Wednesday, November 30, 2011

Last BNN Sept 30, 2011

This is the text word for word setup for Market Call appearance September 29, 2011

TO: BNN – "Franklin Cameron"
From: Bill Carrigan
RE Market Call Sept 30, 2011

Current activities:

Editor of the Getting Technical Market letter (and)
Business columnist Toronto Star
A sub-advisor to Stonebrooke Asset Management Ltd and Union Securities

Top Picks for September 30, 2011

Over sold assets to out perform through year -end

BMO Equal Weight US Banks Hedged to CAD Index ETF (ZUB) @ $10.00 – a TSX listed ETF that gives you exposure to the large beaten up U.S. banks

BMO Nasdaq 100 Equity Hedged To CAD Index ETF (ZQQ) @ $17.27 a TSX listed ETF that gives you exposure to the important U.S. technology sector

iShares S&P/TSX Capped Energy Index Fund (XEG) @ $15.40 a TSX listed ETF that gives you exposure to the beaten up CDN energy producers and oilfield service co’s


Direct ownership of ZUB

Indirect - Client /firm (Union portfolios) have direct ownership of All selections

The Markets:

I recall Warren Buffet saying during a televised interview, "If you wait for the robins, spring will be over." Mr. Buffet was referring to the relationship between stock prices and the economy. Buffet believes the stock market will move higher well before either the sentiment or the economy turns up.

This relationship is being tested once again as fears of a new recession are putting pressure on the stock markets which in spite of a recent rally are struggling to remain above the year-to-date lows posted last August.

The opinion among many experts is always mixed at these important junctures because during periods of confusion and panic traditional forms of fundamental and technical analysis fail to work. Stock valuations are trashed, moving averages and trend lines are broken and safe havens such as the U.S. dollar and U.S. T-bonds with negative returns are nonsensical.

What I look for technically during difficult times like this is divergence.

Currently there is positive divergence between the Dow Industrials and the Dow Transports see CHART (1)

There is also internal positive divergence in the DOW 30 and the TSX60 components with more components now higher now than back at the last August lows. CHART (2)

Chart #1

Positive diverge and DOW THEORY – the averages must confirm

Chart #2 the DOW Industrials Internal Strength

HD is one of 22 components well above the August low

Fibonacci retracements of the 2009 – 2011 Bull are text book

Monday, November 21, 2011

We are Technically OK

Here I am on Monday November 21 about 1pm and the Dow is down 296 and the TSX Comp is down 185. Panic now as investors sell to raise cash. Business television as usual is loaded with doom and gloom.

Technically we are still OK. The NYSE advance / decline line at mid-day is still holding above the early September peak and the A/D line is also well above those early August – late September lows. For more bullish evidence look at the iShares Dow Jones US Regional Banks (IAT) $19.94 which seeks investment results that correspond generally to the price and yield performance of the Dow Jones U.S. Select Regional Banks Index

Top 5-holdings by weight

U.S. Bancorp Common Stock                        USB
PNC Financial Services Group                      PNC
BB&T Corporation Common Stock               BBT
Fifth Third Bancorp                                         FITB
SunTrust Banks, Inc                                       STI

The regional banks lead the SPDR Financial and so far there is no technical damage. Note the recent breakout on the relative spread. As of to-day the IAT at $19.35 is just down to support at the 50-day MA – now or never.

Friday, November 11, 2011

Dominant Theme Investing

To identify and ride a dominant theme is the best way to generate above average returns for at least a 10-yr home run. In the mid 1980’s we had the likes of Walmart, Microsoft and Intel all 1000% winners. In the mid 1990’s the financial and energy stocks began to run and in 2003 the commodity sector took off.

Not all dominant themes pan out such as infrastructure and alternate energy

A new dominant theme is now just getting underway – an “echo” or global technology boom. The first tech boom ran from 1985 to the bust of 2000 and was confined to the English speaking counties. The new global tech boom will be enjoyed by the survivors of the first tech boom and bust.

Technically after a bubble a long congestive secular period will follow in order to repair the damage. Usually there are three bull and bear cycles that span a total of about 12+ years – much like the 1968 – 1980 secular down period. The fourth cycle is usually the breakout cycle. Watch for Cisco Systems to finally break out and up from here – note the new 4th cycle

Sunday, November 6, 2011

A Levered Barrick Play

The Horizons BetaPro S&P/TSX Global Gold Bull+ ETF (HGU) and the Horizons BetaPro S&P/TSX Global Gold Bear+ ETF (HBP Gold Bear+ ETF) seek daily investment results equal to 200% the daily performance, or inverse daily performance, of the S&P/TSX Global Gold Index. The Index consists of securities of global gold sector issuers listed on the TSX, NYSE, NASDAQ and AMEX

This product is highly correlated now with heavy weight Barrick Gold and is basically a levered call on Barrick. OK if you like ABX like I do manly because of the recent higher low put in following 9-months of bullish price congestion the HGU at $16.52 is a lower cost way to participate in Barrick.Gold – think of the HGU as a call option with no expiry

Wednesday, November 2, 2011

On Selling RIM and owning ABX

A few posts ago I observed that Research In Motion at $23 was almost a joke – unless the market knew something we don’t know - but I don’t think RIM is going bust anytime soon. The technical view of RIM is one of the worst big cap train wrecks I have ever seen. RIM was so bad it had to be good. So here we are with RIM at another 52-week low. I planned to sell on a weekly close below the August 8 low of $21.40 and so I now am done with RIM.

The big cap gold stocks are not only lagging the bullion they have not yet attracted the investment sheep. They are raking in the cash and are retuning some to shareholders. Technically on the TSX Gold index there is much price congestion through 2011 but the relative perform vs. the TSX60 is bullish. The price is above the 40-week MA and we have a rising primary trend line. A move above the 420 level should attract some sideline cash. Enjoy with ABX or the basket iShares S&P/TSX Global Gold Index Fund (XGD).