Friday, August 28, 2015

When lost – follow the bellwether:

The term Bellwether - is derived from the Middle English Bellwether which refers to the practice of placing a bell around the neck of a castrated ram - (a wether) in order that this animal might lead its flock of sheep.

Question – lead to where? Green pastures or to slaughter?

When applied to the capital markets – a bellwether is usually an important stock or index – for example – the Russell 2000 – Small Caps, the Dow Transports – Economy Sensitive or the Semiconductors  In the US markets an important stock bellwether is The Goldman Sachs Group Inc. (GS) because it tends to lead the US financial space which in turn is a leader in all bull and bear cycles.

Goldman posted financial crisis peaks in May 2007 and October 2007 and bottomed in October 2008 about 4-months before the broader stock indices. Subsequent to the recent sell-off - the only other major correction was the April – October correction of 2011. The best way to ID Goldman’s bull and bear cycles is to apply a 26-week price channel test – because Goldman tends to trend within a 6-month price window. Our chart is the weekly bar of Goldman displaying the April 2011 and August 2015 violations of the 26-week low (6-month) price channel. Goldman is leading so be cautions

Tuesday, August 18, 2015

The trouble with the energy stocks:

The trouble with the energy stocks is minor if you’re a well financed energy giant such as the companies in the US listed SPDR Energy ETF (XLE)  where Exxon Mobil Corp (XOM), Chevron Corp (CVX) and Schlumberger Ltd (SLB) represent about one third of the sector by market weight. Just to stress the depth of the (XLE) the number ten by weight is ConocoPhillips (COP)

In contrast the fly weight Canadian energy space – as replicated by the iShares S&P/TSX Capped Energy Index ETF (XEG) where the relatively small and troubled Encana Corporation (TSE:ECA) and Crescent Point Energy Corp (TSE:CPG) rank high in a long list of small to micro cap issuers fighting for survival.

Our chart is the monthly XLE above the XEG where you can see troubles with the Canadian energy space (XEG) beginning from the October 2011 lows when the sector failed to run to a new 2014 high as did the SPDR XLE. Note also the long 10+years bullish series of higher lows on the SPDR XLE. The long series of lower highs on the Canadian sector XEG is likely due to the flawed belief that many components can return cash to shareholders and still grow their business. Clearly the Canadian energy complex is a train wreck.

Tuesday, August 11, 2015

The rapid rise of Patient Home Monitoring:

 I see at about 12:30 today the shares of Merus Labs International Inc (TSE:MSL) at $2.58 are down 14% on about 3 million shares – about 6-times the average volume. Seems like another compelling storey has turned into a bad ending.

On the topic of compelling stories - on Friday May 8, 2015 BNN’s Andrew McCreath tweeted “$PHM Patient Home Monitoring Chairman on @BNN 'Weekly w McCreath' in 10 minutes & again at 8:30 pm tonight! #momentum”

On May 12, 2015 a follow up video - Investing Ideas - The rapid rise of Patient Home Monitoring - Part One – BNN commentator Andrew McCreath speaks with Michael Dalsin, Chairman, Patient Home Monitoring about the company's rapid growth strategy,

Also - Patient Home Monitoring (PHM.V) has been a recent stock darling for Market Call guests, appearing as a top pick eight times over the last year. The Venture-listed stock has run up more than 550 percent in the last 12 months alone, based on its growth by acquisition model, as the in-home health care provider acquired nine companies over an 18-month span.

“The wave is finally here. Ten thousand people a day turn 65-years-old and the market is ripe and there’s a lot of demand,” Michael Dalsin, chairman of Patient Home Monitoring told BNN’s Andrew McCreath.

Many investors, however, approach this ‘roll-up’ strategy with scepticism. BNN’s Frances Horodelski says one risk associated with this strategy can be found in accounting. “Acquisition accounting can mask true underlying, organic growth,” she said. “Things can get messy with leverage, non-cash items, balance sheet adjustments, tax policy changes, a host of things that require a deep analysis to uncover.”

Now the technical analyst will usually focus not on the news – but how a stock will react to the news. In other words if the news is negative and the stock goes up. that is bullish – and if the news is positive and the stock goes down, that is bearish. Stocks trade at not what the news is – they trade on what the news will be in the future. So the bullish Dalsin – McCreath interview took place on Friday May 8, 2015 after the close of trading. Now a bullish investor may anticipate a big up day the following Monday May 11 – but no – the stock closed at $1.51 down on the day  A PHM chart tells all.