What is with Info-Tech?

I see last week the TSX listed iShares S&P/TSX Info Tech ETF (XIT) traded up to close at perhaps an all-time high. The XIT, according to the manager - seeks long-term capital growth by replicating the performance of the S&P/TSX Capped Information Technology Index, net of expenses.

Years ago the sector (index) was dominated by Nortel – now the sector is capped and has matured and broadened out to hold about 20 names to include the likes of CGI GROUP INC (GIB.A), CONSTELLATION SOFTWARE INC. (CSU), OPEN TEXT CORP (OTC), BLACKBERRY LTD (BB) and DH CORP (DH).

Technically we know the technology sector is economy sensitive and so the current strength of the XIT is very bullish for the broader markets. Our chart is the weekly bars of the XIT – with the related 40 week simple moving average - plotted above the TSX 60 Index – in this case the clone iShares (XIU).

Note the price is above a rising 40-wk MA. The lower study is a ratio, or spread smoothed by a 20-week simple moving average. Note the out perform through 2014 and 2015 – a short under perform and now the recent return to out perform.

Are you a Bull or a Bear?

Technically a picture is worth a thousand words –certainly worth more than a compelling story. It is that compelling story that keeps us in a losing investment – long after the picture looks bad.

Technically we know the financial stocks lead the broader equity markets and finally the best technical indicator is the very long term primary trend line. So all the technician needs is a long term bar chart – monthly bars – a semi-log scale and a straight edge

The lower study is the old reliable Joseph E. Grandville On-Balance-Volume (OBV)

The plot of 10+ years of Goldman (GS) tells it all

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Popular torpedo stocks;

According to BNN the shares of Concordia International tumbled six per cent on Friday after the company replaced its chief financial officer and slashed its outlook

Most technical analysts I know were not surprised – visit comments on Stockchace.com

Stockchase.com 2015-05-22             COMMENT - Bill Carrigan re Concordia Healthcare Stock Symbol: CXR-T ($83.70) “Chart shows a long run up with a sort of spiked top. Thinks these types of companies are overcrowded trades. They are driven by promises with great stories. He would just avoid it unless you are a trader.”

Stockchase.com 2016-03-24             DON'T BUY - Bill Carrigan re Valeant Pharmaceuticals Stock Symbol: VRX-T ($41.20) “There is a technical rule on spikes. There is a head and shoulders pattern suggesting downside is on the way.  Usually it takes 2 or 3 years to correct the damage.  Does the price lead the fundamentals? He can show you that they were in trouble before the last torpedo. The technicians knew the 50% sell off was coming.  In many cases you cannot avoid them. This was a case where you could avoid it.”

The technical rule on torpedoes is that in many cases you can’t predict them (Potash) but some are preceded by warnings – such as an over-loved story that has broken down below the important 40-wk moving average – the other rule is to never invest following the torpedo – it takes up to three years to repair the story

Stupid cheap for a reason?

A few weeks ago analyst John Zechner selected TorStar (TS.B) $1.56 as a top pick – ”this is just a pure value pick. It’s not that he likes management or the industry. It has a market capitalization of about $120 million. There is net cash of about 60. There is an enterprise value of about $60-$70 billion. Dividend yield of 16.56%. Stupidly cheap.”

Now there are a number of annoying buzz words I flee from – and one of them is cheap – I have always lost money on “cheap” stocks.

Technically the stock has a history of long bears and short bull phases.

Fundamentally the company has three paths to follow. The controlling shareholders could take the company private, or they could sell the company or – they could press on and take the stock to penny stock status. Eventually most penny stocks get delisted – a sad end to a once great enterprise.

Watch the U.S. Financials:

Just to refresh - the term Bellwether – was 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. Just to refresh - no bull market can operate without the leadership – or participation from the financial sector.

Just to refresh – on the bullish inverse head & shoulder (H&S) formation. Bigger is better – so yes a daily bar an inverse H&S is good – but a larger weekly bar inverse H&S is better. Also the first or left shoulder should be longer in duration than the right shoulder and the volume is usually greater on the left shoulder – sometimes the head has the most volume but never the most volume on the right shoulder.

Two charts today – a daily bar of the SPDR Financial (XLF) displaying a small inverse H&S and a weekly bar of the SPDR Financial (XLF) displaying a large inverse H&S – clearly very bullish for the broader U.S. equity markets. 

Watch the Bellwethers:

A year ago many market bellwethers had broken down below long term moving averages. The term Bellwether – was 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.

Some improved market bellwethers are Goldman Sacs (financial), Disney & AutoNation (Consumer), Gilead (Health Care), FedEx (transports), Boeing & Caterpillar (industrial) and Apple (technology)

The Goldman Sachs Group Inc (GS) is a component of the Financial Select Sector SPDR ETF (XLF). Goldman leads most bull and bear market cycles having peaked in October 2007 and bottoming in November 2008. Goldman has completed a short 2015 bear phase and should lead the XLF higher through 2016 + thanks to Stockcharts.com for the point & figure

More on the Guns or Butter question:

Paul Anthony Samuelson was an American economist and the first American to win the Nobel Memorial Prize in Economic Sciences. His textbook Economics (ISBN- 0-07-0 092863-0) has become a classic in which he states in a chapter entitled “Central Problems of Every Economic Society” that a nation has to choose between two options when spending its finite resources. It may buy either guns (invest in defense/military) or butter (invest in production of goods), or a combination of both.

U.S. President Lyndon B. Johnson used the phrase to catch the attention of the national media, while reporting on the state of national defense and the economy. Another use of the phrase was British Prime Minister, Margaret Thatcher's reference in a 1976 speech that, "The Soviets put guns over butter, but we put almost everything over guns.”

The US seems to favour Gums over Butter – so why not drill down into the sector and seek out the Aerospace and Defense names – In the U.S. there are lots of aerospace & defense related companies - L-3 Communications Holdings Inc. (LLL), Lockheed Martin Corp (LMT), United Technologies Corp (UTX), Honeywell International (HON), Boeing Co/The (BA). General Dynamics Corp (GD), Raytheon Co (RTN) and Northrop Grumman Corp (NOC). Many of these names are at or close to new 52-week highs.

The related ETFs are the iShares U.S. Aerospace & Defense ETF (ITA) and the PowerShares Aerospace & Defense Portfolio (PPA) :

In Canada the choices are slim with a few thin traders – such as Magellan Aerospace (MAL) and Heroux-Devtek Inc (HRX). We are left with CAE Inc (CAE) a liquid pure aerospace play. Our chart – monthly of LMT displays a pending new bull cycle – recent all-time highs and strong money flow numbers

So – just what is a bull market?

In my previous post I referred to Ned Davis Research who deems that “a  Bear Market requires a 30% drop in the Dow Jones Industrial Average after 50 calendar days or a 13% decline after 145 calendar days.” Also according to Ned Davis Research during a study period from January 2, 1900 through December 31, 2010, (over 100 years) 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

The business media claim that a decline of 20% puts the market into “bear territory.”

At Getting Technical our historical market studies dictate that bear market prints a lower low within a rolling 26 to 30 week time window. In other words – in order to be a bear, a broad stock index like the S&p500 must print a lower low within a rolling six month window – if not – then it is a bull. The S&P500 from late 2012 through June 2016 charted bear is based on a simple 26 week price channel and note the 2 downward violations of Aug 22, 2015 and finally on Jan 22, 2016 – we are now past the 6-month window and so if not a bear then it’s a bull.. 

So – just what is a bear market?

Ned Davis Research deems that “a  Bear Market requires a 30% drop in the Dow Jones Industrial Average after 50 calendar days or a 13% decline after 145 calendar days.”

Also according to Ned Davis Research during a study period from January 2, 1900 through December 31, 2010, (over 100 years) 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

The business media claim that a decline of 20% puts the market into “bear territory.”

At Getting Technical our historical market studies dictate that bear market prints a lower low within a rolling 26 to 30 week time window. In other words – in order to be a bear, a broad stock index like the TSX Composite must print a lower low within a rolling six month window – if not – then it is a bull.

The TSX late 2014 through 2015 charted bear is based on a simple 26 week price channel

The DJII - America Yesterday and Today:

The changing components of the Dow Jones Industrial Average (DJII) reflect the gradual transition of America yesterday to America today. Years ago – back in the 1980’s investors enjoyed the returns of the Dow Jones Industrial Average which ran from about 800 to over 3000 in ten years – a triple.

Back then the Dow was truly “industrial” with eighteen industrial relater components. There were only six consumer related components with the rest being energy, financial and IBM or “big blue”. Those were the days when the Dow components employed people who made stuff - Allied Chemical, Aluminum Company of America, American Can, Bethlehem Steel, Du Pont, Eastman Kodak Company, General Electric Company, General Motors Corporation and Goodyear – just to name a few of the employers.

Today the Dow is no longer “industrial: with only six industrial manes and twelve consumer names. So instead of working at Goodyear and Union Carbide the jobs go to McDonald's Corp and Wal-Mart Stores Inc.

Yes today’s Dow is populated by companies that sell stuff to Americans that was made somewhere else. We can go to Dow components Wal-Mart, grab a Coke and burger at McDonalds, pick up a Disney movie, get a cell phone plan from Verizon Communications Inc. and use our Visa Inc. credit card. We could also run our American Express Company card at The Home Depot, Inc to cover the purchase of Asian flooring. And yes you could look for shoes from Nike, Inc while you’re out there.

Index Analysis and Voodoo Science:

Technical analysis gets into trouble when the art from migrates from the study of stocks, commodities and currencies and into the price forecasting of the major stock indices such as the S&P/TSX Composite, the S&P500 or the NASDAQ Composite.

Not a day passes when some technician looks at a major stock index and sees a head & shoulders top, support or resistance at so-and-so level, a double top or a double bottom.  Pile on seasonality, moving averages, price momentum, historical comparisons and you get an index forecast that may be correct – about one-half the time.

The problem is that a major stock index is a basket of diverse sectors (like financial, energy or consumer) that – for the most part – do not advance and decline at the same time. Remember the great dot-com bust of 2000-2002? It was a non-event if you owned financial and energy stocks. Our own TSX Composite is dominated by three sectors – financial, energy and materials. If you add in the industrials we have about 76% if the index covered.

Our chart – the monthly bars of the TSX Composite spanning about 10-years. Note the two great advances that followed the 2007-2008 financial crisis collapse. The 2009-2011 advance was lead by the financials (XFN), energy (XEG) and materials (XMA). The second great advance of 2012-2014 was lead by the financials (XFN), energy (XEG) and index heavy-weights BCE, CNR and VRX. Now we have a pending third advance to be lead by (once again) the financials (XFN) and energy (XEG). The materials sector looks weak but a strong industrial sector (ZIN) may do some lifting to bost the TSX Composite at least back to the 2014 highs of the 15600 level.

The Problem With Street Consensus:

The problem with “street” or analyst consensus is the interests of the “street” and the private investor are not closely aligned.

In my last post I referred to an item on Tesla Motors Inc. by Toronto Star columnist David Olive - http://www.pressreader.com/canada/toronto-star/20160514/281874412627633 - “Is the Tesla excitement just magical thinking?” Olive hammers home some valid problems with mounting losses, production questions and the debt levels.

Now a few days latter - an item from Business Insider - Myles Udland – relating to Goldman Sachs and Tesla Motors  http://www.businessinsider.com/goldman-sachs-tesla-equity-offering-2016-5

I quote in part -

Well, here you go.

On Wednesday, before the stock market opened in New York, Goldman Sachs analyst Patrick Archambault upgraded shares of Tesla.

Archambault put a "Buy" rating and a $250 a share price target on the stock because of what he sees as the market's failure to "fully [capture] the company's disruptive potential."

On Wednesday, after the market closed in New York, Tesla said it would sell $2 billion worth of stock, $1.4 billion of which would be issued by the company.

Tesla CEO Elon Musk would sell $600 million worth of stock to meet a tax obligation related to his buying even more Tesla stock. It's complicated. You can read about that here.

Running the book for that new stock offering? Morgan Stanley and ... Goldman Sachs.

Now if you believe that banks — and specifically Goldman — are bad actors, this sort of deal makes sense. You might, in this scenario, say, "Well, of course: Goldman says nice things about Tesla and then Tesla does a nice thing for Goldman."

This would, however, be a breach of what the banks call a "Chinese Wall," or a separation of various divisions that could come into conflict one another.

Research and investment banking are examples of divisions that could create a conflict of interest and between which there exists said wall — meaning that research analysts don't know who investment banks are doing deals with and investment banks don't know what analysts think of companies outside of published research.

In an email to Business Insider, Goldman Sachs said: "Our Research is independent. We followed all of our standard policies and procedures with respect to our research publication [on Wednesday]."

It seems unlikely that a coordinated breach happened here. That would be illegal and, while I'm not a criminal or a lawyer, it would seem that the point of breaking the law is not to get caught.

But here's what this looks like to many:

The stock upgrade is a detailed argument for why you, the investors, should buy the shares. As a result, investors buy.

This report is delivered just as Goldman's sales force is about to hit the phones to push $1.4 billion of those very shares for a nice fat fee for Goldman and a dilutive hit to the shareholders.

So then there are investors who, based on Archambault's note, bought the shares in the morning only to learn by that afternoon that Goldman would have a hand in diluting their newly acquired ownership stake.

And the popular view says Goldman knew this was going to happen the whole time.

There's an additional potentially uglier mess if you also think Goldman clients were told by Goldman sales-trader types not to buy the stock on the upgrade: What did they know, and so on.

End Quote

Our chart – daily bars of Tesla displaying the big volume spikes of the early April 2016 price peaks of $260 and the subsequent decline to the Goldman pop of May 18, 2016. It seems the investment shepherds were selling in April and the investment sheep are buying in May.

Is the Tesla Motors dream a nightmare?

A good item on Tesla Motors Inc. by Toronto Star columnist David Olive - http://www.pressreader.com/canada/toronto-star/20160514/281874412627633 - “Is the Tesla excitement just magical thinking?” Olive hammers home some valid problems with mounting losses, production questions and the debt levels.

Olive then loses credibility when he forgets to say that Tesla cars just use energy from somewhere else – perhaps from that local gas or coal fired power utility. Olive also makes a big mistake when he claims “the auto industry has not changed its essentials since the advent of the internal combustion engine in the 1880’s.”  .

Wow – today we have radial tires, modern suspensions, lighter weight, fuel injection, direct injection, variable valve timing, turbo-charging, seamless shifting auto transmissions, disc breaks – airbags – I could go on. By the way today’s internal combustion engine has almost zero emissions.

Last January auto retailer AutoNation Inc. (NYSE-AN) - said it will trim marketing costs and vehicle inventory by about 10 percent from year-end levels. The nation's largest new-vehicle retailer already has cut jobs in light of increased discounting, plateauing sales and declining vehicle margins, which combined to reduce its fourth-quarter net.

Our chart – weekly bars of Tesla above the weekly bars of AutoNation displays a reasonable price correlation – so there is a relationship and the January 2016 negative warning by AutoNation did impact the Tesla share price. Note the recent Model 3 price rebound which is likely a selling opportunity.

Investors: What to do if Trump gets in?

As investors we need to seek out the beneficiaries of a possible Trump presidency.

One choice would be to buy the companies that would build a wall along the U.S. Canadian boarder – to keep the Americans out. I see that SNC-Lavalin Group Inc. (SNC) printed a new 52-week high and Aecon Group Inc. (ARE) also had an up day on good volume.

In reality the wall strategy is a goofy idea because neither country has the money to fund such a silly project. I guess SNC and ARE were up for other reasons.

A few weeks ago I wrote this item for BMO Asset Management Inc for posting on their BMO Canadian ETF Dashboard web site –

Begin ------------

Bill Carrigan, CIM, Technical Analyst, GettingTechnical.com

Will that be guns or butter?

Summary of Recommendations:

BMO S&P/TSX Equal Weight Industrials Index ETF (Ticker: ZIN)

Paul Anthony Samuelson was an American economist and the first American to win the Nobel Memorial Prize in Economic Sciences. His textbook Economics (ISBN- 0-07-0 092863-0) has become a classic in which he states in a chapter entitled “Central Problems of Every Economic Society” that a nation has to choose between two options when spending its finite resources. It may buy either guns (invest in defense/military) or butter (invest in production of goods), or a combination of both.

U.S. President Lyndon B. Johnson used the phrase to catch the attention of the national media, while reporting on the state of national defense and the economy. Another use of the phrase was British Prime Minister, Margaret Thatcher's reference in a 1976 speech that, "The Soviets put guns over butter, but we put almost everything over guns.”

When it relates to investing – there are three strategies.

1. We can invest in the sector beneficiaries of guns over butter, such as Materials, Energy, Technology and Industrials.

2. We can invest in the sector beneficiaries of butter over guns, such as Financials, Consumer Discretionary, Consumer Staples, Health Care or Industrials.

3. We can also invest in both because there is one sector common to the guns and butter choices: Industrials. Investors can now enjoy one investable product: the BMO S&P/TSX Equal Weight Industrials Index ETF (ZIN), a diverse basket of cyclical companies that includes Railroads, Aerospace, Infrastructure and Engineering Companies.

The BMO S&P/TSX Equal Weight Industrials Index ETF (ZIN) has been designed to replicate, to the extent possible, the performance of the S&P/TSX Equal Weight Industrials Index, net of expenses. The Fund invests in and holds the Constituent Securities of the Index in the same proportion as they are reflected in the Index. ZIN gives investors exposure to companies engaged in Construction and Engineering, Aerospace and Defense, Trading Companies, Railroads, Airlines, Trucking, Industrial Machinery, and Marine Parts.   

The chart below shows long-term plot of the S&P/TSX Industrial Index, which is a reasonable replication of the S&P/TSX Equal Weight Industrials Index. The long-term primary trend line joins the significant lows of early 2009, mid-2011 and the recent 2016 lows – all investment opportunities.

End -------

Now today I still agree with the Gums & Butter issue but why not drill down into the sector and seek out the Aerospace and Defense names – just in case Trump wins in November?

In the U.S. there are lots of aerospace & defense related companies - Lockheed Martin Corp (LMT), United Technologies Corp (UTX), Honeywell International (HON), Boeing Co/The (BA). General Dynamics Corp (GD), Raytheon Co (RTN) and Northrop Grumman Corp (NOC). Many of these names are at or close to new 52-week highs.

The related ETFs are the iShares U.S. Aerospace & Defense ETF (ITA) and the PowerShares Aerospace & Defense Portfolio (PPA) :

In Canada the choices are slim with a few thin traders – such as Magellan Aerospace (MAL) and Heroux-Devtek Inc (HRX). We are left with CAE Inc (CAE) a liquid pure aerospace play. Our chart – monthly of CAE displays a pending new bull cycle and a point & figure (not included) predicts blue sky on a break over $16.50. By the way – CAE is a component of the S&P/TSX Industrial Index

Apple earnings disappointment no surprise:

At the close April 26, 2016 the shares of Apple Inc. closed at about $104 and after the close the business media lead with, “Apple's revenue falls for first time in 13 years” To the technical analyst who looks at very long term charts – today was no surprise so let us re-visit a post of last June 2015 - with the original chart, and I quote.

“I see Apple Inc as built a triple top on a point & figure chart. I love P&F charts because most of the squiggly line guys never use them.

Apple Inc was added to the DJII March 2015 suggesting that Apple is in transition from a growth stock to a value stock. In other words – the great 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

Honeywell was dropped from the Dow in February 2008 and has doubled in price – now a true growth winner – Alcoa also doubled in price after being dropped in September 2013

Our chart – monthly of Apple Inc displays the progressively shorter growth periods – this may cause some momentum loss in the broader technology sector

Street consensus and Buy. Hold and Sell:

Torstar (TS.B) seems to be a value trap at the moment. They are sitting on a lot of cash – companies sitting on cash are usually bad investments. They are tying to go digital, the publisher is leaving, the shares are trading at multi-year lows and out of the 5 analysts that cover the company – all 5 have a “Hold” rating on the stock.  Again - we all know that a “hold” rating means they just don’t know.

One BNN contributor recently said – “Torstar is stupid cheap,”

So there are a lot of negatives – we have a shrinking business with no analyst support and a fundament guy thinks the stock is “cheap”. Cheap to me means cheap because nobody wants to own the shares. I bought some Torstar stock last week because of all the fundamental negatives – and the one technical positive – a bounce of the recent lows on a big (for Torstsr) volume increase. Thanks to Stockcharts.com for the CandleGlance plot of Torstar.

More on the value of street consensus:

According to The Wall Street Journal – April 21, 2016 the Analyst Ratings on the TSX listed Alimentation Couche-Tard Inc (ATD.A) was currently 11 buys, 2 holds and no sells. Three months ago it was 12 buys, 2 holds and no sells. We all know that a “hold” means they just don’t know.

A few posts ago I observed that on BNN’s popular Market Call shows there was a growing tendency for the callers to ask the host for the “street consensus” in addition to the guest opinion on a particular company. The problem is the street consensus is usually a “buy”, a “hold” and rarely a “sell”.

One Market Call guest correctly described Couche-Tard to be “One of the darlings of the TSX via growth by acquisition.”

The fundamentals I see are based on common sense – first the stock was over loved and over-owned and secondly when you grow by acquisition – each one has to be bigger in order to propel the growth story..(sort of like the Valeant story)

Technically the “B” shares are trading below both the 50 and 200 day simple moving averages, the stock is underperforming the TSX Comp and the S&P500 and the point & figure has peaked and the down O’s sit on key support at $55

Our weekly bar chart of Couche-Tard spanning about 100 weeks displays the relative perform vs. the TSX Comp and Couche-Tard’s 40-week moving average. Clearly the street consensus and the technical picture do not agree.

More on phoney Share Buy-Backs:

Today a quote from Aaron Tilley, Forbes Staff - on the Intel workforce cut:

“Reeling from a four-year decline in the PC market, Intel said Tuesday that it would cut 11% of its workforce — or about 12,000 employees. The news came as Intel reported financial results for the first quarter that were roughly in line with Wall Street estimates, but the company forecast weaker-than-expected sales for the current quarter. The cuts will save Intel, the world’s largest chipmaker, an estimated $1.4 billion annually once the are completed and allow the Santa Clara, Calif.-based company to refocus its resources on new areas of growth. The company will also take $1.2 billion restructuring charge.”

A few months ago on a post I was negative on share buybacks stating - the move makes the company's profit per share look better, and many think buybacks have played a key role pushing stocks higher in the seven-year bull market. - but buybacks can also sap companies of cash that they could be using to grow for the future, no matter if the price of those shares rises or falls.

According to Intel, “As of April 2, 2016, $8.6 billion remained available for repurchase under the existing repurchase authorization limit and we have repurchased 4.8 billion shares at a cost of $106 billion since the program began in 1990.”.So far in Q1 this year (2016) Intel has shelled out 800 $million for share buybacks – while at the same time letting go bout 12,000 employees.

Clearly the interests of the employees and the shareholders are not aligned – the employees wish to have a long term job, and the shareholders only wish for the stock price to go up and the sooner the better. Also – when the share count shrinks – the company market cap gets smaller and companies do not shrink themselves to greatness.

The value of street consensus:

I notice that on BNN’s popular Market Call shows there is a growing tendency for the callers to ask the host for the “street consensus” in addition to the guest opinion on a particular company. The problem is the street consensus is usually a “buy”, a “hold” and rarely a “sell”.

In the new investing book - Market Masters (ECW Press, by Robin Speziale, I state on page 388 “the problem with fundamentals is that the fundamental analyst isn’t going to know anything about jewellery stores by going to the annual meeting. He needs to have actually worked in a jewellery store to understand the real story. Take a stock like Auto Canada, which everybody loved for a while. When I was in Ryerson, to pay my tuition I worked at a GM dealer selling cars. Also, I worked as an apprentice mechanic. So I

was at the back end of a dealer and at the front of it. I knew how complicated a dealership is: you’ve got new cars coming in, you’re dealing with trade-ins, you’re dealing with mechanics, you’re dealing with the union, you’re dealing with sales and marketing, you’re dealing with the workers’ compensation. You’ve got so much going on, so the only people who can run a dealership is the owner who is an entrepreneur.

And why would a dealership ever go up for sale? It’s because the owner can’t take it anymore and wants to get out. So he’s going to unload it to AutoCanada. Well, good luck with that..”

A recent tweet by BNN’s Frances Horodelski was refreshing – “In April 2014, 80% of the analysts that followed $BTU rated it a #Buy.  Today, company files for Chapter 11

$BTU refers to NYSE listed Peabody Energy (BTU) which is displayed in our weekly bar chart – spanning about three years. Note circled April 2014 period that Horodelski refers to at the $250 price level and the subsequent decline to the $2 level. I wonder how many analysts rated Valeant a “buy” or “hold” a year ago?

 

The new 52-week high / low rule:

In my last post – I observed that most of the technical analysts I know have their own style or skill sets they apply to the study of the capital markets. Technical analysis is an art form and differs from the fundamental analysis of profit and loss statements and balance sheets which is a mathematical study of past history      

The technical analyst will also scan the new 52-week high / low list because we know the 52-weekk high / low rule – the first new 52-week high will not be the last and, the first new 52-week low will be the last.

At the close on the TSX April 11, 2016 there were about 32 new 52-week highs (I ignore non common issuers) and of the total population 28 were commodity related. Names like Asanko Gold Inc, Yamana Gold Inc, Kinross Gold Corporation, Barrick Gold Corporation, First Majestic Silver Corp, NovaGold Resources Inc., Detour Gold Corporation and Agnico Eagle Mines Limited were listed.

Most of these names are components of the TSX listed iShares Materials ETF (XMA) and so to avoid stock picking why not just own the XMA?

Ignore the noise - listen to the market:

Most of the technical analysts I know have their own style or skill sets they apply to the study of the capital markets. Technical analysis is an art form and differs from the fundamental analysis of profit and loss statements and balance sheets which is a mathematical study of past history      

We technicians tend to tune out the opinions of the fundamental side and conversely listen to what the markets are telling us. Basically the technical analyst will follow the money – because the smart money will lead the lagging financial statements.

The new 52-week high list will often deliver a profound message – like if the bears are predicting doom and gloom, how come the SPDR Technology ETF (XLK) closed last Friday at a new 52-week and multi year high?

Follow the Bellwethers:

During the later stages of a long bull market – investors can get confused and begin to engage in market timing or over-trading. The best approach would be to understand the longer term structure of the great 2009 – 2016 advance in the major global stock markets. If we apply long term analysis to market bellwethers we can better identify our current location within the great 2009 – 2016 advance.     

The term Bellwether – was 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.

US Bellwether - Berkshire Hathaway Inc. Cl B (BRK.B) is a conglomerate holding company owning subsidiaries engaged in a number of business activities and basically a proxy for the world’s largest economy.

Canadian Bellwether - Brookfield Asset Management Inc. (BAM.a) s an alternative asset management company focused on property, renewable energy, infrastructure and private equity and also a proxy for the world’s largest economy.

Our long term plot of BAM.a displays the Elliott Wave structure of the great advance the began from the lows of 2009 – the count being three advancing waves (1,3,5) separated by two corrective waves (2,4)

The first advancing wave (1) originated from the lows of 2009 and peaked in early 2011- this was a rebound bull that typically occurs after a crisis bear such as the 2007-2008 global financial crisis. The first corrective wave (2) occurred in 2011..

The second advancing wave (3) originated from the bear market lows of late 2011 and peaked in late 2014 – followed by the second corrective wave (4) that persisted though 2015 and into early 2016. Advancing wave (3) will contain the “recognition point” which is signalled when the price advances above the peak if wave (!).

If we get a typical Elliott Wave count - then a third and final advancing wave (5) to new highs, should follow the current 2015 – 2016 corrective wave (4) and persist through 2016