Sunday, January 31, 2016

Memo to S&P Dow Jones Indices:

I see a press release that on January 27, 2016 (TORONTO) – TMX Group (TMX) and S&P Dow Jones Indices (S&P DJI) today announced a renewal of the multi-year Index Operation and License Agreement (Agreement) between TSX Inc. and S&P DJI, further extending their long-standing and successful partnership. The Agreement will ensure that market participants will continue to have access to a comprehensive suite of investable indices for the Canadian equity markets, as well as North American and global markets.

One of those indices is the Canadian benchmark S&P/TSX 60 Index which according to the TSX - is designed to represent leading companies in leading industries. So how come a penny stock, Bombardier Inc. BBD.b with a puny weight at 0.16% is still in the index? Why not rename the index to the S&P/TSX59?

Bombardier Inc. is also a component of the S&P/TSX Industrial Index – the other S&P/TSX 60 industrial peers are Canadian National Railway Company, Canadian Pacific Railway Ltd and SNC Lavalin Inc. I suggest that it would be prudent to replace Bombardier Inc. with another industrial sector issuer. – just to keep the S&P/TSX 60 Index balanced. Why not consider CAE Inc., MacDonald Dettwiler and Associates Ltd , Stantec Inc.or WSP Global Inc. Please no more consumer, energy or financial names.

Our chart – is a long term monthly weekly of CAE with a cycle overlay and relative performance study and at 500K + trades per day is a liquid aerospace play.

Monday, January 18, 2016

Defining Bear Markets:

The usual definition of a bear market is that a bear market happens when stocks decline at least 20 percent from their peaks. A correction is when stocks fall 10 percent. According to Ned Davis Research during a study period from January 2, 1900 through December 31, 2010, big corrections in the Dow Jones Industrial Average are actually quite rare.

Dips of 5 % or more totalled 378 or 3.4 per year
Corrections of 10 % or more was 122 or about 1 per year
Bear declines of 20 % or more was 32 or about I every 3.5 years

At Getting Technical our historical market studies dictate that bear markets print a lower low within a rolling 26 to 30 week time window.

Our chart – is a weekly of the S&P500 bounded by a simple 30-week high low price channel. Bull and bear or buy and sell signals on a weekly violation at the close – interim violations are ignored. The current bear in the S&P500 was signaled last August 2015 at the 1990 level. An Elliott Wave A-B-C bear suggests at least two downward violations of the lower price channel with this week testing the first 1867 level of the bottom price channel and then the second and final drop down to support at the October 2014 low at the 1820 level.

Sunday, January 10, 2016

Apple’s long growth rate is slowing:

Back last June 2015 with Apple Inc trading at 128 I observed that AAPL had built a triple top on a point & figure chart. I also commented on the new Dow Jones component jinx because when Apple Inc was added to the DJII March 2015 a move suggesting that Apple was in transition from a growth stock to a value stock. In other words – the great Apple 2001 – 2015 growth period may be over. Some past DJII growth to value stocks - Cisco Systems added in June 2009. Bank of America and Chevron added in February 2008, Intel and Microsoft were added in November 1999. In contrast Honeywell was dropped from the Dow in February 2008 and subsequently has doubled in price.

Our chart – an undated monthly of Apple Inc displaying the progressively shorter stock price growth periods – from May 2003 to Dec 2007 twenty times. From March 2009 to Sept 2012 six times and from August 2013 to May 2015 only two times. In other words in order for Apple to repeat the 2003-2008 growth window the stock price has to go from the current $100 level to $2000 over the next 5-years. Don’t shoot the messenger


Tuesday, January 5, 2016

The new 52-week high / low rule:

When it applies to investing or trading I have learned – the hard way, two rules.

Rule one – your first margin call will never be your last.

Rule two – the first time a stock appears on the new 52-week high or new 52-week low list will never be the last time.

At the close January 5, 2016 – the S&P/TSX Composite Index closed at 12920 down 7.01 points or (-0.05%). There were 12 new 52-week highs and 13 new 52-week lows. This small population of new highs and new lows could be an early sign of sector rotation as investors begin to sell their popular winners and direct capital toward unpopular beaten up stocks.

One surprise was to see the popular Magna International Inc. (MG) posting a new 52-week low – but in reality not a surprise when you look at industry bellwether NYSE listed Autoation (AN) now trading below both the 50 and 200 day simple moving averages, Pile on the TSX listed AutoCanada (ACQ) and the message is clear – investors are running away from the auto related stocks. Another surprise was to see the dull material and industrial related Cascades Inc (CAS) and New Flyer Industries Inc (NFI) on the new 52-week high list. Packaging and buses? Are investors falling out of love with Alimentation Couche-Tard Inc and Dollarama Inc.?

Disclosure – I bought CAS last August when it appeared on the new 52-week high list and am still holding – someday I intend to find out what these guys do but then again – that is old news because stocks trade on what these guys will do – so I just follow the smart money