liquidation of September - November 2009.

Now the relationship has changed with the gold stocks out performing the bullion price - perhaps a bullish sign for a big advance in the last quarter of 2009 -